More than 95% of roughly 12,000 Indian goods will get duty-free access to the Australian market as New Delhi signs a much-awaited trade deal with Canberra on Saturday. India will keep its sensitive dairy sector out of the ambit of the interim pact, but will allow premium Australian wine at concessional duties, official sources said on Friday.
Of course, the scope of the pact will be expanded to cover 100% Indian goods in five years. About 70% of Australian products will get duty-free and concessional access to the Indian market under the Economic Co-operation and Trade Agreement, as the deal will be formally known. This will be increased to cover 85% of goods in 10 years.
Indian exporters in critical sectors, especially labor-intensive ones like agriculture, textiles & garments and pharmaceuticals will get duty-free access to the Australian market. New Delhi will also get greater access in about 100 services. Importantly, the deal will also ensure freer movement of skilled professionals from India under the so-called Mode-4 services. Both the sides will forge a broader free trade agreement (FTA) in due course to build on this partnership.
FE had on March 21 reported that India will likely allow high-end Australian wine but keep the dairy sector out of the pact’s ambit.
The deal will be signed by Commerce and Industry Minister Piyush Goyal and his Australian counterpart in the presence (virtual) of Prime Ministers Narendra Modi and Scott Morrison. The basic customs duty on premium Australian wine (beyond a price threshold) will be cut in phases – from the current 150% to 100% and then to 75%. This is designed to protect the Indian wine industry that does not typically operate in that high-end segment. Public procurement is not part of the deal yet. At just $ 8.6 million, spirits and beverages, including wine, accounted for a tiny slice of Australia’s exports to India until January last fiscal, thanks to the prohibitive impost.
The current deal will be a win-win situation for both countries, said the official sources. It augurs well for Australia, which is expected to go to polls in May.
This deal goes beyond the realm of trade, as it covers strategic considerations as well, said a senior government official. Both countries are part of the strategically-important QUAD grouping along with the US and Japan. Similarly, together with Japan, they form a supply-chain resilience initiative, a move that is seen as countering China’s “weaponisation” of supply chains.
On March 21, the Prime Ministers of both countries had committed to bolstering bilateral co-operation and an early conclusion of a Comprehensive Economic Cooperation Agreement (CECA), as the broader FTA will be formally known.
The CECA would ultimately cover not just traditional pills like goods, services and investments but also a broad range of other critical areas. These include government procurement, logistics, standards, rules of origin, phytosanitary measures, legal and institutional issues. However, many of these areas will not be covered by the enhanced partnership that will be signed on Saturday.
But even this deal will not fall foul of the provisions of the World Trade Organization, as it ensures a “substantial coverage” of each other’s market.
India had a merchandise trade deficit of $ 7.2 billion with Australia in the first ten months of FY22. It shipped out goods worth only $ 6.3 billion, while its imports from Australia stood at $ 13.5 billion. Major traded items include mineral fuels, pharmaceutical products, organic chemicals and gem and jewelery. Bilateral trade, including services, were as much as $ 27 billion in FY21.