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News: Recently, India has signed the first trade agreement with a large developed economy of the world after more than a decade. It was a path-breaking trade agreement known as the Economic Cooperation and Trade Agreement (ECTA) signed with Australia.
India’s trade agreement so far
India already has trade agreements with the Association of South East Asian Nations (ASEAN), Japan, Korea, Singapore and Malaysia. In the case of developed countries, this is the third trade agreement that India has signed with any OECD country after the trade agreement India had with Japan and Korea.
Why is the Indian Industry is happy with new trade deals with UAE and Australia?
The India Industry was consulted at every stage of trade negotiations. Therefore, it has helped Indian industry members to articulate their interests in the overseas market access.
Indian government has identified the right set of countries for trade deals i.e., Australia and the UAE. In addition, it has ensured meaningful market access for Indian exports.
Unlike, in previous FTAs in which India bargained mainly for market access for business professionals under Mode 4 (Movement of Natural Persons), this time Indian government’s focus has been on access to foreign-market for all our merchandise exports.
Why is the Indo-Australian trade deal significant for India?
This agreement has strategic significance. Both India and Australia are part of the Quad and partners in the Supply Chain Resilience Initiative (SCRI).
The trade deal may lead bilateral trade between India and Australia to touch $45 billion in five years.
It will address a tariff disadvantage of 4-5% faced by Indian exports so far. It was present in many labour-intensive sectors. It was posed by China, Thailand, Vietnam, South Korea, Japan, Indonesia and Malaysia in the Australian market. Now, Indian exports will not have to face this disadvantage in the Australian Market.
India’s exports of goods and services are expected to increase. The merchandise export will increase in textiles and apparel, select agriculture and marine products, leather, footwear, furniture, gems and jewellery, pharma and engineering products, etc.
In addition, India will get meaningful access in the Australian market for service sectors too. For example, Annually, 1800 Indian traditional chefs and yoga teachers can enter into Australia as contractual service suppliers, Indian students will get post-study work visa, and a mutual recognition of professional qualifications etc.
Australian government will also stop taxation of the offshore income of Indian firms providing technical services to Australia. It will enhance their competitiveness in the international market.
Many Indian industries in sectors like steel, aluminium, power, engineering will get cheaper raw materials from the Australian exporter. Therefore, they might become competitive
India’s particular sector like milk and dairy, among other where Australia has comparative advantage will remain protected under the ECTA. It is because the Indian government has not offered concessions on these sensitive products.
What will be the challenges?
Currently, Australia has 16 operational FTAs. Therefore, India would be competing with China, ASEAN, Chile, Japan, Korea and New Zealand, which have already-functional FTAs with Australia.
Source: The post is based on an article “India’s trade pact with Australia will click: it ticks the right boxes” published in the Live Mint on 04th April 2022.
