India Australia ECTA: Highlights

?India -Australia Economic Cooperation and Trade ECTA

On April 2, 2022, India, and Australia signed the India-Australia Economic Cooperation and Trade Agreement (ECTA}. The ECTA is an interim arrangement and parties will begin negotiations on a full-fledged free trade agreement in the next 75 days.

Apart from regular chapters like Trade in Goods and Services, Technical Barriers to Trade, Sanitary and Phytosanitary measures, Temporary?Movement of Natural Persons, etc., ?the parties vide certain "side letters"?have made broad commitments on wine, organic goods, work, and holiday visa, post-study work visas, etc.

With respect to goods, presently the average customs duty rate for imports to India is 13.8% across goods. ?On the other hand, Australia has maintained a tariff rate of 5% on a majority of its tariff lines, and many items are subjected to nil rates.?Under the ECTA, Australia has offered a nil rate of duty on all tariff lines with 98% of tariff lines being liberalized with immediate effect on items like textiles, leather, footwear, furniture, etc. India on the other hand has offered to eliminate duties on 40% of its tariff lines immediately and for another 30.3% in a phased manner over 3/5/7/10 years. Further 29.8% of tariff lines that were considered sensitive including agricultural items such as dairy, chickpea, wheat, rice, etc. have been excluded from India's commitments.

It?is expected that the ECTA?would help in promoting bilateral trade between the parties.

Below is a summary of the key provisions of interim ECTA.

The ECTA, though interim, has a variety of provisions that will promote India's economic goals. Some of these are highlighted below:

■ Trade-in Goods

a.??????Parties have agreed on Tariff Rate Quotas (TRQs) for certain items like pears, oranges, almonds, etc.

b.??????With respect to wine, India has made specific commitments to reduce the rate of customs duties over the?span of 10 years depending upon the CIF value.

c.???????Certain strategic items such as various articles of steel have been subject to?a phased elimination of duties over 5 years by Australia.

d.??????Interestingly, Government procurement has not been excluded from the ambit of this chapter while it is expressly excluded from the ambit of Trade in services.

■???Trade remedies

?The ECTA provides that agricultural goods of a party shall not be subjected to the special safeguard duty mechanism.

■????Rules of Origin

In line with the Indian Government's ongoing efforts to curb the misuse of its FTAs, the CEPA: -

a.??????Provides additional product-specific rules applicable to certain strategic items.

b.??????Provides for retrospective issuance of certificates of origin.

c.???????Makes preferential treatment subject to a verification process prescribed under Article 4.25 of the EC TA.

d.??????Requires the issuing authority and (exporter/ producer/ manufacture) to maintain records for a period of 5 years, as well as importers to maintain records in line with the laws and regulations of the importing Party. ?

e.??????Appoints the Department of Commerce as the competent authority for the issuance of certificates of origin.

???????Mutual Recognition in the Pharmaceutical Sector

Parties have dedicated a separate annexure to pharmaceutical products to address technical barriers faced by the pharmaceutical industry. Parties have agreed that the relevant "Therapeutic Goods Regulator" ?of each party shall recognize reports from a regulatory authority that the party considers comparable, for the purposes of pre-market evaluation, quality assessment, etc. of the products manufactured in the territory of the other party.

???????Trade-in Services

?A separate chapter has been introduced to facilitate the temporary movement of representatives of parties who are engaged in trade in goods, the supply of services, or the conduct of investment. Both the parties permit temporary movement for businessmen, installers and servicers, independent professionals, etc. Australia?in their commitments has allowed temporary entry and stay to around 1800 professional Indian traditional chefs and yoga instructors under the category of Contractual Service Suppliers. Further, the following industries have been given specific emphasis under this head-

a.??Parties have agreed to allow financial institutes of other party in their territory. The parties might have taken this initiative to promote trade between both parties in local currencies.

b.?Parties have agreed to provide access to public telecommunication, network, or services to service providers, which will include providing reasonable roaming rates.

c.??Parties have decided to encourage recognition of professional qualifications and experience, registration, and licensing of professionals, including through mutual recognition to facilitate trade in professional services.

d.?Parties have decided that any decision or requirement under the foreign investment framework of each party shall not be subjected to dispute settlement.

???????Institutional Mechanisms for Cooperation

?The ECTA envisages the creation of various dedicated bodies to promote specific areas of engagement. For instance:

a.??????Establishing a Joint Committee that will assess, review and monitor the implementation of the ETCA.

b.??????A Subcommittee on Trade in Goods will be set up to promote trade in both agricultural and non-agricultural goods and to address non-tariff barriers.

c.???????A Subcommittee on Trade in Services will be set up to facilitate trade in services between the parties.

d.??????A Joint Technical Subcommittee on Rules of Origin and Customs Procedures and Trade Facilitation will be set up to oversee any issues arising with respect to Rules of Origin or Customs Procedures and Trade Facilitation

e.??????A Working Group on the Temporary Movement of Natural Persons will be established to monitor and facilitate the temporary entry of each Party's respective

f.????????Professional Services Working Group is to be established for effective implementation and administration of systems for the recognition of qualifications, licensing, and registration procedures across professional services and services in regulated or licensed occupations.

???????Side letters

a.??????Strengthening bilateral cooperation on trade in wine by providing details on the customs procedure, regulatory procedure, certification requirement, etc.

b.??????Promoting organic goods trade by exchanging information related to certification, control systems, etc.

c.???????Parties agreed on a work-based immigration route for a post-study work visa.

d.??????The government of Australia has agreed to amend its taxation law to resolve the issue of double taxation.

e.??????Work and holiday visas to promote youth mobility for people aging between 18 to 31.

f.????????Establishing a working group to examine issues related to market access, maturation rules, etc. for whiskey and other alcoholic beverages.

India has agreed to give MFN status to wines imported from Australia. ?

Currently, India is Australia's 9th largest trading partner and Australia is the 17th largest trading partner for India.44 India has a surplus in services export and a deficit in merchandise exports as India imports coal in bulk from Australia.

It is expected that the ECTA will further facilitate trade between the two countries and will provide better access to the Australian Market for pharmaceutical, clothing and apparel, and leather industries. The Australian government has agreed to a nil?rate of customs duties for almost all the items from the date of implementation of ECTA. Thus, there is a significant concession for various industries.