Australia and India make history as they signed the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) on 2 April 2022

What is an FTA?

A free trade agreement (FTA) is an international treaty between two or more economies that reduces or eliminates certain barriers to trade in goods and services, as well as investment.

Australia negotiates FTAs to benefit Australian exporters, importers, producers and investors by removing certain barriers to international trade and investment.

Australia currently has 16 Free Trade Agreements in force, with India now confirmed, 2 Free Trade Agreements are still expected to come into force (UK and EU).

How will this affect shipping between Australia and India?

The AI-ECTA treaty aims to strengthen the relationship between Australia and India. 

In 2020, India was Australia’s seventh largest trading partner, with two-way trade valued at $24.3 billion, and sixth largest goods and services export market, valued at $16.9 billion.

At an economic standpoint, this agreement is set to give both countries an advantage. Tariffs will be eliminated on more than 85 per cent of Australian goods exports to India (valued at more than $12.6 billion a year), rising to almost 91 per cent (valued at $13.4 billion) over 10 years.

Scott Morrison said the agreement would create enormous trade diversification opportunities for Australian producers and service providers bound for India, valued at up to $14.8 billion each year.

Both countries are set to create new economic and workforce opportunities through this treaty.

Benefits of the AI-ECTA as it comes into force include:

  • Sheep meat tariffs of 30 per cent will be eliminated
  • Wool will have the current 2.5 per cent tariffs eliminated
  • Tariffs on wine with a minimum import price of US$5 per bottle will be reduced from 150 per cent to 100 per cent and subsequently to 50 per cent over 10 years (based on Indian wholesale price index for wine).
  • Tariffs on wine bottles with minimum import price of US$15 will be reduced from 150 per cent to 75 per cent and subsequently to 25 per cent over 10 years (based on Indian wholesale price index for wine).
  • Tariffs up to 30 per cent on avocados, onions, broad, kidney and adzuki beans, cherries, shelled pistachios, macadamias, cashews in-shell, blueberries, raspberries, blackberries, currants will be eliminated over seven years.
  • Tariffs on almonds, lentils, oranges, mandarins, pears, apricots and strawberries will be reduced, improving opportunities for Australia’s horticulture industry to supply India’s growing food demand.
  • The resources sector will benefit from the elimination of tariffs for coal, alumina, metallic ores, including manganese, copper and nickel; and critical minerals including titanium and zirconium.
  • LNG tariffs will be bound at 0 per cent.
  • Tariffs on pharmaceutical products and certain medical devices will be eliminated over five and seven years.

The Australia-India Economic Cooperation and Trade Agreement will enter into force on 29 December 2022.

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