India-Australia Trade Negotiation

Trade Pillars

Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner.

India-Australia bilateral trade (both merchandise and services) stood at US$ 27.5 billion in 2021.

Trade Negotiation Issues

  • Negotiations for the free trade agreement between India and Australia had started in May 2011.
  • The talks gained momentum in 2013, but continued to run into roadblocks e.g., India wanted tariff-free access for Indian agricultural goods in Australia, and a liberal visa regime for Indian professionals.
  • Australia, meanwhile, wanted duty free market access for its processed foods, wines, dairy products and critical minerals.
  • The negotiations for India-Australia ECTA were formally re-launched on 30 September 2021 and concluded on a fast-track basis by the end of March 2022.

Significance

  • Boosting Trade: Bilateral trade in goods and services for both countries is expected to touch US$ 45 billion in five years.
  • Parity with Competitors: Indian exports face a tariff disadvantage of 4-5% in many labor-intensive sectors vis-à-vis competitors in the Australian market such as China, Thailand, Vietnam, South Korea, Japan, etc. This problem would be removed by the current agreement that offers parity treatment to Indian exporters.
  • Engagement with a Developed Nation: The ECTA is the first agreement with a large developed economy of the world after more than a decade.
  • Australia is also the third OECD country after Japan and Korea with which India has signed a free trade agreement (FTA).

Way Forward

  • India would have to work on improving its competitiveness, as in most trade sectors, it would be competing with China, ASEAN, Chile, Japan, Korea and New Zealand, which have already-functional FTAs with Australia.
  • Active diplomatic engagement would be required to make Australia fulfil its promise to amend its domestic tax law.
  • Once the amendment is made, the Indian tech companies would no longer be required to pay taxes on offshore revenues in Australia. This would enhance their competitiveness in the international market.

Related Content