Australian agricultural exporters set to benefit from AI-ECTA

On 29 December 2022, the interim Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) entered into force.

The agreement establishes new and commercially significant market access opportunities for a range of Australian agricultural commodity exporters. 

Key outcomes of AI-ECTA include:

• the reduction or elimination of tariffs on a broad range of agricultural products (see Table 1)
• new quotas – with now lower in-quota tariffs – for lentils, oranges and mandarins, cotton, almonds and pears (see Table 1)
• measures to promote transparency and reduce the impact of non-tariff barriers while maintaining Australia’s strict biosecurity measures.

AI-ECTA will be the first trade agreement to use the Modern Quota System. The Modern Quota system will provide Australian exporters with information about quota balances through the Agriculture Export Service.

Both countries are looking to secure greater agricultural outcomes through a more comprehensive agreement this year.

Implications for Australian agricultural exporters

Under AI-ECTA, tariffs on Australian sheepmeat, rock lobster, wool, most woods and pulps, and hides and skins will be eliminated immediately. Other products will have tariffs eliminated over time and/or receive reduced tariffs through a tariff rate quota (TRQ).

Reduced tariffs lower the cost of importing Australian products into India. This will improve the competitiveness of Australian products, particularly with other countries that don’t have trade agreements with India. A list of India’s current trade agreements are listed on the Government of India's Ministry of Commerce and Industry website.

Table 1 – AI-ECTA key outcomes for Australian agricultural exporters

a. Tariff rate before AI-ECTA. b. Entry into force. c. Raw bovine/sheep/lamb hides and skins, tanned/ crust/ leathers, wet-blue bovine/ sheep and other animal hides and skins. d. Barley, oats, quinoa, rye and some other cereals. e. Tariff Rate Quota. Out-of-quota rates will revert to the current tariff rate. f. Broad beans, kidney beans, adzuki beans and split beans. g. 0% (temporary) Bound rate 30%. h. Seeds of sunflower, sesame, safflower, linseed, poppy and crude canola oil. i. Wine of fresh grapes (including fortified wines). j. 10-year tariff phasing to 25% tariff (Minimum Import Price US$15) and 50% tariff (Minimum Import Price US$5). k. Onions, shallots, leeks, cabbages, lettuce, asparagus, artichokes, aubergines, spinach, celery and cucumbers. l. Cashew (in shell), hazelnuts (shelled/in shell), chestnuts (shelled/in shell), pistachios (shelled) and macadamias (shelled/in shell).

Source: DAFF

India agricultural market overview

India produces most of its own food. Food imports have typically been used to supplement local production, particularly following small harvests. However, India’s large population and growing middle and upper class are creating opportunities for increased food imports.

Rising consumer incomes and increasing rates of urbanisation mean that opportunities are likely to be concentrated in the rapidly growing high-end produce market.

India’s applied tariffs have been reduced to around one-tenth of 1990 levels (Source: DFAT 2018). This has helped to increase trade. However, high barriers to entry for some agricultural products remain (Source: USDA 2021).

Australian agricultural exports to India

In 2021‒22, Australia exported A$772 million of agricultural, fisheries and forestry (AFF) products to India. This accounted for 1.1% of Australia’s total AFF exports and 2% or India’s total imports. Key Australian AFF exports to India included:

• A$213 million of lentils
• A$157 million of wool
• A$138 million of cotton
• A$112 million of almonds.

Australian AFF exports to India peaked at A$3.38 billion in 2016‒17 on the back of then-record grain and pulse production (see Figure 1). Since then, Australian exports have declined. This is due to changes to Indian tariffs on grains and pulses and reduced Australian pulse production.

Under AI-ECTA, tariff rates on a range of Australian crops will be bound at zero. This will provide Australian exporters with more certainty on Indian tariffs when planning their crops.

Figure 1: Australian AFF exports to India, 2012‒13 to 2021‒22

Australian agricultural imports from India

In 2021‒22, Australia imported A$577 million of AFF products from India. Key imports were rice (A$86 million), bread and pastry (A$45 million), coffee (A$29 million) and tea (A$25 million).

Resources

More information about the benefits of AI-ECTA, including key tariff reductions, is available on the Department of Foreign Affairs and Trade website.

The Australian Government’s network of Agriculture Counsellors provided information for this article. More information about the Agriculture Counsellor network, including contact details, is available on the Department of Agriculture, Fisheries and Forestry website.