AI ECTA – FTA Agreement Australia and India 04/04/22

On the 2^nd of April 2022 Australia and India signed a historical free trade agreement.  

This Australia-India Economic Cooperation and Trade Agreement (AI ECTA) is symbolic for both countries at a time where international trade relations are difficult and uncertain.

It is an important agreement for Australian importers because it will reduce 85% of tariffs on imported goods from India to Australia. It will also provide better trade relations for Australian export industries for lithium, lobster and wine. The Full Benefits of the FTA are Include:

• Sheep meat tariffs of 30 per cent will be eliminated on entry into force, providing a boost for Australian exports that already command nearly 20 per cent of India’s market
• Wool will have the current 2.5 per cent tariffs eliminated on entry into force, supporting Australia’s second-largest market for wool products.
• Tariffs on wine with a minimum import price of US$5 per bottle will be reduced from 150 per cent to 100 per cent on entry into force 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 on entry into force 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 on entry into force 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 at entry into force.
• Tariffs on pharmaceutical products and certain medical devices will be eliminated over five and seven years.

Prime Minister 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.

“This agreement opens a big door into the world’s fastest growing major economy for Australian farmers, manufacturers, producers and so many more,” the Prime Minister said. 

“By unlocking the huge market of around 1.4 billion consumers in India, we are strengthening the economy and growing jobs right here at home.

The agreement will also reduce the visa requirements for Indian students and temporary worker visa holders at a time where the Australian hospitality and tourism industry is trying to recover from the effects of the Covid 19 pandemic.

The agreement mentions the pharmaceutical, medical and technical service industries, and is focused on reducing the government red tape on approvals for these industries, with tariffs to be eliminated over five and seven years.

‘So, what can our customers and the supply chain industry stand to benefit from this agreement?’

For Australian importers currently importing from India and paying customs duties, this agreement will reduce or remove the 5% General rate of duty or the 4% developing country duty component.

For importers sourcing goods from China, the trade disadvantages have been noticeable with production delays from electricity black outs, high shipping costs and a Covid zero policy.  Now, for Australian importers that are looking at expanding into the Indian market, this could be a great time to look for ‘trade diversification opportunities’ and envisage India as a strong emerging market.

Ligentia has experts who can provide detailed trade and tariff advice and, with our expertise and knowledge, we can help support critical decision making, working with customers to plan ahead of time.  We have the foresight and ability to hold cargo and delay cargo movements until the free trade agreement is available to use this can used to our customers advantage.

With domestic laws still needing to be passed, we anticipate that this agreement will be in effect by the end of the year.

For more information please see the full press release from DFAT.