Deal a decade in the making . . .
On Saturday, the Indian Minister of Commerce and Industry, Piyush Goyal, and Australian Minister of Trade, Tourism, and Investment, Dan Tehan, signed an interim trade deal — the Economic Cooperation and Trade Agreement (ECTA). Indian Prime Minister Narendra Modi and Australian Prime Minister Scott Morrison were present during the virtual signing ceremony and welcomed the deal that followed more than a decade of negotiations. Both countries see the deal as an important step towards signing a full free trade agreement.
Watershed moment for both economies . . .
The agreement is expected to raise bilateral trade to US$45-50 billion by 2027 from the current level of US$27.5 billion. Australia will remove duties on 96.4 per cent of Indian merchandise imports. In return, India will remove tariffs on 85 per cent of Australian goods, including coal, LNG, wool, non-ferrous metals, and certain critical minerals, which are used by many Indian industries as raw materials. The cheaper raw materials could make Indian manufacturers more competitive in the steel, aluminum, and apparel sectors. Meanwhile, Australia’s increased access to one of the largest and fastest-growing markets in the world will enhance its export potential and help curtail its dependence on exports to China.
Towards a Canada-India trade agreement?
Over the last decade, India has initiated various protectionist economic policies and prioritized regional trade to revive the domestic manufacturing industry and reduce trade deficits with developed economies. However, India shifted this stance toward regional trade agreements in 2019 when it opted out of the Regional Comprehensive Economic Partnership. Since then, India has focused on bilateral agreements. Its signing of agreements with Australia last week and the United Arab Emirates in February demonstrates the country’s shift toward greater economic openness. India is also trying to resume trade talks with the European Union and the United Kingdom, and assessing the need for an agreement with the United States. India and Canada’s return to the negotiation table last month is breathing new hope into the trade talks that first began 2010.