Australia approves free trade agreement with India

Australian PM Anthony Albanese; Indian PM Narendra Modi. Photo: Twitter/@AlboMP

New Delhi: The Australian Parliament on Tuesday approved the free trade agreement inked with India in April, paving the way for the rollout of the pact on a mutually agreed date -- a move which would help in almost doubling the two-way commerce to $45-50 billion in about five years.

The pact is expected to come into force from January 2023.

The agreement, which was signed on April 2, would provide duty-free access to Indian exporters of over 6,000 broad sectors including textiles, leather, furniture, jewellery and machinery in the Australian market.

Labour-intensive sectors which would gain immensely include textiles and apparel, a few agricultural and fish products, leather, footwear, furniture, sports goods, jewellery, machinery, and electrical goods.

Commerce and Industry Minister Piyush Goyal said the agreement is likely to push the bilateral trade to $45-50 billion in the next five-six years from the present $31 billion.

This was the third such agreement signed by this government, after the Mauritius and UAE trade pacts.

A worker sits on a ship carrying containers at Mundra Port in the western Indian state of Gujarat on April 1, 2014. Photo: Reuters/Amit Dave

"Australia will open 100 per cent of their lines (products) with no restriction on even quota. This is the first time Australia has done for any country...We see job opportunities when Australian investment comes here," Goyal told reporters here.

Soon after getting approval from the Executive Council of Australia and assent from the Indian President, both countries will fix a date and implement the pact.

Though the minister did not commit to any date, official sources said the agreement could be implemented from January 1 next year.

"BREAKING: Our Free Trade Agreement with India has passed through parliament," Australian Prime Minister Anthony Albanese said in a tweet.

Replying to the tweet, Prime Minister Narendra Modi tweeted, "Thank you PM @AlboMP! The entry into force of IndAus ECTA will be greatly welcomed by our business communities, and will further strengthen the India-Australia Comprehensive Strategic Partnership."

The India-Australia Economic Cooperation and Trade Agreement (ECTA) needed ratification by the Australian Parliament before its implementation. In India, such pacts are approved by the Union Cabinet.

Goyal said there will be harmonisation of codes and customs regimes on both sides so that "we can enter into force at an early date".

The deal is fair and good for India, he added.

The Australian trade minister said in a statement that the ECTA will enter into force 30 days (or another mutually agreed time) after the respective parties have confirmed in writing that they have completed their domestic requirements.

"The Albanese government has worked hard to expeditiously advance all processes necessary" to ensure that Australia is in a position to implement the free trade agreements before the end of 2022, the statement said.

Australia's Minister for Trade and Tourism Don Farrell said they will work closely with the Indian government to implement the trade agreement "as soon as possible".

Under the pact, Australia is offering zero-duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products that currently attract 4-5 per cent customs duty in Australia.

India's goods exports to Australia stood at $8.3 billion and imports from the country aggregated to $16.75 billion in 2021-22.

The Australian Parliament has also approved an amendment to the Double Taxation Avoidance Agreement (DTAA), a move which would help the Indian IT sector in operating in that market.

It would stop the taxation on the offshore income of Indian firms providing technical support in Australia.

Goyal said the Indian IT sector is the "biggest gainer" of that amendment.

"If the tax will go, they can see a quantum jump in their business with Australia," he added.

The move, as per estimates, may lead to savings of about $200 million each year for over 100 Indian IT firms operating in Australia.

About the beginning of talks for expanding the scope of the India-Australia Economic Cooperation and Trade Agreement, Additional Director General of Foreign Trade (DGFT) Tapan Mazumder said it may start from January next year.

Issues which may figure in that meeting include government procurement and digital trade.

Goyal also said for the "first time", India has got visas for Indian chefs and yoga instructors and also got a commitment that every child going to study in Australia will get an opportunity to work there depending on the level of education.

This is the first agreement with a developed country after a decade, he added.

He also said the pact will help farmers growing grapes for making wine to explore more business opportunities in Australia.

"Today there are 6,000 grape farmers (in India) who grow grapes for wine purpose...wine industry has welcomed it wholeheartedly. It will help attract investments, new farmers can also come into the sector," he added.

Goyal said the ECTA would give a big boost to several sectors of the economy, especially textiles, gems and jewellery and pharmaceuticals.

Around 10 lakh jobs are estimated to be created as the result of the pact, he said, adding it would also open new opportunities for the service sector in India and will immensely benefit students by offering them an opportunity to work in Australia.

An annual visa quota of 1,800 is to be instituted for Indian Yoga teachers and chefs.

Commenting on the move, Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said the agreement has opened vistas of opportunities for domestic exports as over 98 per cent of the tariff lines will have tariff advantage from day one.

"We will also get duty-free imports of critical raw materials like coal, alumina, manganese, copper, nickel, wool, hides and skin. It will impart further competitiveness to our manufacturing and exports," Sahai added.

The Confederation of Indian Alcoholic Beverage Companies (CIABC) Director General Vinod Giri said the pact will take the trade ties between the two nations to newer heights.

"The FTA is a win-win for both. On one hand, it would open up the Indian market for quality Australian wines, and on the other, it would help the Indian wine industry evolve further benefiting from the expertise and investment from their Australian counterparts," Giri said.

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