Beyond Border-Gavaskar: On India-Australia trade agreement

Periodic reappraisal of the economic gains from the trade pact with Australia is pragmatic

Updated - April 08, 2022 01:24 am IST

Published - April 08, 2022 12:25 am IST

The India-Australia Economic Cooperation and Trade Agreement (ECTA) signed last week is a key step in enhancing bilateral economic ties between the two major Indian Ocean littoral states and reflects the growing strategic alignment between New Delhi and Canberra. While India’s strongest ties with Australia had hitherto largely centred around their common colonial legacy of cricket, best exemplified in the Border-Gavaskar Trophy, a more contemporary shared vision has emerged around the mutual need to strengthen their strategic and trade engagement. This was manifested in the June 2020 virtual summit when Prime Ministers Narendra Modi and Scott Morrison decided to elevate the relationship to the level of a Comprehensive Strategic Partnership. Defence and strategic ties have gained significant traction and the latest ECTA has been hammered out in just six months since negotiations restarted in end-September. Envisaged as an ‘early-harvest’ agreement, the ECTA covers the gamut of economic and commercial relations including trade in goods and services, rules of origin, technical barriers to trade, dispute settlement and customs procedures. Targeting a goal of doubling bilateral trade to about $50 billion in five years, from the $27.5 billion logged in 2021, the partners have set about dismantling or lowering tariff barriers. While Australia has agreed to eliminate tariffs on more than 96% of Indian exports, including several labour-intensive industries, India will allow the duty-free entry of 85% of Australian goods exports by value from day one and within the next 10 years cut tariffs to zero on another 5% of Australian merchandise.

That the negotiators adopted a pragmatic tack is evident in the way contentious issues such as the dairy sector, a politically significant export industry in Australia, were set aside for separate resolution at later talks. A key area that has been included is the movement of ‘natural persons’, which is inextricably linked to fostering closer people-to-people links and is an imperative in efforts to promote bilateral trade in services. The agreement aims to support access for a range of Australian and Indian skilled service providers, investors, and business visitors and also, crucially, seeks to address an area linked to another major Australian export — education. Canberra has now agreed, on a reciprocal basis, to ease visa restrictions, enabling students at varied levels of higher education to stay on for periods ranging from 18 months to four years to pursue work opportunities on a temporary basis. Arguably the best feature of the ECTA though is the incorporation of a compulsory review mechanism at the end of 15 years. With past FTAs having proved less than beneficial to domestic industry, India’s negotiators have set a meaningful precedent in including the feature to periodically reappraise the economic gains from such trade pacts.

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