Australia’s India trade deal set for December go-ahead

6 December 2022

Parliament has approved legislation to implement the Australia-India Economic Cooperation & Trade Agreement (AI-ECTA). This means new trade arrangements will come into force on 29 December.

AI-ECTA will eliminate tariffs on 85% of Australian goods exported to India. Australia’s agrifood, health, mining and education sectors are among those that will benefit.

Minister for Trade and Tourism, Senator the Hon Don Farrell, welcomed the news, which came as Parliament also approved Australia’s new trade agreement with the UK.

‘These agreements will support our businesses to grow, to offer more employment opportunities, and will give Australian consumers more choice at the checkout,’ he said.

The long-term impact is potentially huge. AI-ECTA will improve market access to a country of 1.4 billion people and a fast-growing middle class.

India is currently a small but fast-growing export market for Australian businesses. Goods exports reached $19.3 billion in 2021. This equates to 4.2% of Australia’s total exports.

Agriculture exports set to benefit

The AI-ECTA deal will provide new opportunities for Australian agri-exporters.

The agreement eliminates or reduces tariffs on nearly 90 percent of our current food and agricultural exports to India. This includes sheep meat, wool, horticulture, fisheries, fruit, cosmetics and forestry products.

Australian exporters will also gain preferential tariff quotas for lentils, citrus, almonds, cotton and pears.

Until now, high tariffs have limited exporters to mostly premium markets.

Premium wine tariff down by 50%

Wine is a big winner. India currently imposes 150% tariffs on imports of all wine and spirits. Until now, high tariffs have kept most overseas wines out of Indian markets. This is despite the growing popularity of wine-drinking among overseas-educated professionals.

From 29 December, Australian wine exporters will incur a 75% tariff rate on bottles with a value greater than US$15. This ‘premium wine’ rate will fall to just 25% over 10 years.

Mid-range Australian wines will also benefit. Wine priced between US$5-15 will see tariffs fall to 100% immediately, and then 50% after 10 years.

‘We are already in a great position,’ says John Southwell, Trade Commissioner, Mumbai. ‘Australia currently delivers 44% of imported wine in India. We will work with consumer groups and the hospitality sector in India to showcase the depth and sheer diversity of Australian premium wines.’

Mining sector gains tariff-free access

AI-ECTA will also help Australia’s mining industry diversify into Indian markets.

From 29 December, Australian exporters will benefit from a zero-tariff rate on exports of manganese, copper, nickel, cobalt, aluminium and tin ores.

Minor metals is a major export sector. Australia exported A$11.5 billion of non-ferrous metals in 2021. AI-ECTA should assist exports of copper alloys and most nickel products.

Improved prospects for Australian education

Australia focused on education during the negotiations that led to AI-ECTA.

The agreement includes new provisions for work-holiday visas. It will also enable Indian students to stay on in Australia with post-study visas.

Mutual Recognition Agreements (MRAs) will enhance the prospects for Indian students in Australia in medicine and other professional fields. In turn, this will help Australian universities to expand in India as they develop new offshore-delivery programs.

Meanwhile, Indian students who gain top grades in technical and science subjects will be able to work for longer periods in Australia. This will help boost our $169 billion tech sector.

Australian service providers to gain ‘best treatment’

AI-ECTA contains commitments to help service suppliers. Approximately 31 sectors and subsectors are now guaranteed ‘best treatment’. This means service providers will be accorded the same terms as providers from any other trade-agreement partner. 

The sectors set to benefit include banking and insurance, communications, construction, and engineering services.

The agreement also includes niche services providers, such as taxation specialists, medical and dental services providers, and architectural and urban planning practices.

Advisers to help exporters explore opportunities

Austrade advisers are helping Australian businesses to understand how AI-ECTA can change their prospects. This includes our India-based advisers, who work one-on-one with Australian businesses as they investigate market opportunities in India.

We can also help exporters manage the practical challenges of trading with India.

To connect with an Austrade adviser in India, please email Adil-Mohamed in Chennai.

To find out more, please visit the Australian-India Business Exchange.