Australia-India ECTA benefits for Australia (overview)
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Over the next 20 years, a growing India will need many of Australia's goods and services, including agriculture, critical minerals, education and skills training, and healthcare. The Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) will open new markets for exporters and service suppliers in many sectors and bring us closer to one of our most important Indo-Pacific partners.
The AI-ECTA will secure Australia's foothold in the world's fastest growing major economy and enable Australian businesses to unlock or expand their operations in a market of nearly one and a half billion consumers.
The AI-ECTA is a stepping-stone towards a full Australia-India Comprehensive Economic Cooperation Agreement. It provides for competitive tariff elimination or tariff reduction on a wide range of key Australian goods exports and opens new services markets for suppliers in sectors that complement India's domestic reform priorities.
India is one of Australia's most important trading partners, currently our seventh largest, and our economies are highly complementary. Australian resources and other commodities such as wool and cotton are important inputs that drive Indian industry. India is also a growing market for Australia's world leading critical minerals and resources sectors. Australian services are increasingly sought after in India, with Australian services exports nearly doubling in value over the past decade, and many untapped opportunities remain.
The AI-ECTA builds on this strong foundation, delivering new opportunities for trade diversification for Australian businesses and providing important first mover advantages in this burgeoning market, ahead of our competitors.
The AI-ECTA will enable Australian goods exporters to obtain preferential access to the enormous untapped Indian market. From the day AI-ECTA enters into force, 85 per cent of Australian goods exports by value to India will enter without tariffs and an additional 5 per cent will have tariffs eliminated over periods not exceeding 10 years. This is commercially significant for up to $14.8 billion worth of Australian merchandise trade destined for the Indian market each year.
The elimination or reduction in tariffs will open the doors for Australian goods exports and create new opportunities, including where trade was previously not economically feasible due to high tariffs. Lower Australian tariffs could lower the price of imported products from India and increase the variety of goods available to Australian consumers.
Key Australian goods that will enter duty free as soon as the agreement enters into force include:
- sheep meat
- metallic ores such as manganese, copper and zirconium
- titanium dioxide
- certain critical minerals and
- certain non-ferrous metals.
India will also lock-in existing duty-free entry for Australian barley, oats, hides and skins, and LNG.
Australia will have elimination or reduction of tariffs over 3, 5, 7 or 10 years for:
- infant formula
- certain peas and beans
- certain nuts such as macadamias, cashews, shelled pistachios and hazelnuts
- certain fruit and vegetables such as avocados, onions, cherries and berries
- infant formula
- certain oilseeds and oils
- certain food preparation such as malt, pasta and breakfast cereals
- petroleum oils
- certain non-ferrous metals
- wood and paper products
- pharmaceutical products and
- certain medical devices.
Australia will have immediate access to a duty free quota for cotton and immediate 50 per cent tariff reduction in quotas on lentils, almonds, oranges, mandarins and pears.
Elimination of tariffs on entry into force (EIF).
Elimination of the 30% tariff on EIF.
Tariffs reduced from 150% to 50% over 10 years for bottles valued over US$5 and tariffs reduced from 150% to 25% over 10 years for bottles valued over US$15. India has committed to extend any market access improvements to future FTA partners to Australia.
Elimination of the 30% tariff on EIF for fresh rock lobsters and elimination of tariffs over 7 years for most other fresh, frozen and processed seafood products including Atlantic salmon, tuna and frozen rock lobster.
Elimination of 50% tariff over 7 years.
Immediate 50% tariff reduction to a quota of 150,000 tonnes per year.
Elimination of tariffs over 7 years for macadamias, shelled pistachios, cashews and hazelnuts.
Immediate 50% tariff reduction on almonds to a quota of 34,000 tonnes per year.
Fruit and vegetables
Elimination of tariffs over 7 years for avocados, cherries, berries, onions and certain peas and beans.
Reduction of tariffs over 7 years for apricots and strawberries.
Immediate 50% tariff reduction on oranges and mandarins to a quota of 13,700 tonnes per year and pears to a quota of 3,700 tonnes per year.
Barley and oats
Tariffs bound at 0% at EIF.
Oilseeds and vegetable oils
Elimination of tariffs on olive oil, crude canola oil, crude sesame oil, crude palm oil, wool grease and safflower, sesame, linseed and poppy seeds over 7 years.
Reduction of tariffs on seed quality sunflower seeds and elimination of tariffs on other sunflower seeds, both over 7 years.
Hides and skins
Tariffs bound at 0% on EIF for raw hides and skins and immediate elimination of tariffs on EIF for processed hides and skins.
Immediate access to duty free quota of 300,000 bales on EIF of minimum length of 28 mm.
Elimination of tariffs on EIF for most critical minerals such as zirconium and titanium.
Elimination of tariffs on EIF for manganese, copper, nickel, cobalt, aluminium and tin ores.
Elimination of tariffs on EIF, or over 5 years.
Elimination of tariffs over 5 years.
Tariffs bound at 0% on EIF.
Elimination of the 5% tariff on EIF.
Elimination of the 10% tariff on EIF.
Elimination of tariffs on EIF for copper alloys and on most nickel products.
Elimination of the 10% tariff over 5 years.
Wood and paper products
Elimination of 20% tariff on wood and wood products, including sandalwood chips, over 7 years.
India is Australia's third largest services export market. Over the last decade, our services exports to India have nearly doubled to reach $6.9 billion in 2020. The AI-ECTA will provide increased certainty for Australian service suppliers already doing business in India by binding existing market access, broadly in line with current settings or commitments India has made in other trade agreements. India has committed to extend to Australia any future services market access improvements India agrees to give any future FTA partner in 31 sectors and subsectors. By confirming access to these sectors will always always be on par with new international competitors, Australian businesses will have the predictability they need to trade more with India.
These sectors include:
- higher education and adult education
- business services (tax, medical and dental, architectural and urban planning)
- research and development
- communication, construction and engineering
- insurance, banking
- hospital, audiovisual and tourism and travel.
Australia has been able to capitalise on India’s recent liberalisation in the banking and insurance sectors where India has increased foreign participation in commercial banks, insurance and fund managers. India has agreed to lock in 49 per cent foreign equity for a range of Australian banking and insurance services in the AI-ECTA, higher than the foreign equity limit India provided in other significant free trade agreements with Japan, the Republic of Korea and Singapore.
Financial service providers will also have greater certainty and transparency on the rules that will apply to them when providing services in India.
India will provide market access for single-brand retailing and franchising, as well as commitments regarding wholesale distribution services. Australian internet services businesses in India will also have more opportunities to expand their portfolio with a foreign equity limit of 74 per cent for commercial presence.
The level of access to Australia’s services market that India will gain from the AI-ECTA is consistent with the approach taken in other free trade agreements. This includes scheduling market access commitments at the state and territory level.
The AI-ECTA includes mobility outcomes that will foster people-to-people links, support trade and business and contribute to cultural exchange between Australia and India.
The agreement will support access for a range of Australian and Indian skilled service providers, investors, and business visitors, facilitating investment and providing business with greater certainty. Australia's commitments to India on mobility maintain the integrity of our visa system and are consistent with existing visa settings and our previous free trade agreements. This includes equivalent commitments on categories of entrant, length of stay, spouses and dependents.
The AI-ECTA does not include a waiver of labour market testing, so a potential employer in Australia will need to provide evidence they have tested the local labour market first.
Australia has secured clarity around visa pathways and application procedures like periods of stay and other visa conditions from India to support outward mobility for businesses and professionals. Commitments India has agreed to include that the processing of an application must be reasonable and not unduly delay the supply of a service or trade in a good. These commitments are more extensive than India has made in a previous FTA or at the World Trade Organization (WTO).
The AI-ECTA will support the establishment of a Professional Services Working Group for the future facilitation of the mutual recognition of qualifications, licensing and registration procedures between professional services bodies.
Australia and India have agreed to engage their respective professional services bodies to negotiate mutual recognition arrangements for qualifications, licensing and registration procedures across professional services and services in regulated or licensed occupations. This provides a useful platform to encourage professional bodies to negotiate mutual recognition agreements and to encourage them to reach out to their counterparts.
The Trade in Services Chapter also seeks to address red tape in India’s domestic regulatory system to help Australians, including Small and Medium Sized Enterprises, seeking to provide a professional service in India. AI-ECTA mandates transparent and reasonable fees, reasonable timeframes, status updates upon request, acceptance of electronic and authenticated applications, and not requiring physical presence to take forward an application.
Australia has also provided new market access for culturally significant occupations for a combined total of 1,800 per year of qualified professional traditional chefs and yoga instructors entering as contractual service suppliers of India.
Tourism and education
The AI-ECTA has the potential to contribute significantly to the Australian tourism sector’s bounce-back as soon as it enters into force. For hotel and other lodging services, and for travel agency and tour operator services, India has committed to no restrictions on market access via cross-border supply and commercial presence. Education-related travel services, which is Australia's largest overall services export, stands poised for recovery and will benefit from the 'head turning' effect of concluding AI-ECTA, a new Work and Holiday maker program and incentives to study in Australia through the Post-study work visa outcome.
Australia will provide new access for young Indians to participate in working holidays in Australia. Places in Australia's Work and Holiday program will be set at 1,000 per year and Australia will have two years to implement the outcome in this new location. The outcome is expected to contribute to both work force requirements and to tourism in the post- COVID recovery.
To promote the reciprocal exchange of knowledge, Australians who have successfully completed their studies and wish to supplement their training will be able to gain professional experience in India. At the same time, former Indian students will also be able to live, study and work in Australia temporarily upon completion of their studies.
The Post-study work visa outcome for Indian students will apply upon completion of a diploma or trade qualification (stays of up to 18 months); a bachelor degree (stays of up to two years); a masters degree (stays of up to three years); and a doctoral degree (stays of up to four years). In addition, the length of stay for a bachelor degree graduate with first class honors will be extended from two to three years post-study in Science, Technology, Engineering or Mathematics (STEM) and information and communications technology (ICT) sectors.
In addition, India will provide a reciprocal work-based immigration route for Australians who successfully complete their studies and who wish to supplement their training with professional experience in India.
Transparency and reducing non-tariff barriers to trade
Australia and India have agreed to ensure transparency in the application of any non-tariff measures and to ensure that any such measures do not create unnecessary obstacles to trade. Australia and India’s commitment on non-tariff barriers is useful in strengthening our trading relationship, as non-tariff measures had previously affected the smooth flow of Australian exports to India.
The AI-ECTA contains commitments for both countries to make publicly available their laws, regulations, decisions and rulings with regards to the Trade in Goods chapter, making it easier for Australian businesses doing business in India.
The AI-ECTA contains commitments to strengthen the bilateral trade relationship with India. Consultations on trade issues will be undertaken via a Committee on Trade in Goods that will be established under the agreement. The Committee will consider ways to accelerate tariff elimination and address non-tariff barriers to trade, with a view to enhancing two-way trade in goods.