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Source: The post is based on the article “India-Australia Economic Cooperation and Trade Agreement (ECTA): 77% utilization by Indian exporters in 9 months” published in “Business Standard” on 21st November 2023
Why in the News?
Indian exporters have benefitted from the India-Australia ECTA. For the first nine months, the utilization rate was 77%.
What is Utilization Rate in Free Trade Agreements (FTAs)?
1) The utilization rate in Free Trade Agreements (FTAs) refers to the extent or percentage to which the benefits and provisions offered by the agreement are actually utilized or taken advantage of by the participating countries or entities.
2) It measures how much of the trade or economic activity between countries occurs using the preferential terms offered in the FTA.
3) A higher utilization rate indicates that a larger portion of trade is taking place under the terms and benefits outlined in the FTA.
4) According to the Asian Development Bank, India’s FTA utilization rate has remained under 25%, among the lowest in Asia. In contrast, FTA utilization by developed countries averages 70-80%.
5) The reasons for India’s low utilization rate of FTAs are the difficult process of getting a certificate of origin, low awareness about FTAs in the industry and non-tariff barriers, amongst others.
What is the India-Australia Economic Cooperation and Trade Agreement (ECTA)?
| Specifications | Details |
| Signed in | 2022 |
| Aim | To provide an institutional mechanism to encourage and improve trade between the two countries. |
| Key Features of the agreement | Read Here |
| Significance | 1) It is the 1st such agreement for India with a developed country in over a decade. 2) The deal has the potential to raise bilateral trade between India and Australia to nearly $50 billion in the next five years and create at least 10 lakh jobs in the start-up economy. 3) Provide a model for future FTA with other developed countries. |
| Progress of India-Australia ECTA | Indian exporters have benefitted from the India-Australia ECTA.For the first nine months, the utilization rate was 77%. For Indian exporters, sectors that have benefited from the deal include iron and steel products, linens, agri products and electrical conductors. |
UPSC Syllabus: International Relations
