The Australia-India Economic Cooperation and Trade Agreement (ECTA) will enter into force on 29 December. ECTA stands for unity in Hindi and reflects the bond between the two countries. According to Frances Lisson, Australia’s Chief Negotiator for the ECTA, who presented at the South Australian Business Chamber’s ‘Exporting to India’ event this week, this timing means two tariff reductions will take place in the space of a few days, first on entry and then again on 1 January 2023. Tariffs on 85% of Australia’s exports to India will be instantly eliminated, while tariffs on 5% of other goods will be reduced.
Australian exporters are expected to save $2 billion a year, and consumers and businesses who import Indian goods stand to gain $500 million annually. Australia is the first developed economy to sign a trade agreement with India, which means it will have a significant advantage over other major trading partners including Canada, the European Union, New Zealand, UK and USA.
Preferential tariffs on Australian exports to India will include wine, sheep meat, wool, seafood, infant formula, barley, oats, lentils, nuts, fruit, vegetables, coal and alumina. India’s market is seen as lucrative, with the country’s economy expected to grow by 6.8% – 7.1% in 2022/2023, in spite of current global uncertainties. With the ECTA in place, trade between the two countries is forecast to increase to over $45 billion in the next five years.
Importantly, the ECTA includes a most favoured nation clause for Australian wine. Although wine accounts for just 1% of alcohol sales in India, exporters see an opportunity. The market is growing, with the country’s population at almost 1.4 billion people. 24 Australian wine producers are already exporting to India, and although coming from a small base, in 2021 Australian wine exports to India increased by 71% in terms of volume and 81% in value.
The ECTA will result in 150% tariffs on a US$5 bottle of wine falling to 100% immediately, 90% on 1 January and then further reduced to 50% over ten years. 150% tariffs on more expensive, US$15 bottles will fall to 75% on 29 December, 65% on 1 January and gradually drop to 25% after a decade. A trade dispute with China means that there is a void of about $1 billion in the Australian wine export market. Producers hope that exports to India help to alleviate this.
More benefits may follow; the ECTA is not a full Free Trade Agreement, but an interim arrangement preceding one. In January 2023 Australia and India will start negotiations on a Comprehensive Economic Cooperation Agreement (CECA). This will be a larger agreement which will build on the ECTA, rather than replace it.
For more information, please visit Austrade’s India market profile and to find out specific details about tariff reductions, please see the FTA Portal.
To speak to the South Australian Business Chamber about export document certification to India or any of our other international services, please contact Maggie Li, Manager, International Services, on 08 8300 0000 or visit our website.
