Australia-India Free Trade Agreement comes into effect. What does this mean for businesses and consumers?

IMPORTANT POINTS
  • Tariffs on more than 85 percent of Australian products have now been abolished.
  • The changes are part of the free trade agreement between Australia and India that has now come into force.
  • Australian products benefiting include wool, fresh crawfish, barley and cosmetics.

Australian exporters will be exempted from trade tax twice this week as India’s Free Trade Agreement comes into effect.

When will the tariff cuts take effect?

The first round of tariff cuts will take place on Thursday, with a second tranche coming on Sunday.

It gives Australian companies better access to India’s market of 1.4 billion people as the new year approaches.

More than 85 percent of exports to India — including wool, meat, barley, lobster, cosmetics and critical minerals — saw tariffs cut entirely as of Thursday.
Tariffs on another five percent of goods will be reduced to zero over the next six years.

The lifting of the tariffs opens up commercial opportunities “for Australia’s current trade in goods worth up to $14.8 billion destined for India each year,” Australia’s Department of Foreign Affairs and Trade said.

How will Australia’s tourism and education sectors be affected?

Australian tourism will also get a boost with 1,000 job and holiday program places for young Indian travellers.
Australia’s independent education and higher education sectors have welcomed the agreement, saying it offers great opportunities for businesses in the sector by improving access.

The Independent Tertiary Education Council Australia says improved access to the Indian education market will help develop collaborative relationships.

“There are strong economic and societal benefits for Australia from increased access to India’s adult education sector,” said Chief Executive Troy Williams.
The Council’s State of the Sector 2022 Report found that Indian students account for the largest number of enrollments for independent higher education providers, with more than 18,000 students.
Mr Williams said the sector’s rebound would help it recover from the COVID-19 downturn.

Indian companies are also benefiting from the deal with duty-free access for Indian exporters, including jewelry makers.

What’s next?

Trade Secretary Don Farrell says the two nations are natural trading partners.
“This agreement will unlock the tremendous potential of our trade relationship,” he said.
He said the deal would help diversify exports and strengthen bilateral ties.
Mr Farrell said the impact is immediate.

“Starting today, tariffs on premium wine to India will be halved from 150 percent to 75 percent, reduced to 70 percent in a few days on January 1, 2023, and gradually reduced to 25 percent over nine years,” he said.

The federal government says the “groundbreaking” deal will save Australian exporters around $2 billion a year in tariffs. Consumers and businesses are expected to save approximately $500 million in tariffs on imports of finished goods and inputs for our manufacturing sector.
Australia’s Indian community is the second largest and fastest growing foreign-born group in the country. In the 2021 census, 976,000 people reported having Native American heritage. Punjabi is Australia’s fastest growing language and Hindi is among the top 10 languages ​​used in Australian households.
Both countries say work on the Free Trade Agreement – known as the Australia-India Economic Cooperation and Trade Agreement – continues to build with negotiations for a Comprehensive Economic Cooperation Agreement.

A free trade agreement with the UK has also been ratified by Australia and is awaiting entry into force in the UK parliamentary process in early 2023.

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