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2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CUSTOMS AMENDMENT (INDIA-AUSTRALIA ECONOMIC COOPERATION AND
TRADE AGREEMENT IMPLEMENTATION) BILL 2022
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Home Affairs, the Honourable Clare O'Neil MP)
CUSTOMS AMENDMENT (INDIA-AUSTRALIA ECONOMIC COOPERATION
AND TRADE AGREEMENT IMPLEMENTATION) BILL 2022
OUTLINE
The purpose of the Customs Amendment (India-Australia Economic Cooperation and Trade
Agreement Implementation) Bill 2022 (the Bill) is to amend the Customs Act 1901 (the
Customs Act) to give effect to the preferential entry of goods under the India-Australia
Economic Cooperation and Trade Agreement (the Agreement), signed on 2 April 2022.
The Agreement delivers outcomes for trade in goods and services, providing businesses with
the opportunity for greater participation in the Indian and Australian economies. The
Agreement will be the foundation for the development of a further Comprehensive Economic
Cooperation Agreement between Australia and India.
The amendments contained in the Bill will implement the agreed outcomes for the trade in
goods chapter of the Agreement and enable goods that are 'Indian originating goods' to enter
Australia at preferential rates of customs duty. The Bill will:
• introduce new rules of origin that will determine if goods imported into Australia
from India are 'Indian originating goods';
• provide for the development of regulations prescribing record keeping requirements
for exporters and producers for Australian originating goods that are exported to
India; and
• enable authorised officers to request and disclose information to Indian customs
officials to verify the origin of goods exported to India for which preferential tariff
treatment is claimed under the Agreement.
The amendments contained in the Bill will be operative on the later of the day on which this
Act receives the Royal Assent and the day on which the Agreement enters into force for
Australia.
Complementary amendments will also be made to the Custom Tariff Act 1995 (the Customs
Tariff Act) by the Customs Tariff Amendment (India-Australia Economic Cooperation and
Trade Agreement Implementation) Bill 2022 to provide for the preferential rates of customs
duty that will apply to goods that meet the new rules of origin.
FINANCIAL IMPACT STATEMENT
It is estimated that the implementation of the Agreement will reduce customs duty collections
by $335 million over the forward estimates.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
A Statement of Compatibility with Human rights in respect of the amendments contained in
the Bill is at Attachment A. The Statement assesses the amendments to be compatible with
Australia's human rights obligations.
Page 2 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
REGULATION IMPACT STATEMENT
A Regulation Impact Statement in respect of all amendments to give effect to the new rules of
origin requirements in accordance with the Agreement and related preferential treatment of
custom duty is at Attachment B.
Page 3 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
CUSTOMS AMENDMENT (INDIA-AUSTRALIA ECONOMIC COOPERATION
AND TRADE AGREEMENT IMPLEMENTATION) BILL 2022
NOTES ON CLAUSES
Clause 1 Short title
1. This clause provides for the 'Customs Amendment (India-Australia Economic Cooperation
and Trade Agreement Implementation) Bill 2022' (the Bill), when enacted, to be cited as the
Customs Amendment (India-Australia Economic Cooperation and Trade Agreement
Implementation) Act 2022.
Clause 2 Commencement
2. This clause sets out, in a table, the date on which provisions of the Bill, when enacted, will
commence.
3. Table item 1 provides for clauses 1 to 3 and anything in the Bill not elsewhere covered by the
table to commence on the day the Bill receives the Royal Assent.
4. Table item 2 provides for Schedule 1 of the Bill to commence on the later of the day the Bill
receives the Royal Assent, and the day the India-Australia Economic Cooperation and Trade
Agreement (the Agreement), done on 2 April 2022, enters into force for Australia. The
Minister must announce the day on which the Agreement enters into force for Australia by
notifiable instrument, in accordance with the Legislation Act 2003 (Legislation Act). The
announcement made in the notifiable instrument does not lead to the commencement of
Schedule 1 per se, it merely requires the Minister to announce the commencement of the
Agreement for public awareness. Therefore, this instrument is administrative in character as it
does not fulfil the requirements of subsection 8(4) of the Legislation Act.
5. However, the provisions do not commence at all if the Agreement does not enter into force
for Australia. Under Article 14.7 of Chapter 14 of the Agreement, the Agreement shall enter
into force 30 days after the exchange of written notifications by each party, certifying
completion of the necessary domestic requirements, including internal legal requirements, or
on such date as the Parties agree.
Clause 3 Schedules
6. This clause enables the Schedules of the Bill, when enacted, to amend or repeal provisions of
legislation specified in that Schedule in accordance with the applicable items. The Customs
Act 1901 (the Customs Act) is being amended by the Bill.
Page 4 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Schedule 1-Amendments
Part 1-Indian originating goods
Customs Act 1901
Introductory Comments
7. On 2 April 2022, the then Minister for Trade, Tourism and Investment, and his counterpart
from the Republic of India (India), signed the Agreement.
8. The Agreement, on entry into force, provides for new rules of origin to determine whether
goods imported into Australia are originating goods (referred to as 'Indian originating
goods'). Such goods are subject to preferential rates of customs duty under the proposed
amendments to the Customs Tariff Act 1995 (the Customs Tariff Act). 'Indian originating
goods', in accordance with the Agreement, are those goods that satisfy the requirements in
new Division 1JA of Part VIII of the Customs Act inserted by the Bill.
Item 1 Subparagraph 105B(3)(b)(ii)
9. Section 105B of the Customs Act sets out circumstances where the liability to pay import
duty on excise-equivalent goods is wholly or partly extinguished. However,
subsection 105B(3) of the Customs Act provides that the liability to pay import duty will not
be wholly or partly extinguished if the excise-equivalent goods are classified to
subheading 2207.20.10 (denatured ethanol) or 3826.00.10 (biodiesel) of Schedule 3 to the
Customs Tariff Act, or an item in the table in Schedule 4A, 5, 6, 6A, 7, 8, 8A, 8B, 9, 9A, 10,
11, 12, 13 or 14 of that Act that relates to a subheading mentioned.
10. As part of the implementation of the Agreement, a separate Customs Tariff Amendment
(India-Australia Economic Cooperation and Trade Agreement Implementation) Bill 2022 (the
Customs Tariff Amendment Bill) will insert new Schedule 10A into the Customs Tariff Act.
New Schedule 10A will provide for excise-equivalent rates of duty on certain alcohol,
tobacco, fuel and petroleum products in accordance with the Agreement, and the related
preferential rates of customs duty.
11. This item amends subparagraph 105B(3)(b)(ii) of the Customs Act to insert a reference to
Schedule 10A of the Customs Tariff Act. The purpose of this amendment is to ensure the
collection of the correct customs duty for biofuels and biofuel blends imported under the
Agreement.
Item 2 Subsection 105B(4) (paragraph (b) of the definition of biofuel blend)
12. Subsection 105B(4) of the Customs Act defines 'biofuel blend' as goods classified to certain
subheadings under Schedule 3 of the Customs Tariff Act or an item in the table in the
Schedules relating to originating goods under Free Trade Agreements (FTAs) that relate to
the relevant subheadings.
13. This item amends the definition of 'biofuel blend' under subsection 105B(4) of the Customs
Act to insert a reference to new Schedule 10A of the Customs Tariff Act.
Page 5 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
14. As for item 1 of the Bill, the purpose of this amendment is to ensure the collection of the
correct customs duty for biofuels and biofuel blends imported under the Agreement.
Item 3 After Division 1J of Part VIII
15. This item amends Part VIII of the Customs Act to insert new Division 1JA.
16. New Division 1JA is titled 'Indian originating goods' and sets out the new rules for
determining whether goods are Indian originating goods and therefore eligible for a
preferential rate of customs duty under the Customs Tariff Act. These new rules give effect to
Chapter 4 of the Agreement.
17. New Division 1JA contains six Subdivisions, being Subdivision A to Subdivision F as set out
below.
Subdivision A-Preliminary
18. Subdivision A contains a simplified outline of new Division 1JA and the interpretation
provision for this Division.
New section 153ZMK Simplified outline of this Division
19. New section 153ZMK sets out a simplified outline of Subdivision B to Subdivision F of new
Division 1JA.
New section 153ZML Interpretation
20. New subsection 153ZML(1) sets out the definitions for the purposes of new Division 1JA as
follows:
Agreement means the India-Australia Economic Cooperation and Trade Agreement, done on
2 April 2022, as amended from time to time. The note to this definition indicates that as
at 2022, the text of the Agreement is accessible through the Australian Treaties Library on the
AustLII website.
aquaculture has the meaning given by Article 4.1 of Chapter 4 of the Agreement.
Australian originating goods means goods that are Australian originating goods under a law
of India that implements the Agreement.
certificate of origin means a certificate that is in force and that complies with the
requirements of Article 4.15 of Chapter 4 of the Agreement.
Convention means the International Convention on the Harmonized Commodity Description
and Coding System done at Brussels on 14 June 1983, as in force from time to time. The note
to this definition indicates that as at 2022, the text of the Convention is accessible through the
Australian Treaties Library on the AustLII website. This term is necessary and is referred to
in the definition of 'Harmonized Commodity Description and Coding System'.
customs value of goods has the meaning given by section 159 of the Customs Act.
Page 6 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Harmonized Commodity Description and Coding System means the Harmonized
Commodity Description and Coding System (the HCDC System) that is established by or
under the Convention.
The Agreement uses the tariff classification codes of the HCDC System. In particular, Annex
4B to Chapter 4 of the Agreement identifies goods that must satisfy the product specific rules
by reference to their tariff classification codes under the HCDC System. The tariff
classification codes in the Agreement are the codes from the version of the HCDC System in
place immediately from 1 January 2017, commonly referred to as the 2017 version of the
HCDC System.
The HCDC System is a structure for classifying goods based on internationally agreed
descriptors for goods and related six-digit codes administered by the World Customs
Organization (WCO). This six-digit classification uniquely identifies all traded goods and
commodities and is uniform across all countries that have adopted the HCDC System. The
WCO reviews the system every five years to reflect changes in industry practice,
technological developments and evolving international trade patterns.
This term is referred to in the definition of 'Harmonized System', which sets out the
HCDC System on which the Agreement, particularly the product-specific rules, is based.
Harmonized System means:
(a) Harmonized Commodity Description and Coding System as in force on
1 January 2017; or
(b) if the table in Annex 4B to Chapter 4 of the Agreement is amended or replaced to
refer to Chapters, headings and subheadings of a later version of the
HCDC System, the later version of the HCDC System.
Paragraph (a) of the definition of 'Harmonized System' in new subsection 153ZML(1) of the
Customs Act will therefore incorporate into subordinate legislation the version of the HCDC
System on which the Agreement was based (being the version in place immediately from 1
January 2017).
Paragraph (b) of the definition allows later versions of the HCDC System to be incorporated
into the Customs Act if Annex 4B of the Agreement is updated, amended or adopted to
reflect such later versions in line with Article 4.32 of the Agreement.
While each signatory to the Convention is required to implement and reflect related
amendments to the HCDC System in their domestic legislation, simultaneously on the date
when the amendments enter into force, the pace at which the amendments are implemented
varies from country to country and this is reflected in Australia's various FTA with other
countries.
While Australia has implemented, and currently uses, the latest HCDC System of 2022, many
of our established FTAs still utilise other versions of the HCDC System for their product
specific rules of origin. In light of this, and to avoid causing any disruption to international
trade, Australia, through the Australian Border Force, publishes the changes between each
HCDC System update and relevant concordance associated with those updates on its website
Page 7 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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so that anyone can readily identify the appropriate tariff classification codes for importing
goods from other countries into Australia.
The HCDC System is incorporated by reference into the Customs Act through this definition.
This incorporation by reference is also used for the purposes of the definition of
'Interpretation Rules', and 'for the purposes of section 153ZMN with respect to determining
if goods are Indian originating goods.
The definition of 'Harmonized System' will expressly recognise, in the Customs Act, the
version of the HCDC System on which the Agreement was based, and allow subsequent
versions of that System to also be recognised when the relevant Annex of the Agreement is
updated, amended or adopted.
The 2017 version of the Harmonized System is available free of charge on webpages
administered by the WCO (www.wcoomd.org).
Annex 4B to Chapter 4 of the Agreement is available free of charge on the webpage in
relation to the Agreement that is administered by the Department of Foreign Affairs and
Trade, and on the Australian Treaties Library on the AustLII website (www.austlii.edu.au).
Any revisions to Annex 4B to Chapter 4 of the Agreement will also be made available free of
charge on the internet.
Indian originating goods means goods that, under Division 1JA of the Customs Act, are
Indian originating goods.
indirect materials means:
(a) goods or energy used in the production, testing or inspection of goods, but not
physically incorporated in the goods; or
(b) goods or energy used in the maintenance or operation of equipment or buildings
associated with the production of goods;
including:
(c) fuel (within its ordinary meaning), catalysts and solvents; and
(d) gloves, glasses, footwear, clothing, safety equipment and supplies; and
(e) tools, dies and moulds; and
(f) spare parts and materials; and
(g) lubricants, greases, compounding materials and other similar goods.
This definition reflects Article 4.1 (h) of the Agreement.
Interpretation Rules means the General Rules (as in force from time to time) for the
Interpretation of the Harmonized System provided for by the Convention.
The General Rules for the Interpretation of the Harmonized System are available free of
charge on webpages administered by the WCO (www.wcoomd.org). The General Rules of
Interpretation can also be found on the official platform of the WCO, known as WCO Trade
Tools (https://www.wcotradetools.org/).
Page 8 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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non-originating materials means goods that are not originating materials.
Non-originating materials are goods that are not originating materials because they do not
satisfy the requirements of new Division 1JA in their own right. For example, where ice
cream is processed in a Party to the Agreement from milk and cream obtained from cows
born and raised in that Party and cocoa that is produced in Ghana (which is not a Party to
Agreement), the milk and cream would be originating materials and the cocoa would be a
non-originating material.
non-party has the same meaning as it has in Chapter 4 of the Agreement.
This term is referred in new section 153ZMQ, which deals with the consignment of Indian
originating goods (see notes below for new section 153ZMQ).
originating materials means:
(a) Indian originating goods that are used in the production of other goods; or
(b) Australian originating goods that are used in the production of other goods; or
(c) indirect materials.
In some circumstances, in order to determine whether goods that are imported into Australia
are Indian originating goods, and therefore eligible for a preferential rate of customs duty, it
may be necessary to have regard to the goods from which the final goods are produced (see
the notes for new Subdivision C).
production has the meaning given by Article 4.1 of Chapter 4 of the Agreement.
In Article 4.1, 'production' is defined as operations including growing, cultivating, raising,
mining, harvesting, fishing, trapping, hunting, capturing, collecting, breeding, extracting,
aquaculture, gathering, manufacturing, processing, or assembling a good. This list is non-
exhaustive and the term 'production' is capable of capturing any other process that falls
within the meaning of 'operations', including any currently existing operations that have not
been listed and any new operations, which may arise in the future.
territorial sea has the same meaning as in the Seas and Submerged Lands Act 1973. This
definition is taken from Articles 3 and 4 of United Nations Convention on the Law of the Sea.
territory of Australia means territory within the meaning, so far as it relates to Australia, of
Article 1.3 of Chapter 1 of the Agreement.
territory of India means territory within the meaning, so far as it relates to India, of Article
1.3 of Chapter 1 of the Agreement.
21. New subsection 153ZML(2) provides that the value of goods for the purposes of new
Division 1JA is to be worked out in accordance with the regulations and that the regulations
may prescribe different valuation rules for different kinds of goods. The value of goods is
relevant, for example, in determining whether goods satisfy the de minimis requirement in
Article 4.8 of Chapter 4 of the Agreement. The value of goods is to be distinguished from the
customs value of goods, which is to be worked out under section 159 of the Customs Act.
Page 9 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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22. New subsection 153ZML(3) provides that, in specifying tariff classifications for the purposes
of new Division 1JA, the regulations may refer to the Harmonized System. The product-
specific rules of origin in Annex 4B of Chapter 4 of the Agreement refer to the tariff
classifications of the Harmonized System.
23. New subsection 153ZML(4) provides that subsection 4(3A) of the Customs Act does not
apply for the purposes of new Division 1JA. Subsection 4(3A) provides that reference in the
Customs Act to the tariff classification of goods is a reference to Schedule 3 to the Customs
Tariff Act, which is not the case in new Division 1JA.
24. New subsection 153ZML(5) provides that, despite subsection 14(2) of the Legislation Act,
regulations made for the purposes of Division 1JA may make provision in relation to a matter
by applying, adopting or incorporating, with or without modification, any matter contained in
an instrument or other writing as in force or existing from time to time.
25. Subsection 153ZML(5) will override subsection 14(2) of the Legislation Act should it be
necessary in order to implement the Agreement by applying, adopting or incorporating an
instrument or other writing that is not an Act or disallowable legislative instrument. Any
instrument and other writing so incorporated will be limited to those that are required for the
operation of the Agreement and will be accessible through the Department's website, and free
of charge, to ensure they are readily available and at no cost to persons concerned.
26. Where such references are made in regulations, the explanatory material will explain the
basis on which such references are made and indicate where the material referred to can be
located by the public.
Subdivision B--Goods wholly obtained or produced in India or in India and Australia
27. Subdivision B contains new section 153ZMM, which sets out the rules in relation to goods
that are wholly obtained or produced in India or in India and Australia.
Section 153ZMM Goods wholly obtained or produced in India or in India and
Australia
28. New subsection 153ZMM(1) provides that goods are Indian originating goods if they are
wholly obtained or produced in India or in India and Australia, and either the importer of the
goods has, at the time the goods are imported, a certificate of origin, or a copy of one, for the
goods; or Australia has waived the requirement for a certificate of origin for the goods.
29. New subsection 153ZMM(2) provides that goods are wholly obtained or produced in India
or in India and Australia if, and only if, the goods are:
(a) plants, or goods obtained from plants, that are grown and harvested, picked or
gathered in the territory of India, or in the territory of India and the territory of
Australia (including fruit, flowers, vegetables, trees, seaweed, fungi, algae and
live plants); or
(b) live animals born and raised in the territory of India, or in the territory of India
and the territory of Australia; or
(c) goods obtained from live animals referred to in paragraph (b); or
(d) goods obtained from hunting, trapping, fishing, aquaculture, gathering or
capturing conducted in the territory of India; or
Page 10 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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(e) minerals, or other naturally occurring substances, extracted or taken from the soil,
waters, seabed or subsoil beneath the seabed in the territory of India; or
(f) fish, shellfish, and other marine life extracted or taken from the sea, seabed or
subsoil beneath the seabed:
(i) beyond the outer limits of the territory of India and the territory of Australia;
and
(ii) in accordance with international law, outside the territorial sea of non-parties;
by vessels registered, listed or recorded with India and entitled to fly the flag of
India; or
(g) goods produced, from goods referred to in paragraph (f), on board a factory ship
that is registered, listed or recorded with India and is entitled to fly the flag of
India; or
(h) goods other than fish, shellfish and other marine life extracted or taken from the
sea-bed or subsoil beneath the seabed outside the territorial sea of India, by India,
but only if India has the right to exploit the seabed or subsoil in accordance with
international law; or
(i) waste and scrap that has been derived from production or consumption in the
territory of India and that is fit only for the recovery of raw materials or for
recycling purposes; or
(j) goods produced in the territory of India, or in the territory of India and the
territory of Australia, exclusively from the following:
(i) goods referred to in paragraphs (a) to (i) or their derivatives;
(ii) Australian originating goods of a kind covered by subparagraph (a) of Article
4.2 of Chapter 4 of the Agreement or their derivatives.
30. New section 153ZMM gives effect to Articles 4.2, 4.4, 4.15 and 4.20 of Chapter 4 of the
Agreement in respect of rules of origin for goods wholly obtained or produced in a Party to
that Agreement. The purpose of this new section is to enable goods that satisfy relevant
requirements to be subject to preferential treatment of customs duty in accordance with the
Agreement.
Subdivision C--Goods produced in India, or in India and Australia, from non-
originating materials
31. Subdivision C contains new section 153ZMN, which sets out the rules in relation to goods
produced in India, or India and Australia from non-originating materials.
Section 153ZMN Goods produced in India, or in India and Australia, from non-
originating materials
32. New section 153ZMN gives effect to Articles 4.2, 4.3, 4.5, 4.6, 4.8, 4.12, 4.15 and 4.20 of
Chapter 4 of the Agreement in respect of rules of origin for goods produced from
non-originating materials. The purpose of this new section is to specify the requirements that
must be satisfied in order for goods to be subject to preferential treatment of customs duty in
accordance with the Agreement.
Page 11 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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33. New subsection 153ZMN(1) provides that goods are Indian originating goods if:
(a) they are classified to a Chapter, heading or subheading of the Harmonized System
that is covered by the table in Annex 4B to Chapter 4 of the Agreement; and
(b) they are produced entirely in the territory of India, or entirely in the territory of
India and the territory of Australia, from non-originating materials only or from
non-originating materials and originating materials; and
(c) either:
(iii) the goods satisfy the requirements applicable to the goods in that Annex; or
(iv) the goods satisfy the requirements under subsection (3); and
(d) either:
(i) the importer of the goods has, at the time the goods are imported, a certificate
of origin, or a copy of one, for the goods; or
(ii) Australia has waived the requirement for a certificate of origin for the goods.
34. This provision applies the product-specific rules by direct reference to Annex 4B to Chapter 4
of the Agreement. This applies both the product-specific rules and any product specific
process rules. The direct application of Annex 4B does not change the operation of these
rules as set out in that Annex. Rather, as the Agreement is defined to be the Agreement as
amended from time to time, this will ensure that the current Annex in the Agreement will be
applied. It will also ensure that any updated version of the Annex that would be contained in
the Agreement when the Parties implement later versions of the HCDC System will be
applied as soon as any provisions of the Agreement and any of Australia's domestic
treaty-making procedures that pertain to the adoption of an updated Annex are completed.
35. New subsection 153ZMN(2) provides that, without limiting subparagraph 153ZMN(1)(c)(i),
a requirement may be specified in the table in Annex 4B to Chapter 4 of the Agreement by
using an abbreviation that is given a meaning for the purpose of that Annex. For example, the
abbreviation of QVC40 in the Annex means the goods must have a qualifying value content
of at least 40 per cent. Another example of an abbreviation in the Annex is 'CC', which
means that the goods must undergo a change in tariff classification at the two-digit level.
36. Subsection 153ZMN(3) gives effect to Article 4.3(1) of the Agreement by outlining the
requirements for goods to be considered as originating where those goods are not wholly
obtained or produced in the territory of India or Australia and are not covered by the PSR. It
should be noted that subsections (4) to (7) also apply to working out whether goods satisfy
the requirements under subsection (3). This is because both Annex 4B and paragraph 2 of
Article 4.3 refer to a change in tariff classification and qualifying value content.
Change in tariff classification
37. Like most PSR Annexes to FTAs, Annex 4B to the Agreement applies a change in tariff
classification approach. A requirement of a change in tariff classification will only apply to
non-originating materials. Goods that have been sourced outside a Party to the Agreement
and that are used in the production of other goods are non-originating materials. Goods
sourced from a Party to the Agreement that have not fulfilled the requirements of new
Division 1JA and that are used in the production of other goods are also non-originating
materials.
38. A change in tariff classification requires that any non-originating materials that are
incorporated into the final good undergo a specified change in classification in one or more of
Page 12 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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the Parties to the Agreement as they are incorporated into the final good. Subsections
153ZMN(4) - (5) give effect to the change in classification requirements in Articles 4.3, 4.6,
4.7, 4.8 and 4.9 of the Agreement
39. New subsection 153ZMN(4) refers to the first of several requirements that may be prescribed
in regulations made for the purposes of goods that have undergone a change in tariff
classification for the purposes of Subdivision C. The subsection provides that, if a
requirement that applies in relation to the goods is that all non-originating materials used in
the production of the goods must have undergone a particular change in tariff classification,
the regulations may prescribe when a non-originating material used in the production of the
goods is taken to satisfy the change in tariff classification.
40. The regulations made under this head of power include provisions to give effect to the
cumulative rules of origin contained in Article 4.5 of Chapter 4 of the Agreement where the
non-originating materials that are used or consumed in the production of the good do not
satisfy the change in tariff classification.
41. Non-originating materials used to produce other goods may not have the same classification
under the Harmonized System as the final good. For example, non-originating materials used
to produce a good may be classified to one tariff classification before the production process,
and the final good may be classified under a different tariff classification after the production
process. To satisfy the requirement of classification change, and therefore satisfy a
requirement for the purposes of claiming preferential treatment of customs duty in
accordance with the Agreement, the goods concerned must be sufficiently transformed such
that they can be classified to a different tariff classification to that of the non-originating
materials from which they are produced.
42. For example, chicken nuggets are produced from chicken meat produced in India which is
combined with herbs and spices produced in Jamaica (which is not a Party to the Agreement)
(classified to tariff headings 0907 to 0910) to make crumbed chicken nuggets (classified to
tariff code 1602 in Chapter 16 of the Harmonized System). The applicable tariff change for
chicken nuggets is 'a change to Chapter 16 from any other chapter'. As the herbs and spices
are classified to Chapter 9 of the Harmonized System, these non-originating materials meet
the tariff change requirement, considering that the chicken meat concerned is produced by
India, and is therefore an originating material and is not required to change its classification.
43. As per the above example, it is necessary for the tariff classification of the final good and
each of the goods that are non-originating materials used in the production of the final goods
to be known in order to determine the applicable change in tariff classification.
44. New subsection 153ZMN(5) provides that, if:
(a) a requirement that applies in relation to the goods is that all non-originating
materials used in the production of the goods must have undergone a particular
change in tariff classification; and
(b) one or more of the non-originating materials used in the production of the goods
do not satisfy the change in tariff classification;
then the requirement is taken to be satisfied if:
(c) in the case of goods classified to any of Chapters 50 to 63 of the Harmonized
System--the total weight of the non-originating materials covered by paragraph
(b) does not exceed 10% of the total weight of the goods; or
Page 13 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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(d) otherwise--the total value of the non-originating materials covered by paragraph
(b) does not exceed 10% of the customs value of the goods
45. This provision allows for the change in tariff classification requirement for goods of Chapters
50 to 63 to be satisfied if the total value of all of the non-originating materials used in the
production of the goods that do not satisfy the particular change in tariff classification of the
goods, does not exceed 10 per cent of the total weight of the goods. The provision also allows
for the change in tariff classification requirement for goods of Chapters 1 to 49 and 64 to 97
to be satisfied if the total value of all of the non-originating materials used in the production
of the goods that do not satisfy the particular change in tariff classification of the goods does
not exceed 10 per cent of the customs value of the goods. This provision gives effect to the de
minimis rule under paragraph Article 4.8 of the Agreement.
Qualifying value content
46. New subsection 153ZMN(6) provides that, if a requirement that applies in relation to the
goods is that the goods must have a qualifying value content of not less than a particular
percentage worked out in a particular way:
(a) the qualifying value content of the goods is to be worked out in accordance with
the Agreement, unless paragraph (b) applies; or
(b) if the regulations prescribe how to work out the qualifying value content of the
goods--the qualifying value content of the goods is to be worked out in
accordance with the regulations.
47. This provision provides the head of power to prescribe formulae for calculating qualifying
value content and gives effect to Article 4.6 of Chapter 4 of the Agreement.
48. New subsection 153ZMN(7) gives effect to Article 4.11 of Chapter 4 of the Agreement in
relation to goods that are accessories, spare parts or tools.
49. Subsection 153ZMN(7) also establishes a head of power requiring that regulations be made
to specify which accessories, spare parts, tools or instructional or other information materials
are to be taken into account as originating and the value of those goods. Without this
provision, the value of packaging materials and containers would normally not form part of
the value of materials that are used in the production of the goods.
50. New subsection 153ZMN(7) provides that, if:
(a) a requirement that applies in relation to the goods is that the goods must have a
qualifying value content of not less than a particular percentage worked out in a
particular way; and
(b) the goods are imported into Australia with accessories, spare parts, tools or
instructional or other information materials; and
(c) the accessories, spare parts, tools or instructional or other information materials
are presented with, and not invoiced separately from, the goods; and
(d) the quantities and value of the accessories, spare parts, tools or instructional or
other information materials are customary for the goods;
the regulations must provide for the following:
(e) the value of the accessories, spare parts, tools or instructional or other information
materials to be taken into account for the purposes of working out the qualifying
value content of the goods;
Page 14 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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(f) the accessories, spare parts, tools or instructional or other information materials to
be taken into account as originating materials or non-originating materials, as the
case may be.
51. The note to this subsection indicates that the value of accessories, spare parts, tools or
instructional or other information materials is to be worked out in accordance with the
regulations.
Section 153ZMO Non-qualifying operations
52. New subsection 153ZMO(1) provides that goods are not Indian originating goods under this
Subdivision merely because of the following operations:
(a) preserving operations to ensure that the goods remain in good condition for the
purpose of transport or storage of the goods;
(b) packaging or presenting the goods for transportation or sale;
(c) simple processes, consisting of sifting, screening, sorting, classifying, sharpening,
cutting, slitting, grinding, bending, coiling or uncoiling;
(d) for goods that are textiles--attaching accessory articles (including straps, beads,
cords, rings or eyelets) to the goods or ironing or pressing the goods;
(e) affixing or printing of marks, labels, logos or other like distinguishing signs on the
goods or on their packaging;
(f) mere dilution with water or another substance that does not materially alter the
characteristics of the goods;
(g) disassembly of products into parts;
(h) slaughtering (within the meaning of Article 4.7 of Chapter 4 of the Agreement) of
animals. That Article provides for 'slaughtering' to mean the mere killing of
animals;
(i) simple painting or polishing operations;
(j) simple peeling, stoning or shelling;
(k) simple mixing (within the meaning of Article 4.7 of Chapter 4 of the Agreement)
of goods, whether or not of different kinds. That Article provides for 'simple
mixing' to describe activities which do not need special skills, nor machines,
apparatus or equipment especially produced or installed for carrying out the
activity. Simple mixing does not include a chemical reaction, which is a process,
including a biochemical process, which results in a molecule with a new structure
due to the breakage of intra-molecular bonds and formation of new intra-
molecular bonds or alteration of the spatial arrangement of atoms in a molecule;
(l) any combination of things referred to in paragraphs (a) to (k).
53. New subsection 153ZMO(2) defines the term 'simple' to have the same meaning as it has in
Article 4.7 of Chapter 4 of the Agreement. That Article describes an activity which does not
need special skills, or machines, apparatus, or equipment especially produced or installed for
carrying out the activity.
54. New section 153ZMO has effect such that, if any of the above operations are the only
operations that take place in a Party, in relation to goods (either alone or as a combination),
this will not amount to confer originating status on the goods. For example, if non-originating
goods such as spices from Peru are packaged into bottles in India, this will not confer the
status of Indian originating goods on the spices. This section gives effect to Article 4.7 of
Chapter 4 of the Agreement.
Page 15 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Subdivision D--Packaging materials and containers
Subdivision D contains the new section 153ZMP, which deals with the treatment of
packaging materials and containers for retail sale, transportation and shipment.
Section 153ZMP Packaging materials and containers
55. New section 153ZMP gives effect to Article 4.9 and 4.10 of Chapter 4 of the Agreement in
relation to packaging materials and containers for retail sale.
56. Subsection 153ZMP(1) gives effect to paragraph 1 of Article 4.9 of Chapter 4 of the
Agreement and provides that, if:
(a) goods are packaged for retail sale in packaging material or a container; and
(b) the packaging material or container is classified with the goods in accordance with
Rule 5 of the Interpretation Rules;
then the packaging material or container is to be disregarded for the purposes of this
Division.
57. However, in accordance with paragraph 2 of Article 4.9 of Chapter 4 of the Agreement, new
subsection 153ZMP(2) provides one exception to subsection 153ZMP(1). This exception
applies where the goods are required to have a qualifying value content of not less than a
particular percentage worked out in a particular way. In this circumstance, the regulations
must provide for the value of the packaging material or container to be taken into account as
originating materials or non-originating materials, as the case may be, for the purposes of
working out the qualifying value content of the goods.
58. Without this provision, the value of packaging materials and containers would normally not
form part of the value of materials that are used in the production of the goods.
59. The note to subsection 153ZMP(2) explains that the value of packaging materials and
containers for the purposes of this subsection is to be worked out in accordance with the
regulations.
Subdivision E--Consignment
60. Subdivision E contains new section 153ZMQ, which deals with the consignment
requirements applicable to Indian originating goods in accordance with the Agreement.
Section 153ZNP Consignment
61. New subsection 153ZMQ(1) provides that goods are not Indian originating goods under
Division 1JA if the goods are transported through a non-party and either or both of the
following apply:
(a) the goods undergo further production or any other operation in the non-party
(other than unloading, reloading, storing, repacking, relabelling for the purpose of
satisfying the requirements of Australia, splitting up or consolidating loads or any
other operation that is necessary to preserve the goods in good condition or to
transport the goods to Australia);
(b) while the goods are in the territory of the non-party, the goods do not remain
under customs control at all times.
Page 16 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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62. This provision will not apply in relation to transport through the exporting Party or the
importing Party.
63. New subsection 153ZMQ(2) provides that section 153ZMQ applies despite any other
provision of new Division 1JA. This means that even if goods are Indian originating goods in
accordance with any other provisions of Division 1JA, if they come within the terms of
subsection 153ZMQ(1) they will not be Indian originating goods.
64. The section gives effect to Article 4.14 of Chapter 4 of the Agreement which deals with
transport through Parties and non-Parties.
Subdivision F-Regulations
65. Subdivision F contains new section 153ZMR, which provides a head of power to prescribe
regulations to make provisions for and in relation to determining whether goods are Indian
originating goods under new Division 1JA.
Part 2-Verification powers
Item 4 After Division 4G of Part VI
Division 4GA - Exportation of goods to India
66. This item amends Part VI of the Customs Act to insert new Division 4GA, which is titled
'Exportation of goods to India'.
67. New Division 4GA contains new sections 126AME, 126AMF, 126AMG and 126AMH. This
new division replicates the same powers for the Australian Border Force to request
information and documents from exporters. These powers are generally used to support the
administration of free trade agreements and are replicated for other free trade agreements in
Part VI to the Customs Act.
68. Articles 25 and 26 of the Agreement provide that the customs administration of an importing
Party may make written requests to the importer of the goods or the issuing body or authority
for the Certificate of origin. In the majority of circumstances, in line with Articles 25 and 26,
requests for documents and information from the Indian customs authority will be
administered by the issuing bodies and authorities in Australia for certificates of origin. These
powers in Division 4GA supplement the Agreement by allowing the Australian Border Force
to request information and documents and disclose this to the customs authority in India. This
is intended to be used as a back-up measure only in the rare circumstances that the issuing
bodies or authorities in Australia are unable to assist when the customs authority in India is
verifying claims of origin consistent with Articles 25 and 26 of the Agreement.
Page 17 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Section 126AME Definitions
69. New section 126AME defines the term 'Agreement', 'customs administration', 'Indian
customs official', 'producer', 'production' and 'territory of India' for the purposes of new
Division 4GA. With the exception of the terms 'customs administration', 'Indian customs
official' and 'producer', the terms have the same meaning as defined in new Division 1JA of
Part VIII of the Customs Act, inserted by item 3 of Part 1 of the Bill.
70. 'Customs administration' is defined under this section, for India, to have the meaning given
by Article 4.1 of Chapter 4 of the Agreement. The term 'Indian customs official' is defined to
mean a person representing the customs administration for India. The term 'producer' is
defined to mean a person who engages in the production of goods.
Section 126AMF Record keeping obligations
71. New section 126AMF inserts a head of power to prescribe record keeping obligations. These
record keeping obligations will apply in respect of goods that are exported from Australia to
the territory of India.
72. New subsection 126AMF(1) enables regulations to prescribe record keeping obligations that
apply in relation to goods that are exported to the territory of India and that are claimed to be
Australian originating goods, in accordance with Chapter 4 of the Agreement, for the purpose
of obtaining a preferential tariff in the territory of India.
73. New subsection 126AMF(2) provides that the regulations made for the purpose of
subsection 126AMF(1) may impose obligations on an exporter or producer of goods.
Section 126AMG Power to require records
74. Under Article 4.25 of Chapter 4 of the Agreement, the importing party may take action to
verify the eligibility of goods for preferential treatment, including requesting the supply of
information relating to the production or export of the goods. New section 126AMG gives
effect this Article by imposing a requirement on exporters and producers to produce records
to authorised officers, and empowering authorised officers to disclose records to Indian
customs officials.
75. New subsection 126AMG(1) provides that an authorised officer (as defined in section 4 of
the Customs Act) may require a person who is subject to record keeping obligations under
regulations made for the purposes of section 126AMF to produce to the officer such of those
records as the officer requires.
76. The note to new subsection 126AMG(1) indicates that, where an authorised officer has
requested a person who is subject to record keeping obligations under regulations made for
the purposes of section 126AMF, a failure to produce documents or records by that person
may be an offence under section 243SB of the Customs Act. The note also indicates that,
under section 243SC of the Customs Act, a person does not have to produce a record if doing
so would tend to incriminate the person.
77. New subsection 126AMG(2) provides that an authorised officer (as defined in section 4 of
the Customs Act) may disclose any records so produced to an Indian customs official for the
Page 18 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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purpose of verifying a claim for a preferential tariff in the territory of India. Records obtained
by an authorised officer under new section 126AMG may be 'Immigration and Border
Protection information' within the meaning of the Australian Border Force Act 2015 (the
ABF Act).
78. Section 42 of the ABF Act prohibits the disclosure of Immigration and Border Protection
information except, amongst other things, where the disclosure is authorised by or under a
law of the Commonwealth.
79. By including an express provision in the Customs Act to permit the disclosure of information
that may be Immigration and Border Protection information to an Indian customs official, the
disclosure of such information is required or authorised by a law of the Commonwealth for
the purposes of Part 6 of the ABF Act.
Section 126AMH Power to ask questions
80. New subsection 126AMH(1) provides that an authorised officer (as defined in section 4 of
the Customs Act) may require a person who is an exporter or producer of goods that:
(a) are exported to the territory of India; and
(b) are claimed to be Australian originating goods for the purpose of obtaining a
preferential tariff in the territory of India;
to answer questions in order to verify the origin of the goods.
81. The power to ask questions in the circumstances set out in this section is considered a
necessary adjunct to the power to require records in new section 126AMG.
82. The note to new subsection 126AMH(1) indicates that, where an authorised officer has
requested a person to answer questions in order to verify the origin of goods in accordance
with this subsection, a failure to answer questions by that person may be an offence under
section 243SA of the Customs Act. The note also indicates that, under section 243SC of the
Customs Act, a person does not have to answer a question if doing so would tend to
incriminate the person.
83. Subsection 126AMH(2) enables an authorised officer (as defined in section 4 of the Customs
Act), for the purpose of verifying a claim for a preferential tariff in the territory of India, to
disclose any answers to questions answered in accordance with new subsection 126AMH(1)
to an Indian customs official.
84. The answers to questions obtained by an authorised officer under new section 126AMH may
also be 'Immigration and Border Protection information' within the meaning of the ABF Act
and therefore cannot not be disclosed to an Indian customs official except as allowed by
Part 6. By including an express provision in the Customs Act allowing for this information to
be disclosed to an Indian customs official, the disclosure is required or authorised by a law of
the Commonwealth for the purposes of Part 6 of the ABF Act.
Page 19 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Part 3-Application provisions
Item 5 Application provisions
85. This item operates such that amendments made by Part 1 of Schedule 1 to the Bill, when
enacted, apply in relation to:
(a) goods imported into Australia on or after the commencement of that Part; and
(b) goods imported into Australia before the commencement of that Part, where the
time for working out the rate of import duty on the goods had not occurred before
the commencement of that Part.
86. This item also provides that the amendment made by Part 2 of Schedule 1 to the Bill, when
enacted, applies in relation to goods exported to the territory of India on or after the
commencement of that Part (whether the goods were produced before, on or after that
commencement).
Page 20 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Customs Amendment (India-Australia Economic Cooperation and Trade Agreement
Implementation) Bill 2022
The Customs Amendment (India-Australia Economic Cooperation and Trade Agreement
Implementation) Bill 2022 (the Bill) is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The purpose of the Bill is to amend the Customs Act 1901 (the Customs Act) to give effect to
the India-Australia Economic Cooperation and Trade Agreement (the Agreement), signed on
2 April 2022, by introducing new rules of origin for goods that are imported into Australia
from India.
The amendments to the Customs Act will enable goods that satisfy the rules of origin to enter
Australia at preferential rates of customs duty. In particular, the Bill will:
• implement rules of origin to determine goods eligible for preferential tariff
treatment in accordance with the Agreement. Goods that satisfy the rules of origin
under the Agreement are referred to as 'Indian originating goods';
• enable regulations to prescribe record keeping obligations on producers and
exporters for goods exported to India that are claimed to be originating goods in
accordance with the Agreement, and producers of such goods;
• enable an authorised officer (as defined in subsection 4(1) of the Customs Act) to
disclose information (including personal information within the meaning of the
Privacy Act 1988 (the Privacy Act) and Immigration and Border Protection
information within the meaning of the Australian Border Force Act 2015 (the
Australian Border Force Act)) to Indian customs officials for the purposes of
verifying the claims for origin of goods exported to the territory of India under the
Agreement. Indian customs official means a person representing the customs
authority for India.
Complementary amendments will also be made to the Custom Tariff Act 1995 (the Customs
Tariff Act) by the Customs Tariff Amendment (India-Australia Economic Cooperation and
Trade Agreement Implementation) Bill 2022.
The amendments contained in the Bill will be operative on the later of the day on which this
Act receives the Royal Assent and the day on which the Agreement, done on 2 April 2022,
enters into force for Australia.
Page 21 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Human rights implications
This Bill engages the right to not be subjected to arbitrary or unlawful interference with
privacy in Article 17 of the International Covenant on Civil and Political Rights to the extent
that the Bill will allow for the collection and disclosure of personal information.
Article 17(1) sets out:
No one shall be subjected to arbitrary or unlawful interference with his privacy, family,
home or correspondence, nor to unlawful attacks on his honour and reputation.
Under Article 4.21 of Chapter 4 of the Agreement, a 'Certificate of Origin' document applied
for by the exporter or producer or an authorised representative of the exporter or producer
shall support a claim that goods are eligible for preferential tariff treatment in accordance
with the Agreement. The key information that must be included in a 'Certificate of Origin'
document is detailed in Article 4.15 and Annex 4A, of Chapter 4 of the Agreement and
includes personal information, that is the exporter's and/or the producer's name and address.
The Bill in part inserts new sections 126AMF, 126AMG and 126AMH into the Customs Act
to enable:
• regulations to prescribe record keeping obligations that apply in relation to goods
that are exported to India and are claimed to be Australian originating goods, in
accordance with Chapter 4 of the Agreement, for the purpose of obtaining a
preferential tariff in India;
• an authorised officer to require a person subject to record keeping obligations
under the regulations to produce those records;
• an authorised officer to disclose the records to an Indian customs official in order
to verify a claim for a preferential tariff;
• an authorised officer to require an exporter or producer of goods to answer
questions in order to verify the origin of the goods; and
• an authorised officer to disclose the answers to an Indian customs official in order
to verify a claim for a preferential tariff.
Additionally, the record keeping obligations to be prescribed by the regulations will reflect
the obligations set out in Articles 4.21 and 4.25 of Chapter 4 of the Agreement in respect of
the retention of records and the verification of origin.
The new sections allow India to verify the origin of goods exported from Australia that are
claimed to be originating goods. For example, this may include the collection and disclosure
of personal information set out in a 'Certificate of Origin' document to an Indian customs
official for the purpose of verifying a claim for a preferential tariff.
The verification of the eligibility for preferential tariff treatment is required under the
Agreement and the measures in the Bill are directed at the legitimate purpose of facilitating
and supporting Australia's economic and international trade objectives and implementing the
international legal obligations under these agreements. The collection and disclosure of
personal information is authorised under the Privacy Act and, where applicable, the
Australian Border Force Act, with the Bill clarifying that authorised officers may require
exporters or producers of goods to produce records or answer questions, which may be
Page 22 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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disclosed to officials of India for the purpose of verifying a claim for a preferential tariff. The
Bill will not alter the existing Australian domestic law protections.
The collection, access and disclosure is for the limited purpose of verifying a claim made by
a person for preferential tariff treatment and the records captured by the new sections only
relate to goods that are exported to India and are claimed to be Australian originating goods
for those purposes. As such, the amendments are a reasonable and proportionate response to
the legitimate purpose described above. As such, the collection and disclosure of personal
information in these circumstances will not constitute an unlawful or arbitrary interference
with privacy.
Conclusions
The Bill is compatible with human rights because to the extent that it may engage the right to
privacy, it will not constitute an unlawful or arbitrary interference with privacy.
The Honourable Clare O'Neil MP, Minister for Home Affairs
Page 23 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Attachment B
Australia-India Economic Cooperation and Trade
Agreement
REGULATION IMPACT STATEMENT
FINAL PASS ASSESSMENT
28 March 2022
Contents
INTRODUCTION ..................................................................................................................................... 26
PROBLEM IDENTIFICATION - WHAT POLICY PROBLEM ARE YOU TRYING TO SOLVE? ......................... 27
The need for trade diversification .................................................................................................... 27
Challenges for Australian exporters and suppliers in the Indian market ......................................... 28
The risks of becoming uncompetitive ............................................................................................... 31
WHAT ARE THE PURPOSE AND THE OBJECTIVES OF GOVERNMENT ACTION? .................................... 34
The purpose of government action .................................................................................................. 34
The objectives of the proposed AI ECTA ........................................................................................... 35
WHAT ARE THE OPTIONS TO ACHIEVE THESE OBJECTIVES?................................................................. 37
Option 1: sign the proposed AI ECTA ................................................................................................ 37
Option 2: not sign the proposed AI ECTA ......................................................................................... 39
BENEFITS AND IMPACT ANALYSIS ......................................................................................................... 40
Economic modelling .......................................................................................................................... 41
The impact of liberalising trade in goods with India......................................................................... 42
The impact of key goods market access outcomes .......................................................................... 43
Industrial products ........................................................................................................................ 48
Liquified natural gas ...................................................................................................................... 48
Metallic ores and non-ferrous metals........................................................................................... 49
Wine .............................................................................................................................................. 50
Sheep meat and wool ................................................................................................................... 51
Seafood ......................................................................................................................................... 54
Horticulture ................................................................................................................................... 56
Pulses ............................................................................................................................................ 58
Cereals........................................................................................................................................... 59
Page 24 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Cotton ........................................................................................................................................... 61
Processed Dairy ............................................................................................................................. 61
Processed foods ............................................................................................................................ 62
Key goods market access outcomes for India ................................................................................... 62
Trade in Goods Chapter Outcomes................................................................................................... 65
The impact of liberalising trade in services with India ..................................................................... 66
The impact of key services market access outcomes ....................................................................... 67
Trade in Services Chapter outcomes ................................................................................................ 72
Impact on financial services .......................................................................................................... 75
Impact on telecommunications services ...................................................................................... 76
Impact on professional services.................................................................................................... 77
Clarity regarding domestic regulations ......................................................................................... 78
Impact on taxation of services ...................................................................................................... 79
Impact of key mobility (temporary entry) market access outcomes............................................ 80
WHO DID YOU CONSULT AND HOW DID YOU INCORPORATE THEIR FEEDBACK?................................ 83
The stakeholder engagement process in the CECA negotiations ..................................................... 84
Business, Industry and Civil Society .................................................................................................. 84
State and territory governments ...................................................................................................... 91
WHAT IS THE BEST OPTION FROM THOSE YOU HAVE CONSIDERED? .................................................. 92
Assessment of Option 1 - signing the proposed AI ECTA ................................................................. 94
Assessment of Option 2 - not signing the proposed AI ECTA........................................................... 96
HOW WILL YOU IMPLEMENT AND EVALUATE YOUR CHOSEN OPTION? .............................................. 97
Implementing the proposed AI ECTA ................................................................................................ 97
Implementation risks ........................................................................................................................ 99
Engaging with stakeholders to promote the proposed AI ECTA ....................................................... 99
Evaluating the proposed AI ECTA.................................................................................................... 100
Potential metrics for success .......................................................................................................... 100
ATTACHMENT A: JOINT STATEMENT ON A COMPREHENSIVE STRATEGIC PARTNERSHIP BETWEEN
REPUBLIC OF INDIA AND AUSTRALIA .................................................................................................. 102
ATTACHMENT B: 17th AUSTRALIA-INDIA JOINT MINISTERIAL COMMISSION STATEMENT ............... 110
ATTACHMENT C: REGULATORY BURDEN ESTIMATE........................................................................... 111
Page 25 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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INTRODUCTION
1. This Regulation Impact Statement (RIS) relates to an Australia-India Comprehensive
Economic Cooperation Agreement (CECA) Interim Agreement (known as the Australia-
India Economic Cooperation and Trade Agreement (AI ECTA)) to be concluded prior to
the finalisation of the full CECA. The proposed AI ECTA is focussed on an 'early harvest'
of market access outcomes that delivers balanced wins, including access for Australian
agriculture, in advance of a comprehensive CECA being finalised by the end of 2022.
2. In accordance with the Australian Government's Guide to Regulatory Impact Analysis,
the Department of Foreign Affairs and Trade (DFAT) has completed this RIS to analyse
the impact of the decision to sign the proposed AI ECTA with India.
3. India and Australia launched CECA negotiations in May 2011. There were nine rounds
of negotiations before both countries decided to suspend negotiations in September
2015, pending the outcome of negotiations on a Regional Comprehensive Economic
Partnership (RCEP), in which both Australia and India were participating. However,
India withdrew from RCEP in November 2019.
4. At the India-Australia Leaders' Virtual Summit on 4 June 2020, the Prime Minister of
India, Narenda Modi, and the Prime Minister of Australia, Scott Morrison, committed
to a Comprehensive Strategic Partnership (CSP) between India and Australia. Both
Prime Ministers also decided to re-engage on a bilateral CECA. The Joint Statement on
a CSP is at Attachment A.
5. At the 17th Australia-India Joint Ministerial Commission meeting on
30 September 2021, Australia's Minister for Trade, Tourism and Investment, Dan
Tehan, and India's Minister of Commerce and Industry, Consumer Affairs and Food,
and Public Distribution and Textiles, Piyush Goyal, formally re-launched CECA
negotiations and reaffirmed their commitment to conclude a bilateral CECA. This
included reaching an AI ECTA by December 2021 to liberalise and deepen bilateral
trade in goods and services, and to conclude the negotiations on a full CECA by the
end of 2022. The joint media release following the Joint Ministerial Commission on the
Australia and India trade deal is in Attachment B. On 11 February 2022, Minister
Tehan and Minister Goyal committed to concluding the AI ECTA agreement in March
2022.
6. The proposed treaty-level AI ECTA will have 14 chapters, including on trade in goods,
trade in services, entry and temporary stay of natural persons for business purposes,
customs procedures and trade facilitation, rules of origin and origin procedures,
sanitary and phytosanitary measures and technical barriers to trade.
Page 26 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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PROBLEM IDENTIFICATION - WHAT POLICY PROBLEM ARE YOU
TRYING TO SOLVE?
7. Australia's prosperity has been, and will continue to be, underpinned by trade and
foreign investment. Australia has been a major beneficiary of the open rules-based
global trading system and its future growth will continue to depend on having open
economic settings.
8. In recent decades, Australia's exports have been driven by growth in demand from
East Asia.1 However, the COVID-19 pandemic, US-China trade tensions and recent
bilateral trade challenges have highlighted the risks of market concentration. It has
also renewed public debate about how Australia could diversify its export markets to
make Australia's economy more resilient and less susceptible to economic shocks and
trade disruptions.2
The need for trade diversification
9. In February 2020, the Joint Standing Committee on Trade and Investment Growth (the
Committee) resolved to inquire into the 2018-19 annual reports of DFAT and the
Australian Trade and Investment Commission. The focus of the inquiry was to
understand whether there was a need for Australia to diversify its trade markets and
foreign investment profile.3
10. As outlined in the Committee's report of February 2021, a large proportion of
Australia's exports were concentrated towards high demand and high profit markets,
the largest of which was China. The Committee acknowledged that market
concentration could bring benefits to Australian exporters. For example, stable trading
relationships allowed exporters to lower overheads by reducing costs in areas like
regulatory compliance and often offer a price premium.4
11. However, the Committee also acknowledged that market concentration carries an
element of risk. Specifically, the Committee was concerned that Australia's reliance on
a small number of markets had left it exposed to economic, political and security risks.
This had tangible impacts for Australian exporters and suppliers, as it made them
more vulnerable, particularly if there were challenges in the bilateral relationship.
1
Joint Standing Committee on Trade and Investment Growth, Pivot: Diversifying Australia's Trade and
Investment Portfolio - Pivot (aph.gov.au)
2
DFAT Submission to the Joint Standing Committee on Trade and Investment Growth, Pivot: Diversifying
Australia's Trade and Investment Portfolio - Sub043 - DFAT.pdf
3
Joint Standing Committee on Trade and Investment Growth, Pivot: Diversifying Australia's Trade and
Investment Portfolio - Pivot (aph.gov.au)
4
Ibid, page 41.
Page 27 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Therefore, taking greater steps to diversify markets for Australia's exports will help to
mitigate this risk, as well as opening new opportunities for business.5
12. The Committee also heard that a large proportion of Australia's exports come from a
small range of sectors. For example, Australia's goods exports to India is dominated by
coal, which comprises of approximately 70 per cent. Like market concentration, export
concentration may reduce Australia's economic resilience in the case of market
disruptions or shocks. Accordingly, identifying opportunities for diversifying our export
goods and services will help Australian exporters and suppliers to withstand
disruptions in a particular market or economy.6
13. The Committee recommended the Government develop and release a plan for trade
diversification, which focussed on: maintaining existing relationships with existing
close trading partners as well as expanding trade with other countries; and
diversifying Australia's range of goods and services exports.7
14. The Committee also recommended the Government continue to plan for greater trade
opportunities for Australian exporters, including through delivering on its India
Economic Strategy.
15. As part of the Government's formal response, the Government noted that it was
delivering a comprehensive suite of measures to support Australian exporters to
diversify their markets, including through new Free Trade Agreements (FTAs). The
Government also agreed to continue delivering on its India Economic Strategy.8
Challenges for Australian exporters and suppliers in the Indian market
16. Diversifying Australia's trade relationship through the proposed the AI ECTA is
strategic. India is the world's largest democracy and is a market of 1.3 billion people.9
India's economy is recovering from COVID-19 and rapid mass vaccination is restoring
confidence. The International Monetary Fund (IMF) has forecasted that India's GDP
would grow at 9.5 per cent for the current Indian financial year (ending March 2022),
which if achieved, would make India the fastest recovering major economy. 10 Growth
5
Ibid.
6
Joint Standing Committee on Trade and Investment Growth, Pivot: Diversifying Australia's Trade and
Investment Portfolio, page 42 - Pivot (aph.gov.au)
7
Ibid, page xvii
8
Australian Government response to the Joint Standing Committee on Growth report, Pivot, - Govt response -
Pivot 6 August 2021 (1).pdf
9
DFAT, Australia-India Comprehensive Economic Cooperation Agreement - Australia-India Comprehensive
Economic Cooperation Agreement (AI-CECA) | Australian Government Department of Foreign Affairs and
Trade (dfat.gov.au)
10
IMF, India: 2021 Article IV Consultation, October 2021 - 1INDEA2021001.pdf; Aljazeera, India's economic
recovery gathers pace as Omicron looms, November 2021 - India's economic recovery gathers pace as Omicron
looms | Business and Economy News | Al Jazeera
Page 28 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
over the longer term is underpinned by India's sound fundamentals and a continued
economic reform agenda. To 2026, the IMF forecasts GDP growth of 53 per cent on
2019 levels.
17. India's growth will be driven by a young demographic, burgeoning consumer class,
more people employed in formal work, mass technology uptake, significant
infrastructure investment and rapid urbanisation.11 India's ambitious economic reform
agenda and cooperation under the CSP provides significant potential to create
stronger opportunities in education, agriculture, energy, resources, tourism,
healthcare, financial services, infrastructure, science and innovation, as well as in
prospective sectors such as critical minerals, health and critical technology. This makes
India an attractive market for Australian goods and services exports.
18. Under the current trade arrangements, Australia's trade with India will continue to be
hampered by India's exceptionally high tariffs, especially for imported food and
agricultural products, which prevents Australian products from entering and
competing in the Indian market. For example, of the nearly 12,000 lines in India's tariff
schedule, Australia only trades on 1,628 (approximately 14 per cent) of India's tariff
lines largely due to the high tariff barriers to entry.
19. Further, from time to time, measures such as higher tariffs, quantitative restrictions
and changes to non-tariff barriers are imposed by the Indian Government at little or
no notice. This creates uncertainty and disrupts trade for Australian and other
suppliers.12
20. Feedback from stakeholder consultations have also indicated that due to high market
barriers, there would be limited opportunities for Australian producers to broaden
their product exports to India - especially in the agriculture and horticulture sectors.
For example, imports of Australian wine to India attracts a standard import duty of
150%, which the Australian wine sector has identified as a major disincentive to
market development.13 Similarly, associations representing the horticulture and grain
sectors have also identified high import duties as a significant impediment for
Australian producers to export the Indian market.14
21. India has continued its rise in the World Bank's Doing Business ranking from 142 in
2015 to 63 in 2020. However, India still remains a challenging place to invest and do
11
DFAT, India: Market Insights, page 2 - India Market Insights 2021 (dfat.gov.au)
12
Ibid, page 6.
13
Submission from Wine Australia (2011) - Microsoft Word - wine-australia.doc (dfat.gov.au)
14
Submissions from Grain Growers (2021) - GrainGrowers - CECA Submission (dfat.gov.au); Grain Trade
Australia (2021) - ceca-submission-grain-trade-australia.pdf (dfat.gov.au); Australian Horticultural Exporters'
and Importers' Association (2022) - Australian Horticultural Exporters' & Importers' Association (AHEIA) - CECA
Submission (dfat.gov.au)
Page 29 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
business.15 In particular, stakeholders have indicated that regulatory barriers, the lack
of transparency and difficulties in accessing information, a complex visa system and
the absence of a mutual recognition system for professional qualifications have made
it difficult to do business and engage in services trade in India.
22. Under the existing trade framework, Australian exporters and suppliers will continue
to be subject to significantly high tariffs, trade uncertainties and will not be in a
competitive position to tap into one of the world's largest and fastest growing
economies. This is why signing the proposed AI ECTA is important for Australian
exporters and suppliers, as it will allow Australia entry into the Indian market on par
with India's other FTA partners.
15
DFAT, India: Market Insights, page 2 - India Market Insights 2021 (dfat.gov.au)
Page 30 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Trends in Australia and India's trading relationship
23. Since 2007, two-way trade in goods and services between Australia and India has
grown in value from $16.2 billion in 2014 to $24.3 billion in 2020, driven largely by
metallurgical coal and education-related travel services16 (as illustrated in Graphs 1
and 4), accounting for
3 per cent of Australia's two-way trade.17 In 2020, India was Australia's seventh largest
trading partner and sixth largest export destination. Goods exports were concentrated
in resource commodities (metallurgical coal, natural gas, copper and gold) while
services exports were primarily in education, recreational and business travel.
24. While the overall trajectory of Australia's goods and services trade with India is
increasing, the value of Australian goods exported to India has decreased since 2018
(as illustrated in Graph 2). In 2020, Australia's trade and investment relationship with
India has reflected the fall in global trade amid the COVID-19 pandemic and associated
restrictions on international travel. During India's nationwide lockdown, which began
in March 2020, there was a significant reduction in manufacturing and steel
production, which resulted in a decline in India's metallurgical coal imports.18
25. There has also been a slight decrease in the value of Australian services exported to
India from 2019 to 2020 (as illustrated in the table of Graph 3). COVID-19 has hit
Australian education exports hard, especially in the Indian market, where education-
related travel was Australia's largest service export to India valued at $6 billion in
2020. Feedback from stakeholder consultations have reiterated the importance of
Australia's education exports. Against the backdrop of Australia's international
borders opening (21 February 2021), being able to offer post-study work visas for
international students from India through the proposed AI ECTA could make Australia
a more attractive destination. This would be important in rebuilding Australia's higher
education sector following the COVID-19 pandemic.
The risks of becoming uncompetitive
26. India recently announced a review of its ASEAN Free Trade Agreement (FTA), is
currently in negotiations with the UK on a new FTA, has relaunched negotiations with
Canada and has unfinished bilateral trade negotiations with the European Union,
United States and New Zealand.19 If one of these countries or associations agrees an
16
Effective January 2020, there has been a compositional shift in where some student fees are located in
services data due to COVID-19; students have continued to study and pay fees to Australian universities, but as
they are no longer located in Australia due to travel interruptions, this spend is now captured under Personal,
cultural & recreational services.
17
Office of the Chief Economist, DFAT based on ABS data catalogue 5368.0
18
DFAT, India: Market Insights, page 3 - India Market Insights 2021 (dfat.gov.au)
19
Ibid, page 6.
Page 31 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
FTA with India, this will put Australian exporters, investors and service suppliers at a
competitive disadvantage.
27. Submissions received during the stakeholder consultations have indicated that some
Australian goods, including minerals and metal products, are already struggling to
compete in the Indian market which also imports these goods from countries that
have a preferential trade agreement in place with India.20 Therefore, further delays in
securing market access with India would mean that Australian exporters and suppliers
would not be in a position to capitalise on India's economic strength, including its
market size and growing middle class.
28. Further, with continued trade tensions globally, the lack of new market access
opportunities could hamper Australia's post COVID-19 economic recovery efforts,
especially if other trading partners are making concerted efforts to diversify and
expand their trading relationships.
Graph 1: Goods and Services Trade between Australia and India
Source: Office of the Chief Economist, DFAT based on ABS data catalogue 5368.0
20
Submission from the South Australian Government (2010), page 15 - Microsoft Word - South Australian
Government submission AICECA.docx (dfat.gov.au)
Page 32 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Graph 2: Goods Trade between Australia and India
Source: Office of the Chief Economist, DFAT based on ABS data catalogue 5368.0
Graph 3: Services Trade between Australia and India
Source: Office of the Chief Economist, DFAT based on ABS data catalogue 5368.0
Page 33 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Graph 4: Australia-India investment relationship
Source: Office of the Chief Economist, DFAT based on ABS data catalogue 5368.0
WHAT ARE THE PURPOSE AND THE OBJECTIVES OF
GOVERNMENT ACTION?
The purpose of government action
29. Access to global markets allows Australian businesses to secure economies of scale,
which is simply not possible given Australia's relatively small population and domestic
market. Australian businesses will export to markets where Australian products and
services are in demand and where profits are highest relative to risks. While Australian
businesses have opportunities to expand the markets they trade with, they will only
do so where the benefits justify the costs.
30. Through FTAs, the Australian Government can play a role in helping Australian
exporters, suppliers and investors to tap into a new market by negotiating for greater
market access, including through the elimination or reduction of certain barriers to
trade in goods, services and investment. FTAs are negotiated by governments and
constitute an international legal agreement, which generally includes specific
commitments to make trade and investment between the parties more open. FTAs
could include commitments amongst trading partners to improve market access for
Page 34 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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trade in goods and services, provide concessions for direct investment and to facilitate
access to government procurement contracts. Given the nature of FTAs, it is not
possible for Australian industry or businesses to individually negotiate, with a trading
partner, for an elimination or reduction in barriers to international trade.
31. A 2018 FTA Utilisation Study, which focussed on the experience of Australian
businesses on using FTAs, particularly with the three North Asian countries, found that
62 per cent of Australian exporters use at least one FTA to get their product into
export markets while
78 per cent of Australian importers use at least one FTA to source products offshore.21
The study found that market engagement has improved between Australian
businesses and their trading partners in FTA countries following the entry into force of
Australia's FTAs.22
32. As of 31 December 2020, 71.3 per cent of Australia's two-way trade was with
economies covered by FTAs, with Australia partially on track to meeting its goal of
having 90 per cent of trade covered by FTAs by 2022.23
33. In 2020, the Regional Comprehensive Economic Partnership (RCEP) being the world's
largest FTA, was signed by 15 countries. RCEP was designed to enhance regional
cooperation to facilitate a strong economic recovery from COVID-19. It will also
provide Australian exporters and investors with guaranteed levels of access and
treatment in a market covering around 30 per cent of the world's population.24 While
it was disappointing that India elected to leave the RCEP negotiations, the proposed AI
ECTA would be an opportunity for Australia to capitalise on India's growing economic
strength, including its market size and growing middle class.
The objectives of the proposed AI ECTA
Advancing the Joint Statement between Australia and India
34. As outlined in the Joint Statement between Prime Minister Morrison and Prime
Minister Modi, Australia and India are committed to expanding trade and investment
flows to the benefit of both economies.25 Deeper economic links between like-minded
partners is a central element of the Australian Government's broader strategy to
shape our region. It will signal to the world Australia and India's ongoing commitment
to work together to strengthen the rules-based, transparent, non-discriminatory,
21
PricewaterhouseCoopers, Free Trade Agreement Utilisation Study, 2018 - free-trade-agreement-utilisation-
study-pwc-report.pdf (dfat.gov.au)
22
Ibid, page 13.
23
DFAT Annual Report 2020-21, page 44 - DFAT Annual Report 2020-21
24
Ibid.
25
Joint Statement on a Comprehensive Strategic Partnership between Republic of India and Australia |
Australian Government Department of Foreign Affairs and Trade (dfat.gov.au)
Page 35 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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open, and inclusive multilateral trading system, which is also consistent with the joint
commitments made by Minister Tehan and Minister Goyal following the Joint
Ministerial Commission and Australia's 2017 Foreign Policy White Paper.26
35. India is a pivotal geopolitical player in the Indo-Pacific and at a time of sharpening
strategic competition, the importance of our CSP with India continues to grow. The
proposed AI ECTA followed by a full CECA will support Australia and India's
implementation of the CSP and Australia's implementation India Economic Strategy
Update. This will also align with the recommendations of the Committee, as outlined
in the Pivot report, that Australia should create new opportunities by negotiating new
trade agreements to diversify its trade.
36. The proposed AI ECTA followed by a full CECA will sit alongside our existing FTAs with
other Indo-Pacific strategic partners, including Japan, Korea and Indonesia, which will
strengthen our regional economic architecture, and will send an important strategic
message to the region that Australia and India are working together as trusted
partners to promote resilience in the Indo-Pacific region. The signing of new FTAs will
help to counter economic coercion during a period of geopolitical uncertainty and
trade tensions.
Expanding market opportunities for Australian businesses
37. Further, the 2018 India Economic Strategy observed that there is no single market
with more growth opportunities for Australian business to 2035 than India.27 The
proposed AI ECTA will play a vital role in helping Australian businesses to unlock or
expand their operations in the Indian market, while a full CECA is being negotiated.
This includes by securing India's commitment on tariff reduction or elimination to
enhance market access and providing increased certainty to service suppliers already
doing business in India through additional bound commitments on a range of
commercially meaningful sectors.
Limitations of the proposed AI ECTA
38. At the Joint Ministerial Commission in September 2021, Minister Tehan and Minister
Goyal agreed a number of areas that should be in the proposed AI ECTA, including
liberalising trade in goods, services, investment, energy and resources, logistics and
transport, standards, rules of origin and sanitary and phytosanitary measures.28 While
the majority of areas are captured in the proposed AI ECTA, there are outstanding
areas, including in the areas of digital trade and investment that remain outside the
scope of the proposed AI ECTA. Australia and India will continue discussions on these
26
Home | Foreign Policy White Paper (dfat.gov.au)
27
An India Economic Strategy To 2035 - Department of Foreign Affairs and Trade (dfat.gov.au)
28
Australia and India trade deal | Minister for Trade Tourism and Investment (trademinister.gov.au)
Page 36 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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issues, including on more sensitive areas such as government procurement, as part of
negotiating a full CECA. However, the difference in objectives means that
commitments on potential market access for these areas will not be in the proposed
AI ECTA.
39. Nonetheless, agreeing to the AI ECTA will provide a solid platform for ongoing
dialogue between Australia and India on a full CECA. It will also allow us to further
enhance cooperation in other areas which are not traditionally in an FTA, through
side-track initiatives such as transport and logistics and energy and resources.
WHAT ARE THE OPTIONS TO ACHIEVE THESE OBJECTIVES?
40. The RIS considers two options: to sign or not to sign the proposed AI ECTA.
Option 1: sign the proposed AI ECTA
Alignment with Australian Government objectives
41. Signing the proposed AI ECTA will deliver on Prime Minister Morrison and Prime
Minister Modi's Joint Statement, as the proposed interim agreement followed by a full
CECA, will expand trade and investment flows between Australia and India. It will also
deliver on Minister Tehan and Minister Goyal's commitment to conclude a CECA,
including an interim agreement to liberalise and deepen bilateral trade in goods and
services.
42. The proposed AI ECTA will contribute to strengthening the CSP between Australia and
India, as Prime Minister Morrison and Prime Minister Modi agreed to in June 2020 and
will support Australia in its implementation of the India Economic Strategy update,
which the Australian Government agreed to in its response to the Joint Committee's
recommendations following release of the Pivot report.29
43. As outlined above, it will not be possible for the Australian Government to achieve
these objectives, including expand trade and investment flows, as well as liberalise
and deepen bilateral trade in goods with India without the proposed AI ECTA followed
by a full CECA. This is because under the existing trade framework, India's
exceptionally high tariffs are a significant barrier for Australian products, and these
barriers will not be removed in the absence of the proposed AI ECTA and a full CECA.
Benefits for Australian exporters and suppliers
29
Australian Government response to the Joint Standing Committee on Growth report, Pivot, - Govt response -
Pivot 6 August 2021 (1).pdf
Page 37 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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44. In addition to delivering on the Australian Government's objectives, signing the
proposed AI ECTA will provide first mover advantages for Australia, especially if
Australia was able to secure preferential market access before India agrees FTAs with
other trading partners. This will provide Australian exporters and producers with
expanded market opportunities, which will bring about several benefits, including:
a. it will enable Australian suppliers to obtain guaranteed access to the enormous
untapped Indian market. For example, this will result in:
(i) an elimination of tariffs at entry into force for a wide range of mining
and resource products (alumina, coal, coke and semi-coke of coal, most
metallic ores such as copper and manganese ores, titanium dioxide,
certain non-ferrous metals), as well as agricultural products, such as
wool, sheep meat, and fresh rock lobsters
(ii) tariffs bound at zero on entry into force for barley, oats, hides and
skins, , and liquified natural gas (LNG)
(iii) an elimination of tariffs over 3, 5, 7 or 10 years for crude petroleum,
certain waste and scraps, petroleum oils, certain medical devices,
certain fruit and vegetables, such as cherries, berries and avocados,
certain nuts, sandalwood chips and dust, certain oilseeds, seafood, food
preparations, certain wood and paper products and pharmaceutical
products
(iv) preferential tariff reductions for wine and certain fruit such as apricots
and strawberries, and
(v) duty-free quota for cotton and preferential tariffs in-quota for lentils,
almonds, oranges, mandarins and pears.
This will help to broaden and diversify Australia's export profile to India.
b. It will address some of the current restrictions that are placed on the movement of
professionals and their ability to invest in India and supply a service, which was an
issue raised by a number of stakeholders during the consultation process. Please
refer to the 'Benefits and impacts analysis' section and the 'Consultation' section
for further details.
c. It will lower the price of imported products from India and potentially increase the
variety of goods available to Australian consumers.
Page 38 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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45. In the context of trade in services, the Most-Favoured-Nation (MFN) provisions in the
proposed AI ECTA will also enable Australia to reap any future liberalisation that India
might offer to a future trading partner. As MFN only applies on a prospective basis
(and not retrospectively), India will be bound to provide the same treatment to
Australian exporters that it provides to an exporter of a future FTA partner. Therefore,
signing the proposed AI ECTA now, followed by a full CECA, will ensure Australia is in
prime position to benefit from future FTAs that India may agree on - especially as
India appears to be embarking on FTA negotiations with a range of trading partners. A
side letter on wine would have the same effect for that product. In the long-term, this
will enable Australian products to remain competitive in the Indian market.
46. The proposed AI ECTA will provide regulatory certainty for Australian businesses, while
a full CECA is still being negotiated. This certainty will support exporters and support
mobility for businesspeople and professionals, which is important in a post COVID-19
recovery environment.
47. Signing of the proposed AI ECTA will also signal our commitment and pave the way for
further discussions on a full CECA, which will have the potential to address some of
the areas not currently in the interim agreement. This could potentially facilitate more
opportunities in relation to government procurement, enhance investments and other
measures, including around digital trade to foster closer economic links between
Australia and India.
Option 2: not sign the proposed AI ECTA
Inconsistent with Australia Government objectives
48. Not signing the proposed AI ECTA will mean that the Australian Government will not
be able to achieve the objectives of trade liberalisation and strengthened economic
ties with India, as outlined in the Joint Statement between Prime Minister Morrison
and Prime Minister Modi. It will also mean that the commitment between Minister
Tehan and Minister Goyal made during the Joint Ministerial Commission to deepen
bilateral trade in goods and services will not be met. This will be counterintuitive to
Australia's trade diversification efforts, which is a key aspect of Australia's post
pandemic recovery.
49. Further, if we do not sign the proposed AI ECTA and a full CECA, we would not bring
our strategic relationship up to par with other key Quadrilateral partners in the region,
such as Japan. It could also bring into question Australia's reputation as a trading
partner, particularly in terms of its ability to uphold and deliver on its commitments -
for example, the commitment made between Minister Tehan and Minister Goyal to
conclude a CECA, including to reach an interim agreement.
Page 39 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Disadvantages for Australian exporters and suppliers
50. As outlined in the 'Problem Identification' section, the IMF has forecasted that India's
GDP would grow at 9.5 per cent for the current Indian financial year (ending March
2022), which if achieved, would make India the fastest recovering major economy. Not
signing the proposed AI ECTA means that Australian businesses would be in a less
favourable position to capitalise on this growth, which would bring about significant
benefits not only for Australian businesses themselves but also for the Australian
economy, more broadly.
51. In the absence of the proposed AI ECTA, Australia will continue to be trading with
India under the current conditions and many of the key products of interest to
Australia will continue to face very high and variable tariff rates, which as outlined
above, is a barrier for Australian businesses trying to tap into the Indian market,
especially in the agriculture sectors. They will also see market share decrease as key
competitors stand to benefit from prospective FTAs between India and the UK,
Canada and the EU. This will mean Australian exports to India will likely remain
concentrated on a few limited sectors with limited opportunities for diversification.
BENEFITS AND IMPACT ANALYSIS
52. There are multiple influences on international trade and investment flows, such as
current economic conditions, exchange rate fluctuations, supply and demand factors,
and environmental issues such as natural disasters. This has an impact on determining
a causal relationship between an FTA and trade and investment outcomes.
53. Measuring what would have happened if a trade agreement had not entered into
force is complex. Data considered in isolation may not always reveal the full picture.
Comparisons between Australian and partner-country trade data can be difficult,
reflecting valuation differences, transhipments through third-party countries, and
timing issues. The impact of recent disruptions to trade due to COVID-19 and the
effects of trade tensions also add to the complexity. If we do not sign the proposed AI
ECTA, and then CECA, trade will likely continue on its current growth trajectory, but
the opportunity cost may be significant, especially as India continues to negotiate and
enter into preferential trade agreements with other trading partners and tracks as the
fastest growing large economy. Accordingly, DFAT considers that the benefits to
Australia in signing the AI ECTA, while negotiating a full CECA, as explored in detail
below, are greater than not signing.
54. DFAT's qualitative assessment is that signing the proposed AI ECTA would result in a
net benefit for Australia. This is due to the likelihood of increased business activity and
confidence, a greater range of competitively priced goods imported from India for
Page 40 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
consumers, and improved access and competitiveness of Australian goods and
services into India, which is good for Australian jobs and business.
55. This assessment is supported by recent studies. In 2018, DFAT commissioned an
independent study on business utilisation of Australia's FTAs. PricewaterhouseCoopers
(PwC) found that Australia's FTAs with China, Japan and Korea are being widely used
and have a positive impact on business confidence, activity, strategy, expansion
planning, and international investment, including in services sectors. 30
56. The PwC research highlighted the 'head turning' effect of Australia's trade agreements
with China, Japan and Korea, contributing to the positive perception of Australia as a
place to invest and do business. It also noted businesses reporting increases in
domestic demand for goods and services from businesses trading internationally.
57. DFAT estimates that the proposed AI ECTA will have a similar effect on Australian
markets resulting in an overall net benefit for Australian businesses and consumers in
advance of any further openings secured in CECA. More detailed evidence supporting
this proposition is provided below.
Economic modelling
58. Independent economic modelling was commissioned in both India and Australia for
the Australia-India Joint Feasibility Study in 2009.31 Economic modelling is necessarily
based on certain assumptions and the results of the modelling should be regarded as
indicative. While a new feasibility study has not been commissioned since the
Australia-India CECA negotiations recommenced, the results from the 2009 study
indicated that the welfare of the two countries would increase with the conclusion of
an FTA, or an Interim Agreement.
59. The 2009 Joint Feasibility Study found that welfare gains for both the countries could
be in the range of 0.15 and 1.14 per cent of Gross Domestic Product (GDP) for India
(with the upper range in 2010 being valued at US$12.53 billion) and 0.23 and 1.17 per
cent of GDP for Australia (with the upper range in 2010 being valued at US$10.65
billion). Over a period of 20 years (from 2010), an FTA could lead to Indian GDP gaining
in net terms an additional US$34.4 billion in (2009 prices) net present value terms,
compared to US$32.4 billion in Australia. The proposed AI ECTA or a full CECA could
result in a modest positive impact on total global economic output.
30
Free Trade Agreement Utilisation Study | Australian Government Department of Foreign Affairs and Trade
(dfat.gov.au)
31
Australia-India Joint Free Trade Agreement Feasibility Study (dfat.gov.au)
Page 41 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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60. In the absence of a more up-to-date feasibility study, it is not possible to provide more
current figures for this RIS in terms of welfare gains that are anticipated to flow from
the proposed AI ECTA.
The impact of liberalising trade in goods with India
61. India's economy is globally significant - estimated to be the third largest economy in
the world (in purchasing power parity terms), accounting for around 7 per cent of
global gross domestic product in recent estimates.32 It has the world's second largest
population and on track to surpass China within the next decade.33 Yet, India's
economic development is far from its potential - with one sixth of the global
population, its productivity remains 82 per cent lower than OECD best performers.34
However, India's gradual recovery from the pandemic could herald a return to
improved performance. In its most recent World Economic Outlook update for
January 2022, the International Monetary Fund revised India's prospects up for 2023,
citing better-than-expected improvements in the financial sector, with credit growth
leading to greater investment and consumption.35
62. India's strong fundamentals, including its youthful demographics, burgeoning
consumer class, steady urbanisation and formalisation of the economy will fuel a
growing demand for Australian goods and services in the long-term. Having an
established framework to enhance two-way trade in goods would ensure Australian
businesses are in a prime position to capitalise on India's enormous and growing
market. It would also likely result in a greater variety of goods from India being
imported into Australia at a lower cost.
63. In the India Economic Strategy, India's economic growth was assumed to be 6-8 per
cent, which would result in India's economy doubling between 2017 and 2035 and its
share of global economic activity increasing from 6 per cent to 13 per cent. However,
in order to meet this economic growth potential, India will need to undertake a wide
range of economic reforms that require greater integration with the global economy.
64. India is traditionally a highly protected economy with high tariff and non-tariff
barriers, particularly in agriculture. The trade liberalisation measures included in the
32
World Bank (2020), Purchasing Power Parities and the Size of World Economies Results from the 2017
International Comparison Program,
https://openknowledge.worldbank.org/bitstream/handle/10986/33623/9781464815300.pdf?seque
nce=4&isAllowed=y
33
United Nations Department of Economic and Social Affairs, Population Division (2019), World Population
Prospects 2019, https://population.un.org/wpp/Publications/Files/WPP2019_Highlights.pdf
34
OECD (2021), India Economic Policy Reforms: Going for Growth,
https://www.oecd.org/economy/growth/India-country-note-going-for-growth-2021.pdf
35
International Monetary Fund (2022), World Economic Outlook International Monetary Fund Rising
Caseloads, A Disrupted Recovery, And Higher Inflation,
https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022
Page 42 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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proposed AI ECTA will have economic benefits for Australia. The binding, elimination
or reduction in tariffs would bring significant benefits for Australian businesses,
including opening the doors for Australian goods to enter the Indian market (where
this was previously not economically feasible for businesses due to high and variable
tariffs) and ensuring Australian goods are more competitively priced.
65. In 2020, India was Australia's sixth largest exports market for goods and services and
fourth largest goods export market, with coal being Australia's single largest goods
export to India. However, if coal were excluded (it accounted for 42 per cent of
exports in 2020), India drops to Australia's 10th largest export market. The proposed AI
ECTA and a full CECA will provide an important mechanism to further diversify
Australia's exports to India.
66. In 2020, India was Australia's 11th largest source for goods and services imports.
Australia's largest imports by value between 2016-2020 (prior to the pandemic, which
affected international travel) were recreational travel (worth around AU$1,094
million); refined petroleum (worth around AU$1,042 million on average); professional,
technology and other business services (AU$612 million); and telecommunications
and ICT services
(AU$500 million).
67. Liberalising Australia's trade in goods with India would likely have a quantifiable
impact, which has been considered in the context of specific goods, as per below:
The impact of key goods market access outcomes
68. Under the proposed AI ECTA, more than 85 percent of Australian goods exports
(valued at AU$12.6 billion on average over the period 2018 to 2020) will enter India
duty-free on Entry into Force (EIF). This will include key Australian goods such as coal,
LNG, alumina, wool, sheep meat, barley, oats, fresh rock lobsters, hides and skins,
certain metallic ores and non-ferrous metals. Cotton will be able to access a sizable
duty-free quota.
69. Tariff barriers that have been in place on Australian exports will also be progressively
removed over a number of years across a range of key products including certain
medical devices, certain fruit and vegetables, certain nuts, seafood, sandalwood, and
food preparation.
70. Tariffs will also be reduced on certain products, including fruits such as apricots and
strawberries. Almonds, oranges, mandarins, and pears will be able to access
preferential quotas. Tariffs on wine will be reduced for bottles whose import price is
Page 43 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
above a certain minimum value. In total we estimate tariff savings of roughly AU$500
million on imports of Australian goods into India.36
Table 1 summarises the agreed tariff elimination schedule that will apply to Australia's
major goods exports to India under the proposed AI ECTA. Tables 2 and 3 outlines the
key Australian exports to India and key Australian exports to receive tariff preferences
under the proposed AI ECTA. The section, below, also examines the benefits and
impacts for key Australian goods that currently experience high barriers to entry and
will benefit considerably from the proposed AI ECTA.
Table 1: Agreed tariff elimination schedule
India's imports
% India's total
No. of from Australia
% (all lines) imports from
tariff lines (2018-20
Australia
average) AUDm
Total 11,908 14,772
EIF 4,760 40.0% 12,597 85.3%
3 years 196 1.6% 2 0.0%
5 years 813 6.8% 502 3.4%
7 years 2,484 20.9% 60 0.4%
10 years 6 0.1% - 0.0%
Tariff reduction only 102 0.9% 16 0.1%
TRQs 7 0.1% 206 1.4%
Subtotal in offer 8,368 70.3% 13,382 90.6%
Excluded 3,540 29.7% 1,390 9.4%
Table 2: Key Australian exports to India
Commodity HS code Current WTO IN imports from Tariff Treatment - Elimination
tariff Bound AU/World in years
tariffs (2018-20, A$m)
INDUSTRIAL PRODUCTS
Coal 2701 2.5 25 10,322 / 28,894 EIF
5 years bituminous coal
LNG 271111 2.5 Unbound 674 / 13,098 EIF
00
Alumina 281820 5 40 650 / 1,275 EIF
10
Non monetary 710811/ 7.5 40 559 / 39,381 Excluded
Gold 12/13
Copper ores 2603 2.5 40 237 / 2,227 EIF
36
Based on tariff rates and import data provided by India for 2018-2020.
Page 44 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Commodity HS code Current WTO IN imports from Tariff Treatment - Elimination
tariff Bound AU/World in years
tariffs (2018-20, A$m)
Iron ores 2601 2.5-10 25 196 / 627 Excluded
Manganese ores 2602 2.5 25 129 / 904 EIF
Titanium 320611 10 40 111 / 905 EIF
dioxide
Coke and semi- 270400 5 25 108 / 1,617 EIF
coke of coal
Crude 2709 5 Unbound 74 / 130,901 5 years
petroleum
Zirconium ores 261510 2.5 25 52 / 135 EIF
Non-ferrous 7501, 5 25/40/Unb 48 / 658 EIF nickel, not alloyed
metals - Nickel 7502 ound Otherwise excluded
Petroleum oils 2710 0-5 Unbound 9 / 3,639 5 years
Pharma 300212, 10 40/Unboun 7 / 1,889 5 years
products 3003, d
3004
Medical devices 9018 - 5-7.5 40 45 / 4,281 5 and 7 years for cochlear
9023 implants
Otherwise excluded
AGRICULTURAL PRODUCTS
Wool 5101 25 25/40/100 184 / 321 EIF
Almonds 080211 Rs35kg Rs35/kg (in 99 / 1,120 TRQ at 50% of existing MFN
00 (in shell) 0.3 / 71 duty on 34,000 tonnes annually
shell), Rs100/kg
080212 (shelled)
00
(shelled)
Lentils 071340 30 100 56 / 457 TRQ at 50% existing MFN duty
00 on 150,000 tonnes annually
Cotton 5201 5 100 46 (52010020) / Duty-free TRQ of 300,000 bales
1,073.0 per annum for ELS cotton of
Minimum 28 mm length
Oats 1004 0 100 10 / 12 EIF
Wine 2204 150 150 7 / 29 Tariffs reduced from 150 to 50
per cent over 10 years for
bottles valued over US$5 and
tariffs reduced to 25 per cent
over ten years for bottles
valued over US$15.
Hides and skins 41 0-10 25/40/100 6 / 669 EIF
Beans 071331 0/ 100 5 / 591 7 years
to Excluded for 071331 - Beans Of
071339 The Spp Vigna Mungo and
Radiata
Wheat 1001 40-100 80/100 4 / 10 - mainly Excluded
Wheat (excl.
seed for sowing,
Page 45 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Commodity HS code Current WTO IN imports from Tariff Treatment - Elimination
tariff Bound AU/World in years
tariffs (2018-20, A$m)
and durum
wheat)
Oranges 080510 30 40 4 / 54 TRQ at 50% of existing MFN
00 duty on combined 13,700
Mandarins 080521 30 100 1/3 tonnes per annum
00
Chickpeas 071320 60 100 2 / 120 Excluded
20
Sandalwood 121190 15 100 0.8 / 2 7 years
chips and dust 50
Pears 080830 30 35 0.5 / 30 TRQ at 50% of existing MFN
00 duty on 3,700 tonnes per
annum
Dairy 0401 - 30-60 40/60/150 0.5 / 45 Excluded
0406
Sheep meat 0204 30 35/100 0.3 / 2 EIF
Cherries 080929 30 100 0.3 / 3 7 years
00
Wool grease 1505 30 25/40/100 0.2 / 2 7 years
Seafood 03 30 Unbound 0.05 / 166 Mainly 7 years
Fresh rock lobsters - EIF
Barley 1003 0 100 0.01 / 48 EIF
Berries 081010, 30 100 0.01 / 0.5 7 years
081020, Strawberries (081010) - 7 years
081030, with Duty Reduction - Final duty
081040 15%
Canola oil 151411 35 75 0.1 / 114 7 years
20,
151419
20
Page 46 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Table 3: Key Australian exports to India to receive tariff preferences under the proposed AI ECTA
Tariff outcomes
(as % of value)
Value ($A)
Elimination
Eliminated
Eliminated
conditions
conditions
conditions
Reduction
Reduction
Reduction
involving
involving
Excluded
(average,
without
quotas
quotas
with
with
2018-2020)
CH2 Sheepmeat 342,912 - 100.0% - - - - -
CH3 Fish 58,118 - - 100.0% - - - -
CH4 Dairy 490,591 100.0% - - - - - -
CH7 Dried leguminous veg. 68,894,783 12.6% - 2.7% - 84.6% - -
CH8 Veg., fruit, nuts etc. 107,710,561 3.1% - 0.2% - 96.7% - -
CH10 Cereals 14,133,329 26.0% - 74.0% - - - -
CH11 Products milling industry 15,788,622 100.0% - - - - - -
CH12 Rape or colza seed 0 - - - - - - -
CH15 Animal or vegetable fats 373,561 9.9% - 90.1% - - - -
CH19 Food prep. 369,707 20.1% - 79.9% - - - -
CH20 Prep. veg., fruit, nuts, etc. 2,153,446 4.3% - 95.7% - - - -
CH21 Misc. edible prep. 1,126,186 73.3% - 26.7% - - - -
CH22 Wine 7,343,450 - - - - - 100.0% -
CH26 Metallic ores 601,298,647 30.8% - 69.2% - - - -
11,221,538,89
CH27 Coal, oil and gas - - 100.0% - - - -
3
CH28 Alumina 643,978,201 - - 100.0% - - - -
CH30 Pharma products 6,366,542 - - 100.0% - - - -
CH32 Titanium dioxyde 111,718,265 - - 100.0% - - - -
CH41 Hides and skins 5,734,585 - - 100.0% - - - -
CH51 Greasy wool 183,844,203 - - 100.0% - - - -
10
CH52 Cotton 45,132,342 - - - - - - 0.0
%
CH71 Non Monetary Gold 554,656,042 100.0% - - - - - -
CH74 Non-Ferrous Metals - Copper 4,276 100.0% - - - - - -
CH75 Non-Ferrous Metals - Nickel 46,805,483 - - 100.0% - - - -
Non-Ferrous Metals -
CH76 14,061,631 100.0% - - - - - -
Aluminium
CH78 Non-Ferrous Metals - Lead 87,690,364 100.0% - - - - - -
CH79 Non-Ferrous Metals - Zinc 28,672,359 100.0% - - - - - -
CH90 Medical devices 45,598,916 45.9% - 54.1% - - - -
Tariffed commodities n.e.c 975,442,370 47.0% - 52.1% 0.8% 0.1% - -
14,791,328,38 0.3
Total 9.3% 0.0% 89.1% 0.1% 1.1% 0.0%
4 %
Source: Trade Data Monitors, DFAT
Notes: Value of trade estimates use annual average data of Indian imports of merchandise goods from
Australia between 2018 and 2020, at the Indian HS 2017 8-digit commodity code level. Aggregation of data
into broad categories is estimated by DFAT based on Australia's 'exports of interest'
Page 47 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
71. Locking in the elimination and reduction of customs duties, as well as tariff rate quotas
for Australian products on signing of the proposed AI ECTA will provide certainty for
Australian exporters looking to expand or enter the Indian market. This is important,
as stakeholders have indicated that one of the risks they manage is the unpredictable
way in which India imposes and lifts tariffs.37 Therefore, having clear rules around
when and how customs duties will be eliminated or reduced would better support
businesses to manage this risk and improve market confidence.
Industrial products
Mining and heavy industry products
72. Coal is Australia's largest goods export to India representing around 70 per cent of our
exports to India over the period 2018-2020. The current 2.5 per cent tariff (effective
customs rate of 1 per cent plus 1.5 per cent coming from CESS) applied to Australia's
coal exports to India will be eliminated on implementation, or after 5 years in the case
of bituminous coal. This will improve the competitiveness of Australia's coal exports
and allow greater access to a diversified market. India is the world's second largest
import market for metallurgical and thermal coal imports after China, and India's
imports are forecast to grow with ongoing urbanisation and higher energy demand.
India's coal imports from Australia averaged almost AU$10.4 billion per annum over
2018-2020, mostly comprising metallurgical coal exports. This represented almost 36
per cent of India's total coal imports and almost 18 per cent of Australia's total coal
exports.
Liquified natural gas
73. Liquified natural gas (LNG) was one of Australia's largest exports to India over the
period 2018-2020, averaging AU$674 million annually over that period. The 2.5 per
cent will be locked in to zero on implementation, improving the competitiveness of
Australia's exports and allowing greater access to the Indian market. India imported
more than AU$13 billion (annual average, 2018-2020) worth of LNG over the same
period. This demonstrates the considerable opportunity for Australian exporters.
74. Alumina exports will have the 5 per cent tariff eliminated on entry into force. Australia
is India's largest import partner, accounting for 51 per cent of India's imports
(averaging AU$650 million per annum over 2018-2020), while alumina exports to India
accounted for almost 8 per cent of Australia's global alumina exports. The tariff
reduction will be important to maintain Australia's competitiveness in the Indian
market, as India's domestic alumina production is expected to increase over the next
five years.
37
Grain Growers Submission, page 5 - GrainGrowers - CECA Submission (dfat.gov.au)
Page 48 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Metallic ores and non-ferrous metals
75. Most of metallic ores and certain non-ferrous metals including copper and nickel, will
have the 2.5 per cent tariff reduced to zero on implementation. This will improve the
competitiveness of Australia's exports and provide greater access to a growing and
diversified market. Australian exports of these ores and metals to India between 2018-
2020 averaged AU$742 million per year, accounting for 8 per cent of India's total
imports of these commodities and 5 per cent of Australia's total exports to India.
Copper ores and concentrates are the largest commodity in this category, averaging
AU$226 million per annum over 2018-2020. India is heavily dependent on imported
copper concentrates and import demand is forecast to grow. Iron ore remains
excluded from India's offer.
76. Critical minerals including manganese ores, tungsten ores and concentrates, rare
earth oxides and zirconium concentrates will have the 2.5 per cent tariff reduced to
zero on implementation. India's growing role in the energy transition (battery and EV
manufacturing) are expected to see import demand increase, particularly for lithium
and cobalt exports. India provides a diversified export market that can assist in the
development of Australia's critical mineral industry. Greater integration also aligns
with the Australia India MOU on Cooperation in the Field of Mining and Processing of
Critical and Strategic Minerals.
77. Removal or reductions in applied tariffs benefit several industrial products, including
cement copper, which will see a tariff reduction from 5 per cent to 2.5 per cent over 7
years. Australia is India's primary import partner for this product and exports were
worth AU$0.21 million in 2021 (with no exports prior to 2021).
Table 4 provides a summary of Australia's mining, oil, gas and related heavy industry
products trade with India and the tariff outcomes from the proposed AI ECTA.
Page 49 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Table 4: Summary of mining, oil, gas and related heavy industry products trade and proposed AI
ECTA tariff outcomes
Commodity items (aggregated) India's imports of Base Tariff reduction Tariff
Australian goods rate outcome amount
(average, 2018-2020) (%) (average,
% of 2018-2020)*
India's ($A)
global
Description Value ($A) imports
Mineral ore, metal, oil, gas products
CH26 Metallic ores 601,298,647 12.7% - - 39,335,411
10,364,406,67 35.6% - - 1,036,440,667
CH27 Coal
0
CH27 Coke and semi-coke of coal 104,866,605 6.5% - - 10,486,661
CH27 Petroleum oils 80,282,360 0.1% - - 4,490,919
CH27 LNG 671,983,258 5.1% - - 67,198,326
CH28 Alumina 643,998,769 46.0% - - 64,399,877
CH71 Non Monetary Gold 554,656,042 1.4% - - 69,332,005
CH74 Non-Ferrous Metals - Copper 4,276 0.0% - - 214
CH75 Non-Ferrous Metals - Nickel 46,805,483 7.0% - - 2,340,274
Non-Ferrous Metals - 14,061,631 1.7% - - 1,054,622
CH76
Aluminium
CH78 Non-Ferrous Metals - Lead 87,690,364 11.5% - - 4,384,518
CH79 Non-Ferrous Metals - Zinc 28,672,359 4.4% - - 1,585,883
Remaining industry n.e.c 503,027,937 0.7% - - 47,171,179
All commodities
Eliminated on entry-
12,042,969,40
15.6% 5-40 into-force without 1,181,789,662
6 conditions
Eliminated by the 3rd
404,757 0.1% 10 year without 40,476
conditions
Eliminated by the 5th
476,822,971 0.3% 5-15 year without 48,231,207
conditions
Eliminated by the 7th
1,203,019 0.2% 10-40 year without 184,060
conditions
7.5- Reduction by 5th year
27,319 0.0% without conditions
2,049
10
Reduction by 7th year
16,054,726 3.4% 5-10 without conditions
1,213,284
1,164,272,203 2.0% 5-40 Excluded 116,759,818
Total 13,701,754,40 1,348,220,55
4.5% - -
1 6
Source: Trade Data Monitors, DFAT
Notes: Value of trade estimates use annual average data of Indian imports of merchandise between 2018 and
2020. Tariff estimates are based on the value of average annual trade between 2018 and 2020 and the tariff
rates paid. Aggregate commodity groupings were determined by DFAT. Remaining industry not-elsewhere-
categorised (n.e.c) captures the remaining export activity for 'Coal Mining', 'Oil and Gas Extraction', 'Metal Ore
Mining', 'Non-Metallic Mineral Mining and Quarrying', 'Exploration', 'Petroleum and Coal Product
Manufacturing', 'Industrial Gas Manufacturing', 'Non-Metallic Mineral Product Manufacturing', 'Primary Metal
and Metal Product Manufacturing', 'Iron and Steel Forging', and the 'Structural Metal Product Manufacturing'
industry sectors (ABS ANZSIC codes 06, 07, 08, 09, 101, 17, 1811, 20, 21, 2210, and 222 respectively)
Wine
78. Despite Australia being one the world's leading exporters of wine products - exporting
an average of AU$2.9 billion per annum between 2018-2020 globally - exports to India
Page 50 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
only accounted for some 0.2 per cent of that trade, worth an average of AU$7.4
million during this period.
79. Most Indian imports of wine attract an effective customs duty of some 150 per cent.
As a result, India imports very little wine from overseas. Between 2018 and 2020, for
example, India's total wine imports averaged AU$29 million per annum (or around 1.7
million litres). Instead, India relies heavily on domestic production, which, according to
Wine Australia, accounted for 85 per cent of India's wine market by volume in 2010.38
80. The implementation of the AI ECTA will reduce India's effective import duties on
Australian wine from the current 150 per cent: for 750ml bottles at a minimum import
price of US $5 to 100 per cent on entry into force and subsequently to 50 per cent
over a ten-year period; and for 750ml bottle equivalents at a minimum import price of
AU$15, to 75 per cent on entry into force and subsequently to 25 per cent over a ten-
year period. The minimum import price will be indexed every 10 years based on the
Indian wholesale price index for wine. India has also offered to provide Australia MFN
treatment on wine, such that if India provides more favourable market access to
another future FTA partner it must provide the same to Australia.
81. The significant reduction of import tariffs on Australian wine under the AI ECTA
provides Australian wine producers with a substantial advantage over their global
competitors in the Indian market and provides unparalleled opportunities for
expansion and diversification in one of the world's most populous and growth
economies. With reduced demand from China and other disruptions to the wine
industry from the 2020 bushfires (smoke taint) and the global pandemic, the Indian
market offers potential long-term growth for the Australian wine industry.
Sheep meat and wool
82. Tariffs on Australian wool, sheep meat, and sheepskin exports to India will be
eliminated and bound at zero upon entry into force, equivalent to around AU$184
million per annum worth of wool and sheep skin products and AU$1.96 million worth
of sheep meat per annum, based on 2018-2020 average Indian imports of Australian
goods.39
83. Between 2018-2020, India imports from Australia, represented 56 per cent of their
average global sheep meat imports over this period. Although India represents only a
small proportion of our global sheep meat exports (less than 0.05 per cent on average
between 2018-2020), our position as one of the world's leading exporters of sheep
meat and one of the few countries servicing India, means further exporting
38
Wine Australia's 'Australia - India Free Trade Agreement' (2011) submission to DFAT, see
https://www.dfat.gov.au/sites/default/files/wine-australia.pdf
39
Using TDM data of Indian commodity imports
Page 51 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
opportunities under the AI ECTA could lead to stronger relationships between
Australian sheep meat producers and Indian consumers.
84. Between 2018-2020, India imported an annual average of around AU$184 million
worth of wool from Australia, worth almost 6 per cent of our average global wool
exports over this period. This makes India our second-largest export market for wool
behind China, which takes the vast majority of our exports (worth around AU$2.7
billion or 78 per cent of our total wool exports on average from 2018-2020). Australia
is India's largest import source for wool, accounting for almost 50 per cent of total
imports, far exceeding imports from their second-largest import market, New Zealand.
Table 5 outlines the value of Australia's export of wool and sheep meat to India and
the outcomes negotiated in the proposed AI ECTA. With trade diversification an
important aim for Australia, the AI ECTA with India provides further opportunities for
our wool producers to build on their existing trade with India
Table 5: Summary of sheep meat, wool, and sheepskin trade and proposed AI ECTA tariff
outcomes
Commodity items (HS 6-digit) India's imports of Base Tariff reduction Tariff
Australian goods rate outcome amount
(average, 2018-2020) tariff (average,
% of (%) 2018-
India's 2020)*
global ($A)
Code Description Value ($A) imports
Sheep meat
010410 sheep, live 1,614,412 100.0% 30 Excluded 484,324
carcasses and half-carcasses of lamb, Eliminated on entry-into-
CH2 020410 fresh or chilled
0 - 30 force with conditions
0
carcasses and half-carcasses of Eliminated on entry-into-
CH2 020421 sheep, fresh or chilled
0 - 30 force with conditions
0
meat of sheep, cuts with bone in, Eliminated on entry-into-
CH2 020422 nesoi, fresh or chilled
0 0.0% 30 force with conditions
0
meat of sheep, boneless, fresh or Eliminated on entry-into-
CH2 020423 chilled
12,206 76.5% 30 force with conditions
3,662
carcasses and half-carcasses of lamb, Eliminated on entry-into-
CH2 020430 frozen
7,536 47.9% 30 force with conditions
2,261
carcasses and half-carcasses of Eliminated on entry-into-
CH2 020441 sheep, frozen
0 0.0% 30 force with conditions
0
meat of sheep, cuts with bone in, Eliminated on entry-into-
CH2 020442 nesoi, frozen
230,693 17.0% 30 force with conditions
69,208
Eliminated on entry-into-
CH2 020443 meat of sheep, boneless, frozen 92,477 25.8% 30 force with conditions
27,743
CH2 020450 meat of goats, fresh, chilled or frozen 0 - 30 Excluded 0
Subtotal 1,957,324 56.0% 587,197
Sheep wool and skin products
wool grease and fatty substances
Eliminated by the 7th
CH15 150500 derived therefrom (including 222,104 4.8% 30 year without conditions
66,631
lanolin)
sheep or lamb skins with wool on,
fresh, salted, dried, limed, pickled or
Eliminated on entry-into-
CH41 410210 otherwise preserved, but not tanned, 21,091 1.5% 0 force without conditions
0
parchment-dressed or further
prepared
sheep or lamb skins, without wool Eliminated on entry-into-
CH41 410221 on, pickled, whether or not split
6,199 0.1% 0 force without conditions
0
sheep or lamb skins, without wool
on, fresh, salted, dried, limed or
Eliminated on entry-into-
CH41 410229 otherwise preserved, not tanned, 171,367 2.1% 0 force without conditions
0
parchment-dressed or further
prepared
Page 52 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
wool, not carded or combed, greasy Eliminated on entry-into-
CH51 510111 (including fleece-washed), shorn
5,212,857 94.2% 25 force without conditions
1,303,214
wool, not carded or combed, greasy 160,287,70 Eliminated on entry-into-
CH51 510119 (including fleece-washed), nesoi
75.8% 25 force without conditions
40,071,927
6
wool, not carded or combed, Eliminated on entry-into-
CH51 510121 degreased, not carbonized, shorn
1,344,548 10.6% 30 force without conditions
403,364
wool, not carded or combed, Eliminated on entry-into-
CH51 510129 degreased, not carbonized, nesoi
16,356,801 17.9% 25 force without conditions
4,089,200
wool, not carded or combed, Eliminated on entry-into-
CH51 510130 carbonized
642,291 76.6% 30 force without conditions
192,687
garnetted stock of wool or of fine or Eliminated by the 7th
510400 coarse animal hair
0 - 20 year without conditions
0
Eliminated by the 7th
510510 wool, carded 0 0.0% 20 year without conditions
0
Eliminated by the 7th
510521 wool, combed, in fragments 0 - 20 year without conditions
0
wool tops and other combed wool, Eliminated by the 7th
510529 nesoi
324 0.0% 20 year without conditions
65
yarn of carded wool, not put up for
Eliminated by the 7th
510610 retail sale, containing 85% or more 0 0.0% 20 year without conditions
0
by weight of wool
yarn of carded wool, not put up for
Eliminated by the 7th
510620 retail sale, containing less than 85% 0 0.0% 20 year without conditions
0
by weight of wool
yarn of combed wool, not put up for
Eliminated by the 7th
510710 retail sale, containing 85% or more 0 0.0% 20 year without conditions
0
by weight of wool
yarn of combed wool, not put up for
Eliminated by the 7th
510720 retail sale, containing less than 85% 0 0.0% 20 year without conditions
0
by weight of wool
watch straps, watch bands and
watch bracelets, and parts there of, Eliminated on entry-into-
911390 of materials nesoi, including leather,
1,667 0.0% 10 force without conditions
167
plastics or textile material
184,266,95 46,127,25
Subtotal 48.9%
5 5
All sheep products
184,044,52 Eliminated on entry-into-
all sheep products 53.2% 0-30 force without conditions
46,060,559
7
Eliminated on entry-into-
all sheep products 342,912 18.2% 30 force with conditions
102,874
20- Eliminated by the 7th
all sheep products 222,428 0.7% year without conditions
66,696
30
all sheep products 1,614,412 100.0% 30 Excluded 484,324
Total 186,224,27 46,714,45
49.0%
9 2
Source: Trade Data Monitors, DFAT
Notes: Tariff estimates are based on the value of average annual trade between 2018 and 2020 and the tariff
rates paid.
85. Australia is a competitive sheep meat and wool producer, with large farming areas and
low farming costs (such as more ewes managed per full-time labour unit, and lower
costs for machinery and buildings).40 However, the COVID-19 pandemic affected sheep
meat and wool industries through supply chain disruptions and other global economic
effects on demand. Additionally, drought in 2018 and 2019 led to a diminished flock,
which remained an issue into 2021, and with China's domestic sheep meat production
on the rise in coming years, Australian producers are facing increased global
competition.41 As with other agricultural commodities, the AI ECTA with India could go
40
Ibid.
41
Meat and Livestock Australia, February 2021, Global sheepmeat industry and trade report
Page 53 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
some way to helping Australian farmers diversify and expand their export markets
over time.
Seafood
86. A large number of Indian tariffs on Australian fresh, frozen and processed seafood
goods will be phased out over seven years following implementation, including
current tariff rates of 30 per cent for Atlantic salmon, tuna and albacore and frozen
rock lobster. The fresh rock lobster tariff will be eliminated on entry into force.
87. Fresh, frozen and processed seafood goods are an important export for Australia, with
an annual average of AU$1.4 billion per annum exported globally between 2018 and
2020. Of this, fresh rock lobster items accounted for almost half of Australia's seafood
exports - some AU$664 million per annum on average.
88. As Graph 5 illustrates, Australian producers of fresh and frozen rock lobster
experienced a sudden drop in exports in 2020, primarily attributed to a reduction in
export trade with China and freight disruptions due to the global pandemic. 42 Prior to
this, China accounted for around 91 per cent of Australia's rock lobster exports in 2019
and 2020.43
Graph 5: Outlook for rock lobster exports44
42
Australian fisheries and aquaculture outlook 2021 - Department of Agriculture
43
Ibid.
44
Australian fisheries and aquaculture outlook 2021 - Department of Agriculture
Page 54 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
89. Currently, India is a relatively small importer of global seafood products, however,
averaging AU$217 million between 2018 and 2020, of which, Australian producers,
accounted for almost zero.
90. As Australian fisheries exports are dominated by high-value products, such as rock
lobster45, the gradual elimination of tariffs on seafood items represents an
opportunity for Australian producers to establish a new market to expand and grow as
the numbers of wealthy individuals in India increase and consumer preferences shift
over the longer-term.46
91. Table 6 provides a summary of Australia's seafood products trade with India and the
tariff outcomes from the proposed AI ECTA.
45
Australia's seafood trade - Department of Agriculture
46
Australia's seafood trade - Department of Agriculture
Page 55 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Table 6: Summary of seafood products trade and proposed AI ECTA tariff outcomes
Commodity items India's imports of Base Tariff reduction Tariff
Australian goods rate outcome amount
(average, 2018-2020) (%) (average,
% of 2018-
India's 2020)*
global ($A)
Code Description Value ($A) imports
All seafood products
Eliminated on entry-into-
all seafood commodities 0 - 30 force without conditions
0
Eliminated by the 5th year
all seafood commodities 0 0.0% 10 without conditions
0
Eliminated by the 7th year
all seafood commodities 69,240 0.0% 30 without conditions
20,772
all seafood commodities 0 0.0% 30 Excluded 0
Total - 69,240 0.0% - - 20,772
Source: Trade Data Monitors, DFAT
Notes: Value of trade estimates use annual average data of Indian imports of merchandise between 2018 and
2020. Tariff estimates are based on the value of average annual trade between 2018 and 2020 and the tariff
rates paid.
Horticulture
92. India will eliminate or reduce tariffs on a selection of Australian fruits and vegetables
after either 5 or 7 years. Tariffs which will be phased-out or reduced include those on:
a. almonds (preferential tariff rate quota)
b. oranges (preferential tariff rate quota)
c. mandarins (preferential tariff rate quota)
d. pears (preferential tariff rate quota)
e. apricots (reduced over 7 years)
f. cherries (eliminated after 7 years)
g. macadamia nuts (eliminated after 7 years)
h. avocados (eliminated after 7 years)
i. strawberries (reduced over 7 years)
j. blueberries, raspberries, blackberries, currants (eliminated after 7 years),
k. shelled pistachios (eliminate after 7 years)
l. onions (eliminate after 7 years)
m. kiwifruit (reduced over 7 years)
93. In 2020-2021 Australia's total horticulture production was valued at AU$11.9 billion
and employed over 60,000 people. Averaged over the years 2018 through 2020,
around AU$4.15 billion of Australia's annual horticultural production was exported. Of
these exports, China was the largest market with a value of AU$884 million (21 per
cent), followed by Japan (AU$301 million, 7 per cent), and New Zealand (AU$214
million, 5 per cent).47
47
Extracted from TDM using data for Australian commodity exports that correspond with commodities
produced by Australia's 'Nursery and Floriculture Production', 'Mushroom and Vegetable Growing', 'Fruit and
Tree Nut Growing', 'Fruit and Vegetable Processing' industry sectors (ABS ANZSIC codes 011, 012, 013 and
1140, respectively)
Page 56 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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94. Australia's horticultural exports to India over this period averaged almost AU$181
million
(4 per cent of Australia's horticultural exports).48 Of the select horticultural goods
covered by the AI ECTA (listed above), our exports to India of these goods were worth
over AU$167 million on average (or 92 per cent of our horticultural exports to India)
between 2018-2020.
95. The reduction in tariffs as set out by the proposed AI ECTA will enable the Australian
horticulture industry to supply India's growing food demand. For example, India's
demand for fruits and vegetables is expected to grow at 5-7 per cent by 2025.49
Demand for nuts is also anticipated to grow given their nutritional benefits and
consumer preferences.
96. Beyond 2025, increasing income levels in India are likely to lead to increasingly
sophisticated tastes associated with rising per person consumption of fruit, vegetables
and other food products. Removal of Indian tariffs on Australian horticultural goods,
such as those in the proposed AI ECTA will benefit Indian consumers as they will enjoy
greater access to a wider variety of horticultural products, at lower cost. Australian
products also have a reputation for being high-quality, reliable, and safe and will
benefit Indian consumer health.
97. For some products (e.g. almonds) Australia is already a significant exporter to India.
Australia will become more competitive in the Indian market. For other products (e.g.,
oranges, mandarins, macadamias, cherries, berries, avocados) in which Australian
exporters are already active globally, there is significant potential for Australian
exporters to expand into the Indian market.
98. The key outcomes under the proposed AI ECTA in horticulture (see Table 7) are also
consistent with what industry has called for. The Australian Horticultural Exporters
Association (AHEA) has noted that Australian fresh produce trade to India is currently
small, primarily due to Australia's lack of competitiveness on price. Reducing high
tariffs will provide Australia with a competitive advantage, or at the very least, equal
access to other countries with preferential access to the Indian market. Advance
Cairns (representing Tropical North Queensland) has highlighted the opportunities
associated with tropical fruit in that region.
99. In its submission, the Australian Nut Industry Council was supportive of lower tariffs
being sought in the AI ECTA. The Council described the nut industry as being 'ready to
go for export to India with the elimination of the high tariffs that currently inhibit
48
Using TDM data of Indian commodity imports that similarly correspond with commodities produced by
Australia's 'Nursery and Floriculture Production', 'Mushroom and Vegetable Growing', 'Fruit and Tree Nut
Growing', 'Fruit and Vegetable Processing' industry sectors (ABS ANZSIC codes 011, 012, 013 and 1140,
respectively).
49
Ibid.
Page 57 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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trade'. The Council also noted Australia's nut exports would increase from around
AU$1 billion in
2020-21 to AU$2.4 billion in 2030. While the nut industry had a history of developing
its own export markets, a reduction in tariffs in a country like India would be a huge
benefit.
Pulses
100. India will eliminate or reduce tariffs on certain pulses. This includes:
a) certain beans (eliminated after 7 years)
b) lentils (annual tariff rate quota)
101. Australian pulse production has increased significantly since the 1990s. Total
production amounted to only 1.3 million tonnes in 1990 and has since increased to
more than 2 million tonnes annually. Over the same period Australian lentil
production has similarly increased from less than 100,000 tonnes annually in the
1990s to more than 600,000 tonnes annually in 2020. In 2019-20 Australia exported
AU$1,263 million worth of pulses.50
102. Despite growth in the Australian pulse industry, Australia remains a relatively small
import source for India. Over the years 2018-20 India imported more than AU$1.2
billion worth of pulses (including peas, chickpeas, beans and lentils) from all countries,
of which only around AU$68.9 million (or 4.1 per cent) was imported from Australia.
By contrast, Australia's average global exports of these items amounted to almost
$1.064 billion per annum between 2018-2020.
103. There is therefore significant potential for Australian pulse producers to expand into
the Indian market. While peas and chickpeas are excluded from the AI ECTA offer, the
reduced barriers to Australian exporters of beans and lentils creates significant
opportunities.
104. Table 7 provides a summary of Australia's horticultural products (including pulses)
with India and the tariff outcomes from the proposed AI ECTA.
50
ABARES, Agricultural commodities March 2022
Page 58 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Table 7: Summary of horticultural products trade (including pulses) and proposed AI ECTA tariff
outcomes
Commodity items (aggregated) India's imports of Base Tariff reduction Tariff
Australian goods rate outcome amount
(average, 2018-2020) (%) (average,
% of 2018-
India's 2020)*
global ($A)
Description Value ($A) imports
Legumes, Almonds, Avocados, Macadamias, , and other nuts
CH7 Dried leguminous veg. 68,894,783 4.1% - - 22,148,763
CH8 Almonds 99,692,193 8.2% - - 0
CH8 Walnuts 1,322,183 1.6% - - 1,586,620
CH8 Pistachios 963,606 0.4% - - 289,082
CH8 Macadamias 1,935 3.3% - - 580
CH8 Avocados 11 0.0% - - 3
Remaining industry n.e.c 174,528 0.0% - - 57,293
Subtotal 171,049,23 - - 24,082,341
3.0%
9
Oranges and other citrus, Grapes, Apples and Pears, Cherries, Peach, Plums and other stone fruit
CH8 Oranges 3,975,773 7.3% - - 1,590,309
CH8 Grapes 715,512 0.5% - - 286,205
CH8 Apples 102,145 0.0% - - 51,073
CH8 Pears 464,418 1.5% - - 162,546
CH8 Cherries 254,029 9.2% - - 76,209
CH8 Peaches 125,098 29.0% - - 37,529
CH8 Plums 93,657 1.2% - - 23,414
Remaining industry n.e.c 1,118,765 17.2% - - 335,852
Subtotal 6,849,398 1.1% - - 2,563,138
Processed horticultural products
CH11 Products Milling industry 0 0.0% - - 0
CH20 Prep Veg., fruit, nuts ... 2,153,446 1.4% - - 650,418
CH21 Misc. Edible Prep 95,694 0.4% - - 28,708
Subtotal 2,249,140 1.3% - - 679,126
Other horticultural (incl. Nursery and Floriculture products, Mushroom and Vegetables, Kiwifruit, Berries, and Olives)
Subtotal 461,551 0.1% 65,738
All horticultural products
Eliminated by the 7th year
all horticultural commodities 4,662,447 0.2% 10-45 without conditions
1,325,353
Reduction by 7th year
all horticultural commodities 47,009 0.0% 30-100 without conditions
14,103
Reduction involving
all horticultural commodities 163,408,359 9.2% 30-40 quotas
19,535,648
all horticultural commodities 12,491,512 0.6% 10-120 Excluded 6,515,239
Total 180,609,32 2.6% - - 27,390,343
7
Source: Trade Data Monitors, DFAT
Notes: Value of trade estimates use annual average data of Indian imports of merchandise between 2018 and
2020. Tariff estimates are based on the value of average annual trade between 2018 and 2020 and the tariff
rates paid. Aggregate commodity groupings were determined by DFAT. Remining industry not-elsewhere-
categorised (n.e.c) captures the remaining export activity for 'Nursery and Floriculture Production',
'Mushroom and Vegetable Growing', 'Fruit and Tree Nut Growing', 'Fruit and Vegetable Processing' industry
sectors (ABS ANZSIC codes 011, 012, 013 and 1140, respectively).
Cereals
105. Australia is one of the world's largest grains and cereal producers, exporting an
average of AU$9 billion per annum between 2018-2020.
Page 59 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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106. Australian exports of barley and oats to India will have tariffs bound at zero on entry
into force providing predictability and confidence for growers. Wheat and other
cereals are excluded from the AI ECTA offer, however tariffs of up to 30 per cent on a
number of seed, oil and processed wheat, cereal, and grain products will be
eliminated by year seven of implementation.
107. For those wheat products with tariffs that are set to be eliminated under AI-ECTA,
Australia exported an average of AU$2.5 billion per annum between 2018-2020. Of
this, India accounted for less than 0.01 per cent (AU$0.23 million per annum) of
Australia's exports. India's global imports of these products averaged AU$70.5 million
per annum, however, indicating an opportunity for Australian exporters to capture a
larger market share.
108. Table 8 provides a summary of Australia's cereal products trade with India and the
tariff outcomes from the proposed AI ECTA.
Table 8: Summary of wheats, grains, cereals, cotton, sugar cane and other crop grown
commodities and proposed AI ECTA tariff outcomes
Commodity items (aggregated) India's imports of Base Tariff reduction Tariff
Australian goods rate outcome amount
(average, 2018-2020) (%) (average,
% of 2018-
India's 2020)*
global ($A)
Description Value ($A) imports
Cereals, wheats, grains, seeds and rice
CH10 Cereals - Wheat 3,677,433 42.7% 3,677,433
CH10 Cereals - Barley 7,906 0.0% 0
CH10 Cereals - Oats 10,447,989 82.5% 0
CH11 Products Milling industry 15,788,622 17.6% 4,736,732
CH12 Rape or colza seed 0 0.0% 0
CH19 Food Prep - Infant Formula 0 0.0% 0
CH19 Food Prep 239,267 0.7% 71,780
CH21 Misc. Edible Prep 0 0.0% 0
Remaining industry n.e.c 105,556 0.1% 63,038
Subtotal 30,266,774 9.4% 8,548,983
Cotton, sugar cane, & other crop growing
CH52 Cotton 45,132,342 4.2% 11,283,086
Remaining industry n.e.c 9,559,081 0.4% 2,865,246
Subtotal 54,691,424 1.5% 14,148,331
All commodities
Eliminated on entry-into-
all crop grown commodities 10,455,963 16.9% 0-30 force without conditions
0
Eliminated by the 3rd
all crop grown commodities 0 - 30 year without conditions
0
10- Eliminated by the 7th year
all crop grown commodities 9,793,353 1.2% without conditions
2,935,482
70
Reduction by 7th year
all crop grown commodities 0 0.0% 30 without conditions
0
0-
all crop grown commodities 64,708,882 2.1% Excluded 19,761,833
100
Total 84,958,198 2.2% 22,697,315
Source: Trade Data Monitors, DFAT
Notes: Value of trade estimates use annual average data of Indian imports of merchandise between 2018 and
2020. Tariff estimates are based on the value of average annual trade between 2018 and 2020 and the tariff
Page 60 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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rates paid. Aggregate commodity groupings were determined by DFAT. Remining industry not-elsewhere-
categorised (n.e.c) for 'cereals, wheats, grains, seeds and rice' captures the remaining export activity for 'Rice
Growing', 'Other Grain Growing', 'Grain Mill Product Manufacturing', 'Cereal, Pasta and Baking Mix
Manufacturing' industry sectors (ABS ANZSIC codes 0416, 0419, 1161 and 1162, respectively). Remining
industry not-elsewhere-categorised (n.e.c) for 'cotton, sugar cane, & other crop growing' captures the
remaining export activity for 'Other Crop Growing' and 'Cotton Ginning' industry sectors (ABS ANZSIC codes
015 and 0521, respectively).
Cotton
109. The Australian cotton industry employs over 12,000 people. Australia is one of the
world's largest cotton exporters and between 2018 and 2020 exported an average of
AU$1.51 billion worth of cotton a year. The value of exports varies significantly from
year to year in line with growing conditions. Significant importers of Australian cotton
include China, Vietnam, Indonesia, Turkey, and Thailand.51
110. Cotton is an important commodity in the Indian economy. India has a large textile
industry which is predominantly cotton-based. India is also a significant producer and
exporter of cotton. Cotton yarn and fabrics account for about 23 percent of India's
total textiles and apparel export.52
111. The proposed tariff rate quotas in the AI ECTA will create opportunities for Australian
cotton producers and exporters to benefit from the significant Indian market.
Between 2018-2020, India imported around AU$45 million worth (annual average) of
Australian cotton, which accounted for some 4.2 per cent of India's AU$1.09 billion
global cotton imports.
Processed Dairy
112. Tariffs of 50 per cent on Australian milk powder for infant use and 40 per cent on
protein concentrates will be removed after seven years following implementation.
113. In 2018, Australia's export of infant formula products and toddler milk drinks
(ingredient and retailed products) was valued at over $785 million, which comprised
22 per cent of Australia's total dairy exports. This represented an increase of over 57
per cent from 2017, with the then top five export markets being China, Hong Kong,
Taiwan, Vietnam and Korea.
114. While Australia does not currently export milk power for infant use and only a small
amount of protein concentrates, the Indian market represents a potential growth
market, with India importing AU$34 million, on average, of milk power for infant use
51
Department of Agriculture, Water and the Environment, Cotton Export snapshot, December 2021
52
Government of India, Department of Commerce (indiantradeportal.in)
Page 61 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
for the period 2018-20. Urbanisation has been an important determinant of the
quantity and type of food demanded by final consumers and with a growing urban
population in India, demand for dairy products, including infant formula has been and
will continue to increase.53 Supporting Australia's infant milk powder producers to
expand their exporting opportunities through the proposed AI ECTA with India will
help them to tap into a large and growing market.
Processed foods
115. Several processed food exports will have tariff rates reduced to zero in seven years,
from a current effective rate of 30 per cent, including pasta, some roasted corn
products, bulgur wheat and crispbread.
116. Removal of these tariffs will assist in improving the competitiveness and export
potential for Australia's processed food companies. This provides options for
Australia's processed food exporters and reduces the concentration risk of supplying
to a single market or region. This has been reported as an issue in the past including in
a Parliament of Australia publication entitled "The Future of the Australian Processed
Food sector".54 This publication suggests that in order for the sector to flourish, it
must become more internationally competitive in a variety of markets.
117. The proposed AI ECTA outcome of removing tariffs on processed foods relevant to
Australia, contributes to fulfilling that recommendation. It is consistent with
recommendations by a Senate Inquiry into Australia's food processing sector including
resolution of factors that inhibit export market access, growth and development and
that the government continue to lobby for the reduction of tariff, non-tariff barriers
and subsidies in export destinations. 55
Key goods market access outcomes for India
118. Australia's merchandise imports from India averaged AU$5.15 billion a year over
2018-2020, with around half of this subject to import duties not exceeding 5 per cent.
119. The most significant Australian merchandise imports from India included (average
annual value over the 2018-2020 period):
a. Petroleum oils and oils from bituminous minerals (AU$974 million),
b. Medicaments (AU$426 million),
c. Diamonds (AU$258 million),
53
Department of Agriculture, Water and the Environment, ABARES: Insights, Issue 2, 2020 - 0
(sirsidynix.net.au)
54
The future of the Australian processed food sector - Parliament of Australia (aph.gov.au)
55
Inquiry into Australia's food processing sector - Parliament of Australia (aph.gov.au)
Page 62 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
d. Articles of jewellery and parts thereof (AU$187 million),
e. Railway or tramway passenger coaches, luggage vans, post office coaches etc
(AU$178 million),
f. Bed linen, table linen, toilet linen and kitchen linen (AU$108 million), and
g. Rice (AU$91 million)
120. On entry into force of the FTA, almost 98 per cent of Australian merchandise imports
from India will be permitted to enter Australia duty-free on EIF. Table 9 summarises
the market access outcomes Australia will grant India under the proposed AI ECTA.
121. Tariffs on all remaining imports from India in longstanding industries that have been
sensitive for Australia, including articles of iron or steel and aluminium will be
eliminated after a period of four years.
122. Australian consumers will benefit from increased competition, greater variety of
choice in products, and lower prices, because of tariff elimination. While the removal
of tariffs on Australian merchandise imports will result in initial reductions in tariff
revenue, this will likely be offset, over time, by the effects of increased economic
activity due to enhanced two-way trade.
123. Reduced costs and improved access to these products will benefit sectors of
Australia's manufacturing industries. For example, the Australian construction industry
(with revenue valued at AU$424.1 billion from 2017-2022), which draws on the iron
and steel manufacturing industry, is expected to continue growing as the economy
recovers from the global pandemic and demand for non-residential construction
returns to pre-pandemic levels.56 Providing greater access to a wider variety of steel
products as a result of the AI ECTA could help support large industries in Australia that
have the potential to drive a strong economic recovery.
124. Some Australian producers will face increased competition from Indian exports,
though this is expected to be small, as most of our current imports from India across
these goods are sufficiently low compared to those from our largest import markets
for each commodity. Even with an increase in Indian goods, Australian producers
already competing with China and Japan across each of these industries are unlikely to
be substantially impacted by a potential increase in Indian imports based on average
import value from India in recent years:
a. Australia imported around AU$6.6 billion worth of articles of iron and steel on
average in 2018-2020, most of which came from China (AU$3.2 billion or 49 per
cent of total imports). Our imports of iron and steel articles from India in this
period were small, around AU$170 million or 3 per cent of total imports.
Although the Australian iron and steel manufacturing industry has grown over
56
Kelly, A. (2022) "Construction in Australia", Australia Industry (ANZSIC) Report E / Construction,
https://my.ibisworld.com/au/en/industry/e/about
Page 63 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
the last five years, this has been driven largely by world steel prices, which are in
turn driven by China's regulation of its supply.57 Increasing Australian access to a
greater diversity of iron and steel products such as those from India, may help
other industries in Australia, such as the construction industry, manage volatile
steel prices.
b. Australia imported around AU$8.6 billion worth of articles of plastics on average
in 2018-2020, most of which came from China (AU$3.2 billion or 37.5 per cent of
total imports). Our imports of articles of plastics from India in this period were
small, around AU$82 million or 0.9 per cent of total imports.
c. Australia imported around AU$37 billion worth of vehicles (automotive, parts
and accessories thereof) on average in 2018-2020, most of which came from
Japan (AU$10.5 million or 28 per cent of total imports). Our imports of vehicles
(automotive, parts and accessories thereof) from India in this period were small,
around AU$145 million or 0.4 per cent of total imports.
d. Australia imported around AU$13.7 billion worth of textiles products on average
in 2018-2020, most of which came from China (AU$8.5 billion or 62 per cent of
total imports). India was our third-largest import market for textiles, worth an
average of AU$668,274 million or 5 per cent of our total imports of textiles in
2018-2020.
Table 9: Summary table of Australian tariffs on imports of Indian goods
Australia's
imports from
No. of % (all % (all
Overall coverage of duty elimination India (2018-
tariff lines lines) imports)
2020 average)
(AUD m)
Total 6,480 100.0% 5,151 100.0%
A - EIF - MFN duty-free and dutiable 6,367 98.3% 4,966 96.4%
A - EIF - MFN duty-free 3,209 49.5% 2,706 52.5%
A - EIF - MFN dutiable 3,158 48.7% 2,260 43.9%
B5 113 1.7% 185 3.6%
125. The Regulatory Burden Estimate is at Attachment C.
57
Baikie, V (2021), "Iron Smelting and Steel Manufacturing in Australia", Australia Industry (ANZSIC) Report
C2110 / Manufacturing, https://my.ibisworld.com/au/en/industry/c2110/industry-at-a-glance
Page 64 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
Trade in Goods Chapter Outcomes
126. Australia and India's commitments under the proposed AI ECTA reflect the intentions
of the parties to liberalise the goods sector, which would provide a useful platform to
inform negotiations for a full CECA.
127. The Trade in Goods Chapter in the proposed AI ECTA secures Australia and India's
commitment to eliminate or reduce customs duties for a range of goods, as outlined in
Annex 2A (Tariff Commitments). This improves on the status quo and directly
responds to one of the key issues raised by stakeholders during the consultations
(please see the 'Who did you consult' section for a more detailed discussion).
128. Through the MFN discipline, the Trade in Goods Chapter also guarantees that
Australian exporters would receive the MFN customs duty rate provided by India, if
that rate is lower than the customs duty rate calculated under this Chapter. With India
engaging in FTA discussions with a number of other trading partners, including the UK,
and having unfinished trade bilateral trade negotiations with the EU and the US,
securing India's commitment on the MFN discipline would be beneficial for Australian
businesses in the future - especially if India agrees an FTA with these trading partners
in advance of a full CECA.
Broader commitments and transparency
129. The Trade in Goods Chapter affirms Australia and India's commitment with respect to
the application of import and export restrictions. Both parties have agreed not to
impose import and export restrictions other than for the very limited exceptions
provided for under
Article XI of GATT 1994 such as to prevent or relieve critical shortages of foodstuffs.
This commitment is important for enhancing business confidence, as India has
previously imposed quantitative restrictions on imports of mung beans and yellow
peas and introduced export quotas, which had impacted on the volume of Australia's
exports to India.58
130. Australia and India have also agreed to ensure transparency in the application of any
non-tariff measures and to ensure that any such measures are not applied with a view
to, or have the effect of, creating unnecessary obstacles to trade. Non-tariff measures
can include any kind of 'red tape' or trade rules that unjustifiably restrict the flow of
goods and services.
131. Australia and India's commitment on non-tariff barriers is useful in strengthening our
trading relationship, as non-tariff measures had previously impacted on Australian
58
DFAT, Market Insights: India, 2021, page 6 - India Market Insights 2021 (dfat.gov.au)
Page 65 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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exports India. For example, India had previously had restrictive technical plant health
requirements for the treatment of barley entering India. While these measures were
intended to protect local plant health, India's specific requirements limited flexibility
and, in effect, acted as a barrier to Australian barley.59
132. India and Australia's commitment to make publicly available its laws, regulations,
decisions and rulings with regards to the Trade in Goods chapter will also help to
improve transparency and support Australian businesses to do business with India.
133. A Committee on Trade in Goods (the Goods Committee) will be established under the
proposed AI ECTA. The Goods Committee will facilitate consultations between
Australia and India on accelerating tariff elimination and addressing non-tariff barriers
to trade, with a view to enhancing two-way trade in goods. It will also address any
issues relating to the administration and operation of tariff rate quotas. Overall, the
Goods Committee will strengthen communication and provide an avenue for Australia
and India to discuss and address issues that may be impeding trade in goods.
The impact of liberalising trade in services with India
134. India is Australia's third largest services export market; our services exports to India
have nearly doubled over the past decade to reach AU$6.9 billion in 2020. India's
services market is growing rapidly, and the country has developed a leading role
providing a range of support services to business in other countries including back-
office functions and call-centres, which Australian companies are increasingly seeking
to offshore. Imports of Indian services totalled AU$2 billion in 2020. India's services
market is one of the world's largest and its growing middle class presents enormous
opportunities for Australian service suppliers able to tailor products to suit the Indian
market. As services constitutes the bulk of Australia's economy, contributing 79 per
cent of value added and 88 per cent of employment,60 the impact of liberalising trade
in services with a market the size of India would be significant.
The challenge in monetising progressive liberalisation in services trade and the movement
of natural persons
135. While it is understood that there is significant advantage to liberalising trade in
services, it can be difficult to quantify. This been noted in a recent Productivity
Commission report where it is acknowledged that productivity in services is more
difficult to measure than in goods mainly because it is difficult to define a standard
'unit' for many services.61 It is known though that advantages to services liberalisation
59
Australian Government, Non-Tariff Barriers Explained - Non-Tariff Measures and Trade Barriers | Trade
Barriers
60
Things You Can't Drop on Your Feet: An overview of Australia's services sector productivity - PC Productivity
Insights Productivity Commission
61
Ibid
Page 66 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
Implementation) Bill 2022
can include greater services productivity due to a stimulation in the market. That can
also have the flow on effect of consumer benefit due to a likelihood of an increased
range of products, including new technologies, and lower prices that result from
increased competition.
136. It is difficult to quantify the benefit of a guarantee for non-discriminatory treatment
for example (National Treatment discipline) and the benefit of efficiency gains for
business from transparency provisions or addressing behind the border barriers
through strong domestic regulation disciplines. Progressive liberalisation of trade in
services can stimulate economic growth due to increased consumer demand and
expertise from increased movement of professionals but these aspects can take time
to realise. A recent joint OECD, WTO study provides analysis on the benefits to
services trade in reducing red tape and increasing transparency, as the Trade in
Services Chapter and related Annexes in this AI ECTA are designed to do, stating that it
could amount to an annual global cost savings for business of US$150 billion.62
The impact of key services market access outcomes
137. The proposed AI ECTA provides increased certainty for Australian service suppliers
already doing business in India, or wanting to do business there, by binding existing
market access, and providing guarantees on access broadly equivalent to those India
has provided in its other preferential trade agreements (e.g. with Japan, Korea,
Singapore and Mauritius).
138. These outcomes reflect an improvement on the current guaranteed market access
that Australia has with India. Australia's guaranteed access is provided through India's
existing services market access commitments in the WTO, which are limited to 37
services sub-sectors. Many of Australia's key services exports including higher
education and other professional services such as architectural and urban planning
services are not included.
139. India will bind 85 subsectors for Australia in the proposed AI ECTA, a 43 per cent
improvement on the current bound market access that Australia receives through the
WTO GATS agreement. This will provide additional certainty across a range of
commercially meaningful services sectors, including business services (accounting, tax,
architectural and urban planning), research and development, communication,
construction and engineering, insurance, banking, education, hospital, recreation,
sports, tourism and transport services. These binding market access commitments for
Australian service suppliers go beyond the current bound market access that
Australian service suppliers can rely upon.
62
WTO | 2021 News items - OECD, WTO issue joint study on economic benefits of new services domestic
regulation deal
Page 67 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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140. These outcomes give Australian service suppliers confidence that access into the
Indian market will continue on terms at least as good as those described in the market
access schedule, so it is worthwhile to develop business activities. This effect will be
enhanced after six years, when India is obliged to "transition" its market access
commitments to a more modern approach that will leave less (and in some cases, no)
space to reduce its market access. Furthermore, under this approach, any additional
liberalisation India introduces over time will become irreversible in many sectors.
There may also be a 'head-turning effect', encouraging Australian services suppliers to
take notice of opportunities in India and therefore increase economic activity.
141. India's services market has significant opportunities for Australian service suppliers. A
recent OECD report63 highlighted that Indian business services have helped
manufacturers all over the world become more efficient and productive but also
highlighted the importance of streamlining sector-level regulatory frameworks in all
sectors to encourage foreign entry and competition. In addition, the report reflects
that currently, India could benefit from more open markets for services trade in key
sectors such as insurance, accounting and architecture where services trade barriers
are at present very high. 64 The size of the services export market in India is reflected
in Table 10.
63
Services and Performance of the Indian Economy: Analysis and Policy Options | OECD Trade Policy Papers |
OECD iLibrary (oecd-ilibrary.org)
64
[STRI 2021: India] (oecd.org).
Page 68 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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Table 10: value of India's key services export markets
142. The value to liberalising trade in services is regularly considered by the OECD. In a
recent OECD report65 on the effect of services liberalisation, it is highlighted that
efforts to ease barriers to trade in services can yield substantial benefits. Table 11
provides a reflection of this benefit on a sectoral basis in percentage terms.
65
OECD Services Trade Restrictiveness Index: Policy Trends up to 2022 by OECD - Issuu
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Table 11: trade cost effects of services liberalisation by sector
143. Some of the new market access guarantees that Australia is securing through the
Interim Agreement align with India's recent domestic reforms. The timing is important
here, capitalising on recent reforms and binding them in a treaty means that India
cannot adversely modify these commitments in the future. Examples include
architectural services, telecommunications services and distribution services. Under
distribution services, India has committed to market access for single-brand retailing
and franchising, as well as commitments regarding wholesale distribution. India has
also agreed to provide a commercial presence commitment in architectural services
though incorporation in a partnership firm. This outcome binds India to this aspect of
its current reformed regime enabling Australian architectural firms to invest with
more confidence and fulsomely in the Indian market and collaborate professionally
with greater ease. Increasing investor confidence through commercial presence
commitments was a key request from the Australian professional services sector,
which has an annual revenue of AU$258 billion.66
66
Ibid
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144. Australia's architectural services industry annual revenue was AU$6.3 billion in 2021.67
Architectural service suppliers have faced several challenges in recent years. In
response to uncertain economic conditions brought on by the COVID-19 pandemic,
many downstream clients postponed or cancelled projects, reducing demand for
industry services. According to IBIS World68, industry revenue was expected to fall by
2.1 per cent over the five years through 2021-22, to AU$6.3 billion. This trend includes
an anticipated decline of 6.3 per cent in the current year, largely due to low
construction activity limiting the number of new projects. As a result, the impact of
opening up new opportunities in construction in India will likely have a positive impact
and help Australia's architectural services market bounce back from COVID-19
impacts.
145. In telecommunications services, India has agreed to commitments on electronic data
interchange, as well as on internet and infrastructure services (with a foreign equity
allowance of 74 per cent for commercial presence.) Major telecommunications
companies in Australia have indicated a strong interest in India and some are present
in the Indian market. This additional certainty will allow existing market participants to
expand their portfolio of services while also encouraging new market entrants to
enter the Indian market. In distribution services, India has expanded its sectoral
offering significantly to include agricultural raw products, food products, furniture and
household goods, wholesale trade services including machinery, equipment and
suppliers. This is another major win for our distribution service suppliers, who now
have predictability on the products they can distribute and under what conditions.
Lack of predictability around rules relating to distribution services was reported to be
challenging from Australian stakeholders.
146. There were some areas of commercial interest for Australia where India was unable to
make commitments including legal, other health, vocational education, insurance and
multi-brand retailing. Australian negotiators will try and obtain further commercially
meaningful outcomes in these sectors in the full CECA negotiation.
147. Australia's market access offer to India is consistent with the approach that Australia
has taken in the A-UKFTA, including scheduling Services Market Access commitments
(in a 'negative list') at the state and territory level. As part of negotiations with India,
Australia scheduled using the same approach with services (including commercial
presence) market access outcomes and has not reduced the policy space that is
available to states and territories. Except for mobility, the services market access offer
that we provide to India binds Australia to our existing regulation in services sectors
where commitments are made, while also reserving policy space in areas that are
sensitive, such as broadcasting and audio-visual services and Indigenous traditional
cultural expression and the creative arts.
67
IBISWorld - Industry Market Research, Reports, & Statistics
68
Ibid
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Trade in Services Chapter outcomes
148. The Trade in Services Chapter contains modern commitments that guarantee that
Australian service suppliers in a broad range of sectors will receive non-discriminatory
treatment when entering the Indian market. The Trade in Services Chapter also
provides transparency and predictability for service suppliers on the domestic
regulations that they can expect to be exposed to when entering the Indian or
Australian markets. There are also separate Annexes on Financial services,
Professional services and Telecommunications services, consistent with the economic
value that is placed on these sectors.
149. The proposed AI ECTA will not create additional obligations for businesses, community
organisations or individuals that relate to the import or export of services. The
agreement will instead impose obligations on the Australian and Indian Governments
to 'lock-in' a certain level of openness in services sectors where commitments are
made.
150. The Trade in Services Chapter establishes rules for the supply of services between the
Parties, including the MFN discipline, the market access discipline and the local
presence discipline. These disciplines are designed to liberalise services sectors by
confirming the settings that enable trade in services across borders. The disciplines
also improve transparency and predictability for service suppliers to incentivise them
to do business with India and subsequently stimulate economic growth. All of the
services disciplines that Australia is committing to are consistent with the regulatory
framework and practice that exists across Australia's jurisdictions and does not
require regulatory change for Australia.
A built-in agenda to improve outcomes over time
151. Importantly, India has agreed in the Interim Agreement to 31 commercially
meaningful services sectors and subsectors where it will apply the MFN discipline. This
"future-proofs" the FTA as it guarantees, in those 31 sectors and subsectors, that
Australian service suppliers will receive the same treatment that India accords to like
services and service suppliers of a future FTA partner of India. As India is currently
participating in many FTA negotiations, including with significant trading partners and
global competitors of Australia, such as the UK Canada and the EU, Australia will be
able to reap the benefits of these future FTAs and upgrades in those sectors. This is
the first time India has committed to MFN in a bilateral trade agreement, and
consequently constitutes the best MFN outcomes that India has given to any trading
partner. It also provides the first-mover advantage giving Australia a significant
competitive edge over our existing trading partners.
Page 72 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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152. Australia is also offering best FTA practice on MFN. Australia's MFN commitment to
India is prospective, not retrospective, so it means that Australia will provide India
with the same treatment as it provides to a future trading partner. The MFN
commitment does not extend to the treatment that Australia has provided to existing
trading partners. Australia and India have agreed upon a limited preferential Foreign
Investment Review Board screening threshold of $500m, indexed, for incoming Indian
investment in non-sensitive services sectors in Australia, increased from $289m,
indexed. This limited preferential threshold will not apply to Indian investment in non-
services sectors (mining and quarrying, forestry, manufacturing, fisheries and
agriculture) or to sectors classified as sensitive under Australia's Foreign Investment
Framework,69 for which the existing non-preferential thresholds will continue to apply.
153. Examples of commercially meaningful sectors where India is applying the MFN
discipline include higher education and adult education. Higher and adult education
are Australia's largest overall services export and largest services export to India.
India's current higher education market access commitment contains limitations and,
due to domestic sensitivities in adult education, India is not making commitments at
all. Through the MFN provision though, Australia can bank a future commitment now
and reap the benefit later when India is ready to liberalise.
154. Tourism and travel-related services is Australia's second largest overall services
export. It includes services provided by hotels and restaurants (including catering),
travel agencies and tour operator services, tour guide services and other related
services. The COVID-19 pandemic has disrupted the industry by significantly reducing
tourism activity in Australia and potential hotel investments outside Australia due to
the difficulties in travelling internationally. As a result of significantly constrained
tourism activity during the COVID-19 pandemic, industry revenue declined heavily
over the two years through 2020-21. Overall, industry revenue is expected to decline
at an annualised 8.9 per cent over the five years through 2021-22, to AU$8.0 billion.
However, this includes an anticipated revenue rise of 50.5 per cent in 2022, as
domestic travel volumes increase.70
155. Capitalising on India's commitments in tourism services through the Interim
Agreement has the potential to contribute significantly to the sector's bounce-back.
India's market access offer for hotel and other lodging services, and for travel agency
and tour operator services, has no restrictions on market access via cross-border
supply and via commercial presence. This improves upon India's commitment under
the GATs, which does not include such broad sectoral coverage. In addition, Australia
has gained a new sector - tour guide services. This benefit will take place on entry into
force of the Interim Agreement. The commercial presence commitment is an
69
"Sensitive sectors" includes media, telecommunications, transport, defence and military related industries
and activities, encryption and securities technologies and communications systems, and the extraction of
uranium or plutonium, or the operation of nuclear facilities. See further: Foreign Investment Review Board -
General Guidance | Monetary Thresholds at https://firb.gov.au/general-guidance/monetary-thresholds.
70
IBISWorld - Industry Market Research, Reports, & Statistics
Page 73 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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improvement on the status quo as, under GATS, India's commitment is limited to 51
per cent foreign equity in a commercial presence. When India is able to liberalise this
sector in relation to mode 4 (presence of natural persons), because of the MFN
commitment that India is making, Australia will also be able to capitalise on this
market gain.
156. Insurance is an exciting sector where Australia has obtained new market access.
Insurance penetration is India is currently at 3.7 per cent of GDP compared to the
world average of 6.31 per cent. Due to the COVID-19 pandemic, growth in the life
insurance sector has slowed to 11-12 per cent, down from 15-20 per cent in 2020, as
the pandemic pushed customers to not take out insurance policies. Due to this, since
2021 there has been a dramatic liberalisation in this sector, and the agreement
captures some of this, for example the liberalisation of capitalization requirements for
Australian life insurance suppliers.
157. Annual revenue of the Australian general insurance industry is valued at A$70.2
billion71. Declining investment returns over most of the 2019-21 period have limited
revenue growth. The increase in natural disasters has increased the number of claims
insurers incur, forcing industry operators to raise premiums. The 2019-20 bushfire
season and the COVID-19 outbreak have constrained revenue growth. Additionally,
the COVID-19 pandemic has caused significant volatility in the financial market,
negatively affecting investment income in 2019-20. Given these challenges, expanding
into new and growing markets like India will likely be of benefit to the insurance
industry.
158. India has also applied the MFN discipline to insurance and insurance-related services
and banking and other financial services. India is making some commitments in
insurance services, such as non-life insurance, where market access has not previously
been provided. Current treaty-level access for Australian suppliers is guaranteed
through India's GATS commitment, but this is limited to mode 1 insurance of freight.
In the Interim Agreement, India has offered new market access in commercial
presence with 49 per cent foreign equity. The commitment will allow Australian
insurance brokers to have resident representatives and representative offices who can
procure reinsurance business from Indian insurance companies, including while
abroad. As this sector is only partially open though, the MFN discipline is important
and an improvement on the status quo as Australian financial services stakeholders
will be able to capitalise on this improved treatment once India provides this market
access, including in other modes of supply.
71
Ibid
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Impact on financial services
159. Australian financial service suppliers have reported that a lack of transparency
associated with government regulations and decision-making processes, negatively
affects the ability to supply financial services to India. The Financial Services Annex will
include specific rules giving financial service suppliers greater certainty and
transparency regarding the rules that will apply to them when providing services in
both Australia and India. These rules principally concern a guarantee of non-
discriminatory treatment and transparency for service supplies. In addition, India and
Australia are committed to publish regulatory changes and promptly administrative
decisions within 180 days. These disciplines are designed to remove the opaqueness
that Australian financial service suppliers currently experience when trying to work
out how to operate in India.
160. The Annex also includes provisions that promote regulatory transparency in the
authorisation procedures that are necessary to supply financial services. It also
provides details of the access requirements for self-regulatory organisations, where
access is necessary to supply a financial service in India. This transparency is highly
valuable as Australian suppliers indicate that they struggle to navigate the Indian
authorisation system. The obligations in the Chapter around transparency should ease
this burden and provide more predictability than there is at present.
161. For a long time, foreign equity restrictions on commercial presence in banking and
insurance sectors has acted as a disincentive to Australian investment in financial
services in India. Australia has been able to capitalise on India's recent liberalisation in
this sector where India has increased foreign participation in commercial banks,
insurance and fund managers. For insurance, in March 2021 India increased the
foreign equity limit from 49 to 74 per cent. India has agreed to lock in 49 per cent
foreign equity for Australia in the Interim Agreement, better treatment than the 26
per cent provided to Japan Korea and Singapore. For banking, Australia has been
provided the ability to now invest in a private sector bank with an FDI ceiling of 74 per
cent. This is covered in India's mode 3 (commercial presence) services market access
offer. The proposed AI ECTA does not include commitments on investment outside of
services sectors.
162. The AI ECTA provides an avenue for a commercial advantage for Australian businesses
that need to move data from India to Australia as a function of ordinary business,
subject to domestic regulatory requirements. The agreement contains confirmation
that Australia provides adequate data protection. This means that when the proposed
Personal Data Protection Bill 2019 legislation (currently in Parliament) comes into
force to replace the Personal Data Protection Bill 2018, Australian companies will be
able to point to confirmation in AI ECTA that India recognises Australia's adequacy,
which will be a prerequisite for moving copies of sensitive and critical data. This
declaratory language has never before been included in an FTA with India.
Page 75 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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163. Australians will also gain additional market access by being able to provide Actuarial
and Advisory Services (after attaining formal certification by Actuarial Society of India).
164. As the disciplines in the Financial Services Annex are consistent with Australia's
financial services regulatory framework, it is unlikely that there will be a significant
impact on the Australia's financial services market. Indian financial services service
suppliers already have access to Australia's market on a non-discriminatory basis.
Impact on telecommunications services
165. The Telecommunications Annex contains rules that guarantee service suppliers from
India and Australia access to and use of public telecommunications networks and
services. While this commitment does not result in a change in the access that
Australian suppliers currently have into India, nor Indian suppliers into Australia (we
maintain a non-discriminatory regime) it does promote greater predictability and
transparency for Australian service suppliers, which can have the knock-on effect of
increasing trade in services and stimulating economic growth.
166. The Telecommunications Annex also includes a guarantee for non-discriminatory
access to interconnection, including for new market entrants. The benefits of these
outcomes include increased certainty for Australian and Indian businesses, providing
encouragement to engage in services trade, for example via commercial presence, and
therefore stimulating economic growth. There are no costs or concessions for
Australia to meet this commitment as it reflects Australia's domestic regime. There
may be benefits for consumers due to the potential increase in competition that could
lower prices and improve service supply.
167. The transparency provisions that relate to public availability of regulations, licensing
requirements and options for dispute resolution directly respond to stakeholder
concerns regarding a current lack of transparency around licensing requirements and
dispute resolution options in India. The Telecommunications Annex improves upon
the status quo as it clarifies the market conditions for Australia's telecommunications
service suppliers in India. While it is challenging to anticipate the magnitude of the
benefit that this commitment will provide, the effect of this language will likely be an
increase in trade in telecommunications services between India and Australia and
resultant positive impact on economic growth.
168. Additional obligations in the Telecommunications Annex relate to India and Australia
guaranteeing advance notice on regulatory decisions. This commitment will support
market confidence and stimulate economic growth as opaque rules and regulations
and a lack of understanding regarding the legal process can disincentivise industry to
trade internationally. As there are only a few Australian telecommunications
Page 76 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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companies in India, this provision may incentivise more Australian companies to move
into the lucrative Indian market. Given that India is currently the world's second-
largest telecommunications market with a subscriber base of 1.16 billion and a strong
growth trajectory72, these rules will likely facilitate trade and have an overall positive
impact for telecommunications consumers due to the likelihood that increased
competition would result in improved service provision.
169. The obligation in the Telecommunications Annex for licensing criteria and procedures
to be publicly available, and to provide reasons when a licence is refused, revoked or
not renewed is particularly pertinent. Australian stakeholders requested stronger
transparency provisions around regulation and licencing across voice, data
transmission and private leased services. The Telecommunications Annex does not
address stakeholder requests in relation to non-voice growth areas such as enterprise
data provision as this request would require regulatory reform in India so goes beyond
what is possible in this Interim Agreement. It may be that these provisions can be
addressed in the full CECA.
170. As the disciplines in the Telecommunications Annex are consistent with Australia's
telecommunications regulatory framework, the impact that this Annex will have on
Australia's telecommunications market is expected to be minimal. The 'head turning
effect' of the Interim Agreement might attract more Indian telecommunications
service suppliers to the Australian market but the impact is likely to be minimal. If
Indian telecommunications suppliers do increase their presence in Australia, this
would likely have a positive impact, stimulating economic growth and improving
competition, with the knock-on effect of improving services and choices for
consumers.
171. The potential increase in service suppliers in Australia is unlikely to have a negative
displacement effect due to the number of mature suppliers in Australia already and
because Australia's market is already regulated on a non-discriminatory basis, so
India's telecommunications service supplier market access is unchanged. It will still
likely result in a positive impact for consumers though, given the impact that improved
competition can have on consumer savings.
Impact on professional services
172. The Interim Agreement includes a framework to improve the two-way movement of
professionals. It will establish a Professional Services Working Group for the future
facilitation of the mutual recognition of qualifications, licensing and registration
procedures between professional services bodies. Australia and India have agreed to
engage their respective professional services bodies to negotiate mutual recognition
arrangements for qualifications, licensing and registration procedures across
72
Telecom Industry in India (ibef.org)
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professional services and services in regulated or licensed occupations. This provides a
useful platform to encourage professional bodies to negotiate mutual recognition
agreements and provides a hook for the bodies to reach out to their counterparts.
From consultations with stakeholders, it is understood that currently there are only a
limited number of mutual recognition agreements (MRAs) between Australia and
India, including in the engineering, accountancy and architecture professions.
173. The framework established through the Interim Agreement may provide the necessary
impetus to increase the number of MRAs, and therefore two-way mobility of
professionals and trade in professional services. A 2015 Productivity Commission
report on barriers to services exports recommends that the Australian Government
put in place a framework to support the development of MRAs and that that would
likely improve trade in professional services. The report suggests that a framework,
such as the one that has been agreed in the AI ECTA, should be part of a trade
agreement. The report goes on to suggest that the framework should include clear
actions and timeframes for an implementation working group (that is adequately
resourced and involves relevant regulators and government bodies) to report on its
progress to the committee responsible for overseeing implementation of the trade
agreement. The framework should also include a process for consulting with industry
stakeholders. This is exactly what DFAT has delivered for our professional services
stakeholders and the report suggests that this would ultimately improve trade in
professional services and therefore is an improvement on the status quo. 73
Clarity regarding domestic regulations
174. Stakeholder consultations also reveal that currently there is considerable red tape in
India's domestic regulatory system when seeking to provide a professional service in
India. For example, stakeholders have reported that currently the process for
obtaining a business visa and/or a license to work in India is complicated and difficult
for Australian businesses and professionals to navigate. The domestic regulation
provisions in the Trade in Services Chapter look to address these challenges by setting
disciplines on a range of aspects surround authorisation requirements, including by
mandating transparent and reasonable fees, reasonable timeframes, status updates
upon request, acceptance of electronic and authenticated applications, not original
copies, and not requiring physical presence to take forward an application. Lack of
access to these processes, when accumulated in terms of time lost and person power,
are considerable, particularly on SMEs. These outcomes, while difficult to quantify, are
likely to be beneficial to service suppliers seeking to obtain authorisation to supply a
service in India.
73
Research report - Service Exports Productivity Commission (pc.gov.au)
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Impact on taxation of services
175. Australia and India have agreed to resolve an issue concerning the application of
taxing powers under the Double Taxation Avoidance Agreement between the
Government of the Republic of India and the Government of Australia for the
avoidance of double taxation and the prevention of fiscal evasion ("the DTAA")
through a side letter to the AI ECTA. Presently, due to the interaction of the DTAA and
Australian taxation legislation, the Australian Taxation Office is required to tax the
offshore income of Indian firms providing technical services into Australia, although
Australia does not generally tax such services. Under the terms of the side letter,
Australia will make amendments to taxation legislation (the International Tax
Agreement Act 1953 and/or the Income Tax Assessment Act 1997 and/or the Income
Tax Assessment Act 1936) to provide an outcome which would stop the taxation of
offshore income of Indian firms providing technical services into Australia, to be
implemented in a similar time period to the implementation of the AI ECTA. The cost
to revenue on this outcome, once implemented, is estimated at $145 million over the
forward estimates.
176. The rules that have been agreed in the Domestic Regulation article in the Trade in
Services Chapter seek to address these challenges as they ensure that laws and
regulations that affect trade in services will be administered in a reasonable, objective,
and impartial manner and will not be more burdensome than necessary to ensure the
quality of the service. While this outcome does not necessarily result in a change in
the market access that Australian professionals currently have, it provides greater
transparency and predictability on the experience a professional might be expected to
have in order to provide a service in India.
177. In addition, the Interim Agreement guarantees that a licensing process will not, in
itself, be a restriction on the supply of a service. This domestic regulation discipline,
among others, may improve upon the status quo as it specifies, in legally binding text,
the baseline treatment that Australian service suppliers can expect to receive when
applying for a license in India. Ensuring that licensing requirements are reasonable and
objective is likely to contribute to addressing the current concerns of Australian
stakeholders regarding burdensome red tape in their attempts to provide a
professional service in India.
178. Australian legal professionals also indicated that it is currently not possible for
Australian lawyers to practice in India and that they would like to see legal services
liberalised. This request had come from the Law Council of Australia, which represents
approximately 65,000 Australian legal professionals,74 which gives a flavour of the size
of the interest in accessing the Indian market. The restriction that India maintains
includes the inability to provide all legal services on a fly in, fly out basis in India and
74
Our Constituent Bodies and Directors - Law Council of Australia
Page 79 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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also does not offer 'registered foreign legal consultant' rules, which would enable
restricted practice of foreign and international law by Australian lawyers in India. This
request will not be addressed in the Interim Agreement as it will require regulatory
reform in India that is not possible at this time. It may be that this issue can be
addressed in the full CECA.
Impact of key mobility (temporary entry) market access outcomes
179. Australia is providing India with mobility outcomes that are consistent with its existing
visa settings and previous FTAs including A-UKFTA and the Australia-China FTA
(ChAFTA), and in a form which ensures the integrity of our visa system. This includes
equivalent commitments on categories of entrant, length of stay, spouses and
dependants. The agreement extends a new commitment for Indians undertaking Post-
Study Work, consistent with existing settings except permitting an additional year for
STEM graduates with First Class honours. The FTA also establishes a Work and Holiday
Maker Program for Indians coming to Australia, with a thousand places available, to
be implemented within two years. An important difference from the A-UKFTA is that
the Interim Agreement does not include the waiving of Labour Market Testing (LMT).
What this means is that an employer will still need to provide evidence that they have
tested the local labour market first before looking to recruit from overseas. With or
without an LMT waiver, the current sponsorship requirements for an Australian
employer will remain in place, including wage and qualification requirements, and
costs associated with relocating employees from overseas.
180. Australia is obtaining commitments from India that reflect the best of its existing FTAs,
including additional commitments on access for Australian Contractual Service
Suppliers in a wider range of sectors (for stays up to a year) beyond any of its
precents. India will make commitments on access for Australian spouses and
dependents of primary visa holders, balancing Australia's similar commitments.
Australia has secured Temporary Movement of Natural Persons Chapter text that
addresses visa and related concerns faced by Australian businesses in India, such as
clarity on application procedures including periods of stay and other conditions. The
Chapter text also includes a commitment that the processing of an application is
reasonable, in that it does not impair or delay the supply of a service or trade in goods
and it also include rules around the granting of temporary entry.
181. Some of the key outcomes in the temporary entry package are in a number of mobility
side letters. The side letters expand access to FTA outcomes to a broader demographic
than is traditionally covered by FTAs, with the goals of fostering people-to-people
links, supporting trade and business, and contributing to cultural exchanges between
Australia and India. The Post-Study Work visa outcome commits Australia to maintain
opportunities for former Indian students to live, study and work in Australia
temporarily upon completion of a diploma or trade qualification (stays of up to 18
months); a bachelor degree (stays of up to two years), a masters degree (stays of up to
Page 80 Customs Amendment (Australia-India Economic Cooperation and Trade Agreement
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three years); and a doctoral degree (stays of up to four years). In addition, the length
of stay for a bachelor degree graduate with first class honours is extended from two to
three years post-study in Science, Technology, Engineering or Mathematics (STEM),
including information and communications technology (ICT) sectors.
182. As the world changes and digital technology becomes central to everything we do, the
Australian government is looking to match the skills that are required.75 There is now a
priority focus on STEM, including the development of workplace skills in STEM. Due to
the economic trend toward a more technology focused economy, retaining
exceptional Indian graduates in ICT and STEM is consistent with the need to increase
the number of graduates with these skill sets.76
183. Current data on visa grants for Indian citizens graduating from Australian universities
with first class honours degrees (across all fields) is low (see Table 12). The impact on
the Australian labour market will therefore be small, but will target key skill areas the
Australian Government is seeking.
Table 12: Visa grants for Indian students graduating with first class honours
Citizenship Qualification 2021-22 to
Country Level 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 31/01/2022
Honours
Degree (1st
India Class) <5 8 7 16 10 24 19 13 31
Source: Department of Home Affairs (2022).
184. India will also provide a new work-based immigration route with reciprocal eligibility
and duration for Australian nationals who successfully complete their studies and who
wish to supplement their training with professional experience in India. This will
expand Australia and India's people-to-people links and improve exchange of
knowledge, a key factor in enhancing an innovative and dynamic economy.
185. The FTA also includes a side letter establishing a Work and Holiday Maker outcome.
This is new for India, and will need to be established in Australia's system, and so have
been given a two-year implementation window. Australia will commit to extend the
Work and Holiday (subclass 462) visa to Indian citizens who meet the eligibility
requirements under Australian legislation. The maximum number of visas that
Australia may grant in each program year (1 July to 30 June) to Indian citizens who
have not previously participated in the Work and Holiday (subclass 462) visa program
is 1,000 per year. As this is a targeted outcome that will entail a cap on temporary
entry under the Work and Holiday Maker, it will make a modest contribution to the
75
SCIENCE, TECHNOLOGY, ENGINEERING AND MATHEMATICS: AUSTRALIA'S FUTURE | Chief Scientist
76
Why is STEM important? - Department of Education, Skills and Employment, Australian Government
(dese.gov.au)
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Australian workforce. Importantly, this outcome will also make a new contribution to
the Australian economy though the holidays undertaken by Indian participants,
supporting the post-CIVID recovery of Australia's tourism sector. India currently does
not have a similar visa category but has undertaken to extend similar arrangements to
Australia if it puts in place such a program with any country in the future.
186. To support trade and investment, the Chapter on Temporary Movement of Natural
Persons will include provisions that enhance opportunities for business travel and
encourage people to travel and provide services in each other's territory. These
provisions provide certainty on visa pathways for businesses and professionals
working across our countries. These commitments build upon those made by both
countries in the WTO and are designed to encourage skilled professional temporary
mobility, to facilitate the trade that we are promoting in this Interim Agreement. The
Chapter text includes a Temporary Movement of Natural Persons Working Group,
which will meet annually, and will provide the opportunity to review implementation
and discuss commitments, including progress on additional outcomes covered in
mobility side letters.
187. As in a number of our previous FTAs, Australia has provided India with additional
certainty on market access to nationals working in culturally significant occupations.
The commitment confirms possible access for a combined total of 1,800 per year of
qualified professional traditional chefs and yoga instructors entering as contractual
service suppliers of India. This is a targeted commitment, and subject to market
demand and sponsorship requirements associated with the Temporary Skills Shortage
(TSS) visa. It is not expected to displace the existing Australian workforce of traditional
Indian cuisine chefs or yoga instructors, but may support the development of these
traditional Indian occupations in Australia (a strong priority for India globally). There
are currently over 94,000 chefs in Australia.77 Data on specific cuisine chefs, such as
Indian cuisine, is unavailable. Permanent employment data for yoga instructors is also
unavailable but if considered part of the Fitness Instructors occupation, there are
currently 24,000 instructors78 or part of the Other Sports Coaches and Instructors
sector, currently there are 7,700 instructors.79 Because of the size and nature of the
workforce, a cap of 1,800 is not expected to have a displacement effect on the existing
markets. It could instead be predicted to benefit the Australian market by increasing
the number of skilled yoga instructors and Indian chefs for Australian consumers to
enjoy and increase the diversity and development of these skills and professions in
Australia. Current visa entry data for Indian nationals working in these occupations is
provided in Table 13 and suggests that there will be an increase based on current low
numbers.
77
Chefs | JobOutlook
78
Fitness Instructors | JobOutlook
79
Other Sports Coaches and Instructors | JobOutlook
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Table 13: Indian national TSS visa grant for the occupations of Chef and Other Sports
Coach or Instructor
Primary TSS/457 Visa Grant 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Chef (to 31-Dec-21)
Indian Nationals 83 100 140 111 109 188*
All Countries/Nationalities 1,109 1,129 1,594 715 896 1,370
Indian % of visa grant for occn 7.5 8.9 8.8 15.5 12.2 13.7
Other Sports Coach or
Instructor
Indian Nationals 0 0 0 0 0 0
All Countries/Nationalities 66 28 50 36 21 11
Indian % of visa grant for occn 0.0 0.0 0.0 0.0 0.0 0.0
*follows inclusion of Chef on PMSOL from 22 June 2022
188. The net benefit for Australia from the mobility commitments includes greater
certainty on mobility pathways and, red tape including for Australian Contractual
Service Suppliers and Independent Professionals to India in addition to, for India, a
new Work and Holiday maker program and increased lengths of stay for students of
STEM and ICT courses, priority growth sectors for Australia.
189. These increased opportunities are designed to build stronger people-to people links
and improve collaboration and skills transfer in important sectors between our
countries for many years to come. Without these arrangements, mobility between the
India and Australia, including in STEM, ICT and culturally significant areas, may not
grow as strongly and would be subject to more uncertainty. Together, the enhanced
certainty and increased opportunities are likely to increase mobility and professional
collaboration between our countries and therefore stimulate economic growth.
WHO DID YOU CONSULT AND HOW DID YOU INCORPORATE
THEIR FEEDBACK?
190. DFAT is committed to transparency and maintains a highly consultative approach
throughout trade negotiations. We lead Australia's whole-of-government
negotiations, and our positions rely on input provided by stakeholders. Stakeholders
are invited to express their views throughout the negotiations in public meetings,
industry specific consultations, or written submissions. Feedback is fed directly to the
leads of the relevant Chapter or market access negotiation and forms part of the
negotiation strategy for the Australian negotiating team.
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The stakeholder engagement process in the CECA negotiations
191. During both the earlier CECA negotiations and those which led to the AI ECTA, the
Australian negotiating team held numerous direct stakeholder consultations. These
have included industry and worker representatives, such as peak bodies and trade
unions, as well as businesses, individuals and other entities. Stakeholders were also
invited to consider and comment on the commercial, economic, regional and other
impacts that could be expected to arise from the proposed AI ECTA and a full CECA, via
written submissions.
192. DFAT provided regular updates on CECA, including the proposed AI ECTA through
established DFAT consultative groups such as the Ministerial Advisory Council, the
fortnightly Economic Diplomacy Peak Body Consultative Group and Peak Bodies
meetings.
193. The Australian negotiating team also contacted key industry stakeholders after the
December 2021 and February 2022 negotiating round in India. These consultations
play an important role in nuancing our negotiating positions and making sure we are
getting the right outcomes for Australians to diversify our trade and drive an export-
led recovery.
Business, Industry and Civil Society
194. Over the course of CECA negotiations since 2011, DFAT communicated with over 70
entities, including private organisations, individuals, consumer groups and peak
bodies. Engagement was through meetings with individual entities and numerous
stakeholder forums.
195. Before negotiations were suspended, DFAT received 51 formal submissions (including
three from the Australian Chamber of Commerce and Industry) from the following
entities (Table 14). Public submissions from these entities are available on the DFAT
website here.
Table 14: submissions from stakeholders
1. Australia-India Business Council 2. Australian Business Solutions (ABS Group)
Pty Ltd
3. Australian Chamber of Commerce and 4. Australian Pharmacy Council
Industry (provided three submissions)
5. ADInstruments 6. Advance Cairns
7. Andrew Godwin 8. Australian Dairy Industry Council
9. Australian Fair Trade and Investment 10. Australian Horticultural Exporters
Network (AFTINET) Association
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11. Australasian Performing Right Association 12. Australian Forest Products Association
Limited and Australasian Mechanical (AFPA)
Copyright Owners Society (APRA/AMCOS)
13. Australia India Business Council (AIBC) 14. Australian Industry Group
15. ANZ Banking Group Limited 16. Australian Nursing and Midwifery
Accreditation Council
17. Australian Tea Tree Industry Association Ltd 18. Australian Wool Innovation Limited
19. Baker & McKenzie 20. BBX Barter Services Pvt Ltd
21. Cassegrain Tea Tree Oil Pty Ltd 22. Copper Mines of Tasmania
23. CPSU (multiple submissions) 24. Federation of Automotives Products
Manufacturers
25. Financial Services Council 26. Indo Australia Design Research Alliance
27. The Institute of Chartered Accountants of 28. Insurance Australia Group
India
29. Insurance Council of Australia 30. International Trademark Association
31. Law Council of Australia 32. Meat & Livestock Australia
33. Molina Asthana 34. Music Council of Australia
35. Natio Cosmetics 36. National Australia Bank
37. NSW Department of Trade and Investment 38. Office of Horticultural Market Access
39. OZ Minerals Ltd 40. Pioma Chemicals - Tea Tree Oil
41. RayGen Resources 42. Seafood Services Australia
43. South Australian Education 44. South Australian Government
45. TFS Corporation Ltd (TFS) 46. VicRoads
47. Wine Australia 48. Winemakers Federation of Australia
196. Since the re-launch of CECA negotiations in 2020, DFAT has received a further 23
formal submissions from organisations and individuals (Table 15). Public submissions
from these entities are available on the DFAT website here.
Table 15: submissions received after the re-launch of CECA negotiations
1. ABS Group 2. Apple & Pear Australia Ltd (APAL)
3. Australian Berries Industry 4. Australian Food and Grocery Council
5. Australian Grape and Wine 6. Australian Horticultural Exporters and
Importers Association (AHEIA)
7. Australia India Chamber of Commerce and 8. Australian Nut Industry Council
University of Adelaide (joint submission)
9. Beyond Wines Australia 10. Dairy Australia
11. Femeconomy 12. Grain Growers Australia
13. Grain Trade Australia 14. Meat & Livestock Australia
15. National Farmers Federation 16. Pernod Ricard
17. Perth USAsia 18. Quintis Sandalwood
19. Sheep Producers Australia 20. Swisse Wellness
21. The Tahbilk Group 22. Vibe Ayurveda
23. K-Mart 24. Cherry Growers Australia
25. Australia-India Institute 26. Citrus Australia
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27. Summerfruit Australia
197. Regarding goods exports, the outcomes sought by stakeholders, which were compiled
from submissions, are summarised as follows:
a. reduce or eliminate or reduce tariffs for Australian exports, including fruit
(apples, stone fruit, blueberries, dates, citrus, table grapes, kiwifruit and pears),
wine, nuts, grains, dairy, wool, cotton, malt, sandalwood, seafood, tea tree oil,
computer products, solar products and processed foods,
b. seek tariff reduced quotas for certain citrus products,
c. reduce tariffs in a phased approach for sensitive products,
d. reduce tariff on goods from India being imported into Australia,
e. reduce non-tariff barriers, including by simplifying complex regulatory
frameworks and improving access to information about regulations, customs
procedures, tender processes and state/federal taxes in India,
f. reduce tariffs for coal and copper concentrates,
g. seek same preferential tariff treatment as those afforded to other trading
partners, including for sandalwood, as well as mineral and metal products,
h. duty free treatment of wood, paper and forestry products from Australia,
i. duty free trade of automobiles,
j. acknowledgement of Australia's internationally recognised food and safety
regime,
k. seek more streamlined rules of origin,
l. support action on simplification and harmonisation of customs procedures,
m. consider using the most appropriate HS code when classifying products to
determine duties that should be applied, and
n. have provisions in the agreement on anti-dumping, countervailing measures and
safeguards.
198. The proposed AI ECTA addresses the submissions received from 26 stakeholders
regarding the reduction in tariffs for a range of Australian products (please see a
summary of key outcomes in paragraph 164, below, as well as in the 'Benefits and
Impacts Analysis' section on trade in goods.
199. However, as with all negotiations, it was not possible to incorporate the outcomes
sought by stakeholders with respect to the reduction in tariffs for all the different
goods identified. For example, the types of goods raised in 11 submissions, including
tea tree oil, automobiles, dairy, goat meat, computer products, and solar products,
have not been afforded market access opportunities under the proposed AI ECTA.
Australia and India will continue discussions on trade in goods in advance of
negotiations for a full CECA and there may be a possibility for some of these goods to
be incorporated.
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200. Please find below a summary of the key outcomes for goods exports, including:
a. elimination of tariffs at entry into force for sheep meat, rock lobsters, wool and
coal, metallic ores such as manganese ores, coal, coke and semi-coke of coal,
LNG, titanium dioxide, certain non-ferrous metals (copper and nickel),
b. elimination of tariffs over 3, 5, 7 or 10 years for, certain fruit and vegetables,
certain nuts, fish, sandalwood, cotton, food preparation, and alumina,
c. elimination and reduction of tariffs in-quota over 4-10 years for lentils, cotton,
almonds, oranges, mandarins and pears, and
d. India will bind itself to maintain existing duty-free entry for barley and oats and
hides and skins.
201. The outcomes, as outlined above, mean that Australia will be on the same level
playing field on a number of goods as other trading partners that have preferential
trade agreements with India. The proposed AI ECTA has secured greater market access
for a range of Australian goods that stakeholders had identified were subject to high
tariffs. Further analysis of the outcomes for goods exports is contained in the Benefits
and Impact Analysis section, above.
202. The outcomes sought by financial services stakeholders, compiled from submissions,
are summarised as follows:
a. mutual recognition by securities regulators of financial services licences,
b. set benchmarks for "behind the border" regulatory barriers, including in relation
to data protection, privacy and storage, as well as regulator and prudential
supervision,
c. reduce regulatory burden and more streamlined processes to allow greater
market access in the financial services sector, and
d. in the insurance sector: (i) raise the foreign direct investment cap from 26 per
cent to 49 per cent; and (ii) have in place a social security agreement.
203. Australia has been able to capitalise on India's recent liberalisation in the financial
services sector. For example, in March 2021, India increased the foreign equity limit
from 49 to 74 per cent and India has agreed to lock in 49 per cent foreign equity for
Australia in the proposed AI ECTA. This is higher than the foreign equity limit India
offered to Japan, Korea and Singapore in their FTA.
204. The Financial Services Annex will promote regulatory transparency in authorisation
procedures that are necessary to supply financial services, may assist to streamline
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processes by increasing transparency. Particularly, as stakeholders have indicated that
they struggle to navigate the authorisation system.
205. The proposed AI ECTA will also provide a basis for ongoing discussions between India
and Australia on some of the issues identified. For example, a dedicated Financial
Services Working Group will enhance the relationship between our financial services
government representatives to continue to discuss issues that could be included in a
full CECA. This will include increased cooperation on emerging issues in the sector and
continuing to discuss the barriers facing financial services suppliers in each country. In
addition to ongoing consultation on the implementation of the MFN discipline with
respect to insurance and insurance-related services, banking and other financial
services.
206. The outcomes sought by professional services stakeholders, compiled from
submissions, are summarised as follows:
a. mutual recognition of professional qualifications, including for lawyers,
engineers, accountants and architects,
b. liberalise legal services in India, including allow foreign firms to establish and
operate representative offices, allow domestic firms to employ foreign lawyers,
permit Australian and Indian law firms to formally enter into commercial
associations and permit the restricted practice of foreign and international law
by Australian lawyers, and
c. maintain existing processes for the relevant professional bodies, including for
pharmacists, nurses and midwives to assess the competencies of individuals
trained overseas prior to their registration or commencement of employment in
Australia.
207. The proposed AI ECTA will provide a solid platform for Australia and India to continue
discussions and to look at ways to further liberalise professional services. For example,
establishment of a Professional Services Working Group will help to facilitate the
mutual recognition of qualifications, licensing and registration procedures between
professional services bodies.
208. While stakeholders have raised the challenges of not being able to practice in India,
including on a fly-in / fly-out basis or as a 'registered foreign legal consultant', these
issues would not be addressed in the proposed AI ECTA. This is given such
liberalisations will require regulatory reform in India. Nonetheless, establishment of
the Professional Services Working Group will ensure discussions on these issues
continue and could perhaps be addressed in a full CECA.
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209. The proposed AI ECTA will not change existing processes that are in place for relevant
professional bodies to assess the competencies of pharmacists, nurses and midwives
trained overseas.
210. On telecommunications, a stakeholder requested a specific telecommunications
services Chapter being included in the CECA to strengthen transparency. A stakeholder
also suggested the CECA reflect other international agreements that encourage cross-
border services for data.
211. The proposed AI ECTA incorporates stakeholder views through inclusion of a specific
telecommunications annex, which includes stronger transparency provisions around
regulation and licencing across voice, data transmission and private leased services.
Strong provisions guaranteeing non-discriminatory interconnection should also assist
in facilitating new market opportunities, such as enterprise data services, which was
an issue raised by stakeholders during consultations. Matters relating to data
localisation are being considered in the financial services Chapter.
212. On temporary entry, the outcomes sought by stakeholders, compiled from
submissions, are summarised as follows:
a. more streamlined visa processes that allow for greater movement of people
between Australia and India, including academics,
b. better link between education outcomes and skilled migration opportunities, as
international students can help address some of Australia's skills shortages,
c. introduction of work rights post study to make Australia a more attractive
international study destination,
d. sustainable growth in student mobility,
e. free trade agreements should not include agreements on movement of natural
persons and/or migration policy, and
f. reference to ILO and UN standards on labour rights and the environment.
213. The proposed AI ECTA includes a Chapter on Temporary Movement of Natural Person
and side letters, providing a framework on rules that would better facilitate the
movement of professionals, businesspeople, students and individuals would enhance
our trade relationship and strengthen our people-to-people links.
214. The Chapter on 'Entry and Temporary Movement of Natural Persons will include
provisions that will enhance opportunities for business travel. It will provide certainty
on visa pathways for businesses and professionals working across India and Australia.
This will address the key concern that has been raised by stakeholders, which was
around the lack of clarity and the long period of time required to obtain a business
visa.
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215. The outcome on post-work study work commits Australia to maintain opportunities
for Indian students to live, study and work in Australia temporarily upon completion of
their studies, including for a diploma or trade qualification, bachelor degree, masters
degree or doctoral degree. This may help to alleviate the skill shortages in particular
sectors and make studying in Australia more attractive for Indian students, noting
education is our largest services export to India. The extension of such assess to
Australians in India will provide greater awareness of the Indian market for Australian
business, supporting future growth in trade and investment between our two
countries.
216. On mining, resources and energy and infrastructure, the outcomes sought by
stakeholders, which were compiled from submissions, are summarised as follows:
a. transparency and certainty for businesses, including around contracts, dispute
resolutions and mineral leases
b. streamlined approvals for significant investments
c. investment opportunities for infrastructure
d. expand cooperation in mining services, expertise and technology
e. local policies and practices do not limit opportunities for investment in the
mining, energy and engineering sectors
217. The issues raised and outcomes sought by stakeholders have not been addressed in
the proposed AI ECTA, as they relate largely to domestic practices.
218. Eight stakeholders also sought outcomes in relation to intellectual property,
investments, government procurement and digital trade. The proposed AI ECTA does
not include any agreement on these issues. However, the full CECA Agreement will
include government procurement and digital trade.
219. Seven stakeholders identified challenges and sought outcomes in relation to ease of
doing business and taxation for foreign organisations, while five stakeholders sought
greater collaboration opportunities in a range of fields between Australian and Indian
entities, and one stakeholder suggested gender-based analysis of trade policy be
applied in FTAs. These issues were not addressed, as they were outside the scope of
the proposed AI ECTA.
Australian Government agencies
220. Australian Government departments were extensively consulted throughout the CECA
negotiations that have led to the AI ECTA. Regular inter-departmental meetings were
held, updates on the status of negotiations were provided and relevant agencies were
invited to participate in negotiations.
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State and territory governments
221. State and territory governments have been engaged and consulted throughout the
negotiations, including through emails and meetings. DFAT met with state and
territory governments in January, February and March 2022.
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WHAT IS THE BEST OPTION FROM THOSE YOU HAVE
CONSIDERED?
222. As outlined in the 'Options to achieve these objectives' section, this RIS considers two
options: Option 1 - sign the proposed AI ECTA and Option 2 - not sign the proposed AI
ECTA. Based on these two options, the best option is to sign the proposed AI ECTA for
the reasons set out below.
223. In reaching this conclusion, DFAT relied on a range of qualitive and quantitative
evidence, with a greater weight placed on qualitative analysis given DFAT has not had
the opportunity to undertake a feasibility study to determine, in detail, the
quantitative effects of the proposed AI ECTA. Nonetheless, a high-level quantitative
analysis of the existing tariff lines, a quantitative and qualitative assessment of the
benefits and impacts of the proposed elimination or reduction in tariffs, alongside a
qualitative analysis of outcomes stakeholders have requested and a qualitative
consideration of the benefits and impacts for the Australian services sectors and the
temporary movement of natural persons, indicates that it would be in Australia's
interests to sign the proposed AI ECTA. Table 16 provides a summary of the
advantages and disadvantages of Options 1 and 2.
Table 16: summary of the advantages and disadvantages of Options 1 and 2
Category Benefit or cost Method of assessment Option 1 - sign the proposed AI Option 2 - not
ECTA sign the
proposed AI
ECTA
Strategic Increased Qualitative Increased diversification Status quo
benefits to diversification of relative to status quo
Australia export markets
Strengthened Qualitative Strengthened relative to status Status quo
regional economic quo
architecture during a
period of geopolitical
uncertainty and
trade tensions
Foundation for Qualitative Stronger foundation for future Weaker
future full CECA CECA foundation for
which could address future CECA
issues such as
procurement
Welfare gains for Independent economic Gains of between 0.15 and 1.14 Baseline
both Australia and modelling (2009) per cent of GDP (India) and
India between 0.23 and 1.17 per cent
of GDP (Australia) relative to
baseline
Benefits to Reduced tariff DFAT analysis of tariff Elimination and binding at zero No clear
Australian barriers for wide lines and average imports or reduction of tariffs for 70.3% pathway to tariff
businesses (2018-2020) elimination
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Category Benefit or cost Method of assessment Option 1 - sign the proposed AI Option 2 - not
ECTA sign the
proposed AI
ECTA
and variety of goods of tariff lines, covering 90.6% of
consumers exports trade by value
Potential to build DFAT analysis of key Stronger potential for growth in Weaker
export markets Australian exports and exports of many commodities potential for
where there potential for growth in with a zero tariff binding growth in
currently are limited Indian market (measured exports of many
exports to India by Indian imports from commodities
Australia compared to
Indian imports from
World)
Reduced tariff DFAT analysis of Almost 98 per cent of Around half of
barriers on Australian Australian imports from Australian imports from India Australian
merchandise imports India will enter duty-free on EIF imports from
from India India by value
are currently
subject to
import duties
not exceeding 5
percent
Increased economic Productivity Commission Greater economic activity Less economic
activity due to report "Rising activity
enhanced two-way Protectionism:
trade Challenges, threats and
opportunities for
Australia"
Increased certainty Qualitative assessment Existing market access No obligation to
for Australian regulations will be "locked in" "lock in" existing
services suppliers regulations
Telecommunications Qualitative assessment Enhanced transparency Baseline
sector
Regulatory Regulatory burden, DFAT quantitative Approximately AU$17 million Baseline
burden comprising: assessment over 10 years
costs incurred by all
businesses to learn
about the CECA rules
costs incurred by
exporting businesses
in to understand
requirements;
costs of COO over 10
years
Tariff Australian consumers Treasury costing AU$335 million over the Opportunity
foregone will benefit from forward estimates (following cost of $335
increased entry into force of the proposed million forgone
competition, greater AI ECTA) over the
variety of choice in forward
products and lower estimates
prices.
Reduced costs and
improved access to
goods will also
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Category Benefit or cost Method of assessment Option 1 - sign the proposed AI Option 2 - not
ECTA sign the
proposed AI
ECTA
benefit sectors of
Australia's
manufacturing
industries.
Double Cost to revenue of Treasury costing This would mean that Australia Indian technical
Taxation $145 million over the would not tax Indian technical services firms
Avoidance forward estimates service firms supplying services providing
Agreement to Australia remotely. It would services to
result in a cost to revenue of Australia
$145 million over the forward remotely would
estimates. continue to be
taxed in
Australia. There
would be no
impact on
revenue
Net benefit or cost Significant strategic benefits No benefits
relative to the
Significant benefits to status quo
Australian businesses and
consumers No regulatory
burden relative
Revenue and expenditure to the status
impacts of $482 million over quo
the forward estimates
Assessment of Option 1 - signing the proposed AI ECTA
Advantages of Option 1
It advances the Australian Government's objectives
224. Signing the proposed AI ECTA will further the Australian Government's objectives,
which are set out in the 'What are the option to achieve these objectives' section, in
the following ways:
a. it will advance the Australian Government's trade diversification agenda by
opening new markets for Australian exporters and suppliers. This will help to
mitigate the risks associated with market concentration and it is also an important
pillar in supporting Australian businesses to recover in a post COVID-19
environment,
b. it will deepen Australia's economic links with likeminded trading partners in the
region and demonstrate Australia and India's commitment to trade liberalisation,
which is important in a global environment where protectionist sentiments are
growing.
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It will bring benefits to Australian exporters, suppliers and consumers
225. Signing the proposed AI ECTA will bring benefits to Australian exporters, suppliers and
consumers in the following ways:
a. it will provide early market access, which Australian businesses and consumers can
benefit from, while a full CECA is still being negotiated. This will allow Australian
exporters and suppliers to secure preferential market access into one of the
world's largest and growing economies, ahead of other trading partners - many of
whom are still in negotiations with India,
b. the proposed AI ECTA will eliminate, bind at zero or reduce the high tariffs
currently imposed on wide range of goods, which will make Australian goods more
competitive and enable them to compete with goods from other countries that
have existing FTAs with India,
c. it will assist Australian businesses to diversify the markets for their products, which
is important in an era where bilateral uncertainties could have a detrimental
impact on trade.
It aligns with feedback received from stakeholders during consultations
226. In the context of trade in goods and trade in services, stakeholders have sought
several key outcomes, as set out in the 'Who did you consult and how did you
incorporate their feedback' section. The proposed AI ECTA will deliver on stakeholder
outcomes in several ways, including:
a. facilitate greater market access for Australian goods into the Indian market
through the elimination or gradual reduction in tariffs. This would make
Australian goods more competitive, which would be beneficial for Australian
exporters,
b. provide increased certainty for Australian service suppliers already doing
business in India by binding existing market access,
c. enhance transparency in the telecommunications sector, which would better
clarify the market conditions for Australia's telecommunications service suppliers
in India,
d. establish a framework to improve the two-way movement of professionals,
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e. promote opportunities for business travel, including by providing certainty on
visa pathways for businesses and professionals working across India and
Australia.
Disadvantages of Option 1
227. The proposed AI ECTA does not address all the issues outlined in Minister Tehan and
Minister Goyal's joint media release following the Joint Ministerial Commission. For
example, investment and digital trade are not included in the proposed AI ECTA.
228. Nonetheless, the proposed AI ECTA will provide a solid platform for ongoing
discussions between Australia and India on these issues and on more sensitive matters
such as government procurement, as part of negotiations for a full CECA.
Assessment of Option 2 - not signing the proposed AI ECTA
Advantages
229. There are no advantages to not signing the proposed AI ECTA.
Disadvantages
230. There are many disadvantages of not signing the proposed AI ECTA.
231. As outlined in the 'Problem identification', the 'Purpose and objectives' and 'Options
to achieve these objectives' sections, Australia's trade with India is predominantly
inhibited by significantly high tariffs. Not signing the proposed AI ECTA means that
India will remain an unattractive and inaccessible market for a number of key
Australian exports, especially in the agriculture and horticulture sectors. Australian
exports to India will continue to be dominated by coal and other products will not be
able to enter or be competitive in the Indian market. This would have adverse impacts
on Australian businesses trying to diversify their export markets as part of their post
pandemic recovery efforts.
232. Not signing the proposed AI ECTA could potentially stall negotiations for a full CECA, as
Minister Tehan and Minister Goyal had committed to reach an interim agreement
ahead of a full CECA. This would be detrimental to Australia's longer-term economic
interests, as it will impede Australia's trade diversification agenda and Australian
businesses will continue to have difficulties tapping into one of the largest and
growing markets in the world. Should India agree on FTAs with other trading partners,
Australian goods and services will become less competitive in the Indian market,
which may result in a greater market concentration of Australian products in India,
which as outlined in the 'Problem identification' section carries risks.
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HOW WILL YOU IMPLEMENT AND EVALUATE YOUR CHOSEN
OPTION?
Implementing the proposed AI ECTA
Australian domestic laws
233. In line with Australia's treaty making processes, once agreed, the text of the proposed
AI ECTA will be tabled in Parliament. The Joint Standing Committee on Treaties
(JSCOT) will then conduct an inquiry into the proposed AI ECTA and report back to the
Parliament. Following consideration by the JSCOT, Parliament will consider any
legislation or amendments to existing legislation that may be necessary to implement
the proposed AI ECTA prior to treaty action being taken.
234. To give effect to commitments in the proposed AI ECTA, Australia will need to make
the following changes:
a. amend the Customs Tariff Act 1995 to incorporate preferential tariff rates that
will apply to goods imported from India under the proposed AI ECTA; and the
Customs (International Obligations) Regulation 2015 and Customs Tariff
Regulations 2004 to allow for refunds of excess customs duty paid,
b. amend the Customs Act 1901 and create a Customs (Australia-India AI ECTA
Rules of Origin) Regulation to establish the rules for determining the originating
status of goods imported from India for the purpose of determining eligibility for
preferential tariff treatment, and
c. update Australia's visa system to include new categories for post-work study and
culturally significant occupations such as traditional chefs and yoga instructors,
as well as revise the Work and Holiday (subclass 462) visa to include Indian
citizens who meet the eligibility requirements.
235. DFAT has worked closely with the Department of Home Affairs throughout the
negotiations and Home Affairs is aware of the legislative amendments, as outlined in
the above paragraph, that would need to be made to give effect to the proposed AI
ECTA. From the date of signing, Home Affairs will have 12 months to make the
necessary legislative amendments and implement the outcomes for post-study work,
which is an adequate amount of time to make the changes required. Home Affairs will
have two years to make legislative amendments and implement the Work and Holiday
Maker program with India, which was considered adequate time to extend this
program for the first time to India.
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Proposed AI ECTA Committees
236. The proposed AI ECTA includes legal and institutional provisions that establish the
administrative provisions necessary for its operation. This includes the processes by
which the agreement will enter into force, and provisions detailing how the
agreement may be subsequently amended or terminated.
237. The proposed AI ECTA includes a structure of regular committee meetings intended to
create an ongoing dialogue between Australia and India.
238. The Joint Committee is the overarching committee under the proposed AI ECTA and
will play a key role in assessing, reviewing and monitoring the implantation and
operations of the proposed agreement.
239. The Joint Committee will also be responsible for supervising and coordinate the work
of the subcommittees and working groups listed in the table, below, which will be
established to monitor implementation and enable technical consultation provisions
in the relevant Chapters of the proposed AI ECTA.
240. The Committee architecture in the proposed AI ECTA is provided below:
COMMITTEE ARCHITECTURE IN THE PROPOSED AI ECTA
Joint Committee
Committee on Trade in Goods
Services Sub-Committee
Professional Services Working Group
Working Group on Temporary Movement of Natural Persons
Financial Services Working Group
Joint Technical Committee on Rules of Origin and Origin Procedures
Committee on Sanitary and Phytosanitary Measures
Sub-Committee on Standards, Technical Regulations and Conformity Assessment
Procedures
Working Group on Rules of Origin and Customs and Trade Facilitation
Implementation and Negotiation Subcommittee
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Implementation risks
241. Delays in any aspects of the treaty making process could result in delays in the
proposed AI ECTA coming into effect. This could result in reputational risks for
Australia, as depending on the reasons for the delays, it could be perceived as
Australia stalling on its commitments. DFAT is working closely with the Treaties
Secretariat to mitigate this risk by ensuring the Secretariat is aware of the proposed
timeframes and is able to factor this into their work plan to ensure the proposed AI
ECTA can be tabled on time.
242. Delays on implementation of the proposed AI ECTA on either Australia or India's side
could impede liberalisation measures, which would bring about delays for Australian
businesses and suppliers. Australia and India will work closely to mitigate this risk,
including through engagement in the committees, subcommittees and working groups
established under the proposed AI ECTA.
243. Lack of industry awareness about the proposed AI ECTA could also impede
implementation, as businesses that that do not have knowledge about the interim
agreement and how they could use the outcomes negotiated will not be using the
interim agreement to expand or tap into the Indian market. This is why DFAT, in
collaboration with Austrade, will be undertaking outreach activities with industry and
a range of stakeholders, as outlined in the section, below.
Engaging with stakeholders to promote the proposed AI ECTA
244. Engagement with stakeholders will continue after the conclusion of the proposed AI
ECTA negotiations to raise awareness of it's the opportunities it provides and ensure
that businesses and consumers are well placed to access the benefits of the
agreement. DFAT and Austrade will undertake proactive advocacy to lift awareness
and uptake of the proposed AI ECTA benefits from Australian business.
245. Following signing of the proposed AI ECTA, DFAT will ensure its published webpages
offer a range of practical resources that will help Australian importers and exporters
take advantage of the proposed AI ECTA. These will include:
- the full text of the proposed AI ECTA, plus side letters/initiatives and tariff
schedules,
- outcomes documents, background documents and Chapter summaries that
provide plain-English descriptions relating to elements of the proposed AI ECTA,
and
- a news section that provides updates on developments relating to the proposed
AI ECTA and frequently asked questions.
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246. DFAT will also publish additional resources for importers and exporters which will
include a guide for business wanting to use the proposed AI ECTA to export and
import goods, including information about complying with origin documentation
requirements.
247. DFAT's social media accounts (such as Twitter, Facebook and the DFAT blog) will be
platforms for promoting increased understanding and utilisation of the proposed AI
ECTA. Once the proposed AI ECTA has entered into force, DFAT will use social media
posts to draw tariff outcomes and other benefits of the proposed AI ECTA to the
attention of the wider public.
Evaluating the proposed AI ECTA
248. Australia's FTAs are not static. They are implemented over time and are subject to
regular review to maximise the benefits they deliver.
249. Australia and India, through the Joint Committee, will undertake a general review of
the proposed AI ECTA at ministerial level within one year following the entry into force
of the interim agreement. Following the initial review, it is anticipated that the Joint
Committee will then undertake a general review every two years, or at such times as
agreed between Australia and India.
250. As this proposed AI ECTA is an 'early harvest' agreement, the interim agreement will
include a mechanism to support transition to a full CECA, which will be supported by
the Implementation and Negotiation Subcommittee.
251. It is anticipated that a Post Implementation Review (PIR) will be undertaken of a full
CECA, which will also include a review of the proposed AI ECTA. This is on the basis
that a full CECA will build on the interim agreement and the PIR will be an opportunity
to consider the effectiveness of CECA, as a whole, including the impacts the interim
agreement and a full CECA has had on businesses or other groups in the community.
Potential metrics for success
252. As part of the general review referred to in the section above on 'Evaluating the
proposed AI ECTA', potential metrics for success, includes the extent to which:
a. the proposed AI ECTA has facilitated bilateral trade for goods and services,
b. balanced outcomes are being achieved, as a result of the implementation and
operation of the proposed AI ECTA,
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c. the disciplines contained in the proposed AI ECTA remain relevant to the trade
issues and challenges between Australia and India,
d. the relevant committees, subsidiary bodies or working groups are working
effectively.
253. More broadly, other potential metrics for success that the department may use to
evaluate the effectiveness of the proposed AI ECTA may include:
a. whether opportunities for Australian businesses have improved under the
proposed AI ECTA,
b. whether the outcomes of the proposed AI ECTA have met business and other
stakeholder expectations,
c. whether the proposed AI ECTA has reduced any administrative or regulatory
costs for business.
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ATTACHMENT A: JOINT STATEMENT ON A COMPREHENSIVE
STRATEGIC PARTNERSHIP BETWEEN REPUBLIC OF INDIA AND
AUSTRALIA
1. Hon'ble Prime Minister of India Shri Narendra Modi and the Hon Scott Morrison
MP, Prime Minister of Australia jointly participated in an India-Australia Leaders' Virtual
Summit on 04 June 2020.
I. Comprehensive Strategic Partnership
2. The meeting between the two Prime Ministers took place in a cordial atmosphere
and was highly productive. During the meeting, both Prime Ministers noted the progress in
the relationship across many fields, as well as the importance of a globally coordinated
response to COVID-19 and working to build a prosperous, open and stable post-COVID-19
world. Affirming their commitment to strengthening India-Australia ties for the long term,
they committed to elevate the bilateral Strategic Partnership concluded in 2009 to a
Comprehensive Strategic Partnership (CSP).
3. The CSP is based on mutual understanding, trust, common interests and the shared
values of democracy and rule of law. It reflects India and Australia's strong commitment to
practical global cooperation to address major challenges like COVID-19. It is in line with
India's increasing engagement in the Indo-Pacific region through her Indo-Pacific vision and
Australia's Indo-Pacific approach and its Pacific Step-Up for the South Pacific. Both
countries share the vision of an open, free, rules-based Indo-Pacific region supported by
inclusive global and regional institutions that promote prosperous, stable and sovereign
states on the basis of shared interests. Under the CSP, both countries decided to work
together in the areas of mutual cooperation as per the following:
II. Enhancing science, technology and research collaboration
4. India and Australia recognise the importance of global cooperation for saving lives
and managing the economic impacts of COVID-19, and future global challenges. We will
share the benefits of scientific and medical research and development, strengthen
healthcare systems, and reflect on the recommendations of the independent and
comprehensive evaluation of the international health response to COVID-19 to improve
capacity for global pandemic prevention, preparedness, and response.
5. India and Australia resolve to boost collaboration on science, technology and
research to support their national COVID-19 responses. We have committed to a new
phase of the Australia - India Strategic Research Fund to promote innovative solutions for
responding to and treating COVID-19, as well as other jointly determined priorities, to be
preceded by a one-off Special COVID-19 Collaboration Round in 2020.
6. India and Australia jointly decided to work cooperatively through multilateral,
regional and plurilateral mechanisms to strengthen and diversify supply chains for critical
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health, technology and other goods and services. We will work together to strengthen
international institutions to ensure they are inclusive and rules based.
7. Both countries jointly decided to work together in the areas of digital economy,
cyber security and critical and emerging technologies as identified by the Framework
Arrangement on Cyber and Cyber-Enabled Critical Technology Cooperation.
8. Australia conveyed that India could consider it as a stable, reliable and trusted
supplier of high-quality mineral resources to India. Both sides jointly decided to diversify
and expand the existing resources partnership. The MOU on cooperation in the field of
mining and processing of Critical and Strategic minerals identifies specific areas where
both sides will work together to meet the technological demands of the future economy.
Both countries jointly decided to cooperate on new technologies for exploration and
extraction of other minerals.
III. Maritime cooperation for an Open and Inclusive Indo -Pacific
9. Both countries share a view that many of the future challenges are likely to occur
in, and emanate from, the maritime domain. We agreed to boost cooperation in the
maritime domain as encapsulated in our Joint Declaration on a Shared Vision for Maritime
Cooperation in the Indo-Pacific. Our enhanced arrangements will facilitate deeper
engagement between our two countries including maritime domain awareness, and
expanded linkages between our maritime agencies.
10. Both India and Australia are committed to work together with partners and relevant
regional organisations across the Indo-Pacific, including ASEAN, to enhance capacity for
sustainable management of marine resources and challenge in maritime domains. In this
regard, Australia expressed support for India's Indo-Pacific Oceans Initiative (IPOI) which
will promote better coordination and cooperation among the countries in the region on
maritime related issues.
11. Both sides agreed to share technologies and resources to support the health and
sustainability of oceans and water resources, including through regional institutions. They
also concurred to build on existing commitments to combat marine litter and single-use
plastic waste, and target Illegal, Unreported and Unregulated (IUU) fishing.
IV. Defence Cooperation
12. Both sides agreed to continue to deepen and broaden defence cooperation by
enhancing the scope and complexity of their military exercises and engagement activities to
develop new ways to address shared security challenges. Both sides agreed to increase
military inter-operability through defence exercises through their Arrangement concerning
Mutual Logistics Support (MLSA). It was agreed that the Implementing Arrangement
concerning cooperation in Defence Science and Technology to the MoU on Defence
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Cooperation provides a framework for growing collaboration between the defence science
and technology research organisations of both countries.
V. Regional and Multilateral cooperation
13. Both India and Australia share a vision of a free, open, inclusive and rules-based
Indo-Pacific region to support the freedom of navigation, over-flight and peaceful and
cooperative use of the seas by adherence of all nations to international law including the
United Nations Convention on the Law of the Sea (UNCLOS) and peaceful resolution of
disputes rather than through unilateral or coercive actions.
14. Both sides share a commitment to supporting a strong and resilient regional
architecture, with ASEAN at its centre. Both countries agreed to continue to work with the
East Asia Summit (EAS) and other ASEAN-led institutions; the ASEAN Defence Ministers'
Meeting (ADMM Plus), Indian Ocean Naval Symposium (IONS) and Indian Ocean Rim
Association (IORA) to realise our long-term objectives for the region. Both sides committed
to continue to work through plurilateral and trilateral mechanisms as mutually agreed.
15. Both sides commit to continue to work together through various plurilateral
mechanisms, including trilateral meetings with Japan, trilateral meetings with Indonesia
and consultations on COVID-19 with Japan, New Zealand, the Republic of Korea, Vietnam,
and the United States. They welcomed the inaugural Quad ministerial meeting with Japan
and the United States in September 2019, and reaffirmed their commitment to ongoing
Quad consultations.
16. Both sides recognised the importance of the prosperity and security of the South
Pacific and will exchange views on their respective approaches to the South Pacific region
under Australia's Pacific Step Up and India's Forum for India-Pacific Islands Cooperation
(FIPIC), with a view to cooperate in the region.
17. Both sides reiterated their support for continued bilateral civil nuclear
cooperation and their commitment to further strengthen global non-proliferation. Australia
expressed its strong support for India's membership of the Nuclear Suppliers Group (NSG).
VI. Terrorism
18. Recognising that terrorism remains a threat to peace and stability in our region,
both sides strongly condemned terrorism in all its forms and manifestations, and stressed
that there can be no justification for acts of terror on any grounds whatsoever. Consistent
with resolutions of the United Nations and the 2015 G20 Statement on the Fight against
Terrorism, both sides support a comprehensive approach in combating terrorism, including
by countering violent extremism, preventing radicalisation to terrorism, stemming
recruitment, preventing the movement of terrorists including Foreign Terrorist Fighters,
disruption of financial support to terrorists, countering incitement to commit terrorist acts
and facilitating the investigation and prosecution of terrorist acts. Both sides reiterate our
resolve to work with internet companies to strengthen transparency to prevent online
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terrorist activity consistent with the G20 Osaka Leaders agreement on Preventing
Exploitation of the Internet for Terrorism and Violent Extremism Conducive to Terrorism.
19. Both sides will also assess and address potential risks associated with virtual assets
and new financial technologies that may be abused for the purpose of money laundering
and terrorist financing and take steps to ensure that such virtual assets service providers are
subject to Anti-Money Laundering/Countering Financing for Terrorism
(AML/CFT) regulations. Both sides called for early adoption of a Comprehensive Convention
on International Terrorism (CCIT).
VII. Economic cooperation: A More Prosperous Shared Future
20. The two sides committed to encourage expanded trade and investment flows to the
benefit of both the economies. In view of the remarkable growth in the trading relationship
between India and Australia, both sides decided to re-engage on a bilateral
Comprehensive Economic Cooperation Agreement (CECA), while suitably considering
earlier bilateral discussions, where a mutually agreed way forward can be found.
21. Both countries committed to work closely together on our approach to
international economic issues through the G20 and in that context, Australia welcomed
India's hosting of the G20 in 2022.
22. Both sides share a common commitment to the rules-based multilateral trading
system and committed to work together to protect and shape the rules that promote
economic growth, development, trade liberalisation and open markets in accordance with
the Preamble of the Marrakesh Agreement establishing the World Trade Organization
(WTO). This includes reforming and strengthening the WTO, while preserving its
fundamental principles so that it continues to remain relevant to the needs of all WTO
Members.
23. Both sides expressed their interest in ensuring that Australian businesses are aware
of opportunities through India's "Make in India" program and the Smart Cities initiatives,
and that Indian companies are aware of investment projects in Australia.
24. Both countries also jointly decided to continue to raise awareness among Australian
investors and Superannuation Funds of opportunities in India's infrastructure sector under
the National Investment and Infrastructure Fund (NIIF).
25. India and Australia jointly decided to explore the possibility of launching the Indian
RuPay Card in Australia.
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VIII. Innovation & Entrepreneurship
26. In this context, both sides committed to continue fostering collaboration between
entrepreneurs, developing innovative products and promoting start-ups and incubation
centres. Both sides committed to enhance cooperation in the Micro, Small and Medium
Enterprises (MSME) sector and decided that major industries of both countries should
endeavour to integrate the SME/MSMEs of the other country into their supply chains,
thereby diversifying bilateral trade. Both countries jointly decided to take forward
SME/MSME cooperation including through the Australia India Business Exchange program.
IX. Agriculture Cooperation and Water Resources Management
27. Agriculture is an important pillar of the Australian and Indian economies with
shared challenges and climactic conditions. Recognising the long history of collaboration in
agricultural research, education, development and capacity building, it was jointly decided
to continue building on our mutually beneficial agriculture relationship including through
exploring the development of a partnership on grains management and logistics to reduce
post-harvest losses, rationalise costs and ensure farmer income is not affected by supply
chain disruptions (particularly in light of the COVID-19 pandemic).
28. Both countries noted that on market access issues, some progress has been made
and they demonstrated their strong commitment to continue the negotiations.
29. Water security is a critical challenge for both countries and it was jointly decided to
deepen policy and technical cooperation on mutually agreed activities to improve water
management and sustainable economic development through the Memorandum of
Understanding on cooperation in the field of Water Resources Management.
X. Education, Culture, Tourism and People-to-people ties
30. Education, research and skills are a central component of the relationship. Both
sides noted they underpin the progress and growth trajectories of our nations, and the
exchange of students and academics between our countries generates valuable people-to-
people links. We agree to continue efforts to expand our partnership in these areas,
including to deepen research collaboration. We will work together to support the
development of education campuses in each other's countries.
31. As India continues its ambitious skills reform agenda, we have concluded a new
Memorandum of Understanding on Cooperation in Vocational Education and Training to
forge new bonds of cooperation in policy development, program delivery and information
exchange.
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Tourism
32. Building on the 2014 bilateral MOU on cooperation in the field of tourism, both
sides jointly decided to renew the MOU in order to identify opportunities to strengthen,
deepen and broaden cooperation in the travel, tourism and aviation sector.
Parliamentary Cooperation
33. Both sides noted the importance of inter-parliamentary interaction as a valuable
component of their bilateral relations.
People to People Connections
34. The expanding linkages between our people are enriching all aspects of bilateral
ties. The Indian diaspora in Australia is now the fastest-growing large diaspora. In
recognition of the growing contribution of Indian-Australians to the bilateral relationship,
we will continue to work to deepen diaspora and community-level contact.
35. Both countries agreed to hold a senior-level Dialogue to discuss India's proposed
draft Migration and Mobility Partnership Arrangement, which outlines ways to cooperate
on the prevention of illegal migration, people smuggling and trafficking in human beings
and is also designed to facilitate mobility of students, academics and researchers and
migration for professional and economic reasons.
XI. Support in UN and international bodies
Reformed Multilateralism
36. Australia reiterated its support for India's candidacy for permanent membership of
a reformed UN Security Council (UNSC) and India's candidature for a non-permanent seat
at the United Nations Security Council for the 2021-22 term.
37. Australia welcomes the International Energy Agency (IEA)'s strategic partnership
with India, and looks forward to continuing to work closely on building stronger ties
between India and the IEA community.
Energy and Environment
38. India and Australia jointly decided to progress their Energy Dialogue, which will
further cooperation in areas such as pumped hydro storage, cost-effective battery
technologies, hydrogen and coal gasification, adoption of clean energy technology, fly ash
management technologies, and solar forecasting and scheduling. Both countries
committed to continue to collaborate on climate change, energy security and other issues
of importance to the region and wider world, especially through the International Solar
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Alliance (ISA) and Coalition for Disaster Resilient Infrastructure (CDRI). Australia is proud to
be a founding member of both organisations.
XII. Public Administration and Governance
39. India and Australia are proud, diverse and multicultural democracies. Both nations
have similar systems of governance founded on robust and accountable public institutions.
In this regard, both sides committed to work together in the field of public administration
to exchange knowledge in areas of mutual interest through an Memorandum of
Understanding on Co-operation in the field of Public Administration and Governance
Reforms.
40. Recalling the celebrations of his 150th anniversary, both leaders paid tribute to the
lasting legacy of Mahatma Gandhi and his philosophy of non-violence and harmony.
XIII. Implementation
41. To provide oversight of the CSP and to deepen economic and strategic cooperation
into the future, India and Australia affirm their desire to increase the frequency of Prime
Ministerial contact through reciprocal bilateral visits and annual meetings in the margins of
international events.
42. To pursue CSP, our Foreign and Defence Ministers will meet in a '2+2' format to
discuss strategic issues at least every two years.
43. Both countries also jointly decided to continue their regular interactions under the
Foreign Ministers Framework Dialogue (FMFD).
44. Both sides jointly decided to continue regular meetings of the annual Australia-India
Joint Ministerial Commission to enhance trade and investment relations between the two
countries.
45. India and Australia reiterated their commitment to enhance cooperation under the
annual Australia-India 'Energy Dialogue.'
46. Both countries also jointly decided to use the existing 'Consular Dialogue'
Mechanism to address the entire gamut of consular matters.
47. Both sides jointly decided to enhance their partnership in the domain of education
through the Australia-India Education Council.
48. The Virtual Summit is yet another milestone in furthering the longstanding, deep
and cooperative ties between India and Australia. The list of the Joint declarations
announced and MoUs/Arrangements signed, during the Virtual Summit is enclosed at the
Annexure.
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New Delhi and Canberra, 04 June 2020
Annexure
1. Joint Statement on a Comprehensive Strategic Partnership
between Republic of India and Australia
2. Joint Declaration on a Shared Vision for Maritime Cooperation in the
Indo- Pacific.
3. Framework Arrangement on Cyber and Cyber-Enabled Critical Technology
Cooperation.
4. MOU on cooperation in the field of mining and processing of Critical and
Strategic minerals.
5. Arrangement concerning Mutual Logistics Support (MLSA).
6. Implementing Arrangement concerning cooperation in Defence Science
and Technology to the MoU on Defence Cooperation.
7. Memorandum of Understanding on Co-operation in the field of Public
Administration and Governance Reforms .
8. Memorandum of Understanding on Cooperation in Vocational Education
and Training.
9. Memorandum of Understanding on Water Resources Management.
*****
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ATTACHMENT B: 17th AUSTRALIA-INDIA JOINT MINISTERIAL
COMMISSION STATEMENT
Mr Piyush Goyal, India's Minister of Commerce and Industry, Consumer Affairs and Food,
and Public Distribution and Textiles, and Mr Dan Tehan MP, Minister for Trade, Tourism and
Investment, Government of Australia, have formally launched the resumption of
negotiations on the India-Australia Comprehensive Economic Cooperation Agreement
(CECA).
Both Ministers discussed a range of issues during the 17th India-Australia Joint Ministerial
Commission meeting yesterday. Key issues included the expeditious negotiation of a
bilateral CECA, resolution of tax-related issues faced by Indian software firms in Australia,
ensuring increased two-way trade and the 12th Ministerial Conference of the WTO
scheduled to be held at the end of this year.
Both India and Australia reaffirmed their commitment to conclude a CECA, including to
reach an interim agreement by December 2021 to liberalise and deepen bilateral trade in
goods and services, and to conclude the negotiations on a full CECA by the end of 2022.
The Joint Ministerial Commission detailed the areas that will be covered by the interim
agreement consistent with Article XXIV of the General Agreement on Tariffs and Trade,
including goods, services, investment, energy and resources, logistics and transport,
standards, rules of origin, and sanitary and phytosanitary measures. Ministers also agreed to
explore government procurement. It was agreed that there would be an exchange of offers
by the end of October 2021.
Looking to build on the progress made by both countries on earlier bilateral negotiations,
both Ministers agreed the need for a balanced trade agreement that encourages expanded
trade and investment flows to the benefit of both of our economies, and that reflects a
shared commitment to the rules-based international trading system.
Reaffirming their commitment to working together, both ministers agreed to strengthen the
rules-based, transparent, non-discriminatory, open, and inclusive multilateral trading
system embodied by the World Trade Organization. They also agreed to work towards an
ambitious and balanced outcome at the 12th WTO Ministerial Conference (MC12) in
Geneva, Switzerland.
Australia and India are important trading partners. India-Australia bilateral trade exceeded
AUD$24 billion last year. Major Indian exports to Australia are petroleum products,
medicines, polished diamonds, gold jewellery, apparels etc., while key Australian exports to
India include coal, LNG, alumina and non-monetary gold. In services, major Indian exports
relate to travel, telecom and computer, government and financial services, while Australian
services exports were principally in education and personal related travel. In 2020, India was
Australia's seventh-largest trading partner and sixth largest export destination, driven by
coal and international education.
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ATTACHMENT C: REGULATORY BURDEN ESTIMATE
Estimate of Regulatory Burden
• Some costs will be incurred by traders to understand the requirements and benefits of
the FTA. It is estimated that all exporters to India will undertake a once off
administrative cost of around two hours of time to understand the CECA FTA rules. The
average number of exporters to India from 2016-17 to 2018-19 was 2,177. At a scaled-
up labour cost of AU$68.79 per hour, this would result in costs of AU$299,511.66 for the
first year only.
• The average number of annual exports to India from 2016-2017 to 2018-2019 was
31,203. The average price of a COO for non-members is A$55.10. Thus, it is estimated
that exporters in Australia would at most, pay AU$1,719,285.30 per annum.
• Once off costs are AU$299,511.66 in the first year, with additional ongoing costs of not
more than AU$1,719,285 per annum. This results in an estimate of total administrative
costs of not more than AU$17,492,361.66 over 10 years.
• Additionally, Issuing Body staff will undertake a one-hour training session to understand
CECA.
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