Trade pact: The Economic Cooperation and Trade Agreement (ECTA) between India and Australia, which was signed last week, is a significant step toward strengthening bilateral economic ties between the two major Indian Ocean littoral states and reflects New Delhi and Canberra’s growing strategic alignment. While India’s greatest relations with Australia have long been concentrated on their shared colonial history of cricket, as highlighted by the Border-Gavaskar Trophy, a more recent shared vision has formed around the mutual need to increase strategic and trade interaction.
This was demonstrated at the virtual summit in June 2020, when Prime Ministers Narendra Modi and Scott Morrison resolved to raise the relationship to a Comprehensive Strategic Partnership. Defense and strategic relationships have seen a lot of traction, and the newest ECTA was worked out in less than six months after talks resumed in late September.
The ECTA, dubbed an “early harvest” agreement, includes a wide range of economic and commercial connections, including goods and services trade, rules of origin, technical trade barriers, dispute resolution, and customs processes.
The trade pact aims to double the bilateral trade
The partners have begun deconstructing or cutting tariff barriers in order to double bilateral trade to around $50 billion in five years, up from $27.5 billion in 2021. In the said trade pact, Australia has agreed to remove tariffs on more than 96 percent of Indian exports, including several labor-intensive industries, India will allow the duty-free entry of 85 percent of Australian goods exports by value on day one and cut tariffs on another 5% of Australian merchandise to zero within the next ten years.
The way sensitive subjects like the dairy sector, a politically vital export industry in Australia, were placed aside for separate resolution at subsequent discussions demonstrates the negotiators’ realistic approach. A key area that has been included in the mobility of ‘natural persons’ is intrinsically related to building closer people-to-people ties and is critical in attempts to increase bilateral services trade. The trade pact aims to facilitate access for a variety of professional service providers, investors, and business travelers from Australia and India, as well as, more importantly, a sector tied to another significant Australian export — education.
In the trade pact, Canberra has now agreed to remove visa rules on a reciprocal basis, allowing students at various levels of higher education to stay for periods ranging from 18 months to four years to pursue temporary job opportunities.
The inclusion of a mandatory review mechanism at the end of 15 years is arguably the best element of the ECTA. With previous FTAs proving to be less than advantageous to domestic industry, India’s negotiators have set a significant precedent by inserting a clause that allows for periodic reassessment of the economic benefits of such trade agreements.