The India-Australia Free Trade Agreement, officially called the Australia-India Economic Cooperation and Trade Agreement (AIECTA), is the first trade agreement India has signed with a developed economy in more than a decade. Negotiations began in 2011 but were suspended in 2015 as talks stalled over issues such as market access for dairy products in India and visa liberalization for Indian professionals. They resumed in September 2021, and the pact was signed in a record time of just over six months.

The agreement is expected to give a big boost to bilateral trade as it not only eliminates or lowers tariffs on a wide range of goods but also addresses non-tariff barriers such as technical barriers to trade and sanitary and phytosanitary restrictions. India’s apparel sector has welcomed the new agreement, which it believes will boost exports, employment and investment in the sector.

The Indian government estimates that merchandise trade will nearly double to $50 billion in five years from about $27 billion currently. Since India does not belong to any major regional trading bloc and most of the world’s major economies have bilateral or regional trade pacts with other countries, it is also important for India to sign similar agreements so that it does not have to give up preferential market share and weaken its export competitiveness.

India said it hopes that the AIECTA will send a positive signal to other developed countries such as the U.K., Canada and the EU, which are already negotiating similar agreements with New Delhi. This would show that India is serious and ready to conclude such agreements quickly if a balanced agreement is reached.

The agreement is an ambitious pact with significant commitments to tariff reductions. Australia will provide duty-free market access for 96.4 percent of the value of India’s exports (98 percent of tariff lines) on the first day of implementation of the agreement.

Exports of several labor-intensive sectors currently subject to import tariffs of 4-5 percent in Australia will benefit from immediate duty-free access. These include most textiles and apparel products, as well as some agricultural and fishery products, leather, footwear, furniture and sporting goods, jewelry, machinery products, and selected pharmaceuticals and medical devices. Tariffs on the remaining 113 tariff lines, which account for 3.6 percent of India’s exports, will be eliminated within five years.

Australia will also gain significant market access in India, as tariffs on more than 85 percent of Australia’s merchandise exports will be eliminated immediately, rising to nearly 91 percent within 10 years.

While tariffs on goods such as wool, mutton, coal, alumina, metallic ores and critical minerals will be immediately reduced to zero, tariffs on other products such as avocados, onions, cherries, shelled pistachios, macadamia nuts, shelled cashews, blueberries, raspberries, blackberries and currants will be eliminated over the next few years. Import duties on Australian wines will also be reduced but not eliminated.

Both sides want to deepen engagement and work toward a Comprehensive Economic Cooperation Agreement (CECA). It was agreed that within 75 days of the signing of the agreement, a negotiating subcommittee will begin negotiations on additional areas of market access for goods and services, a chapter on digital trade and a chapter on government procurement to transform the AIECTA into a CECA.

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