Australian agricultural commodity exporters are expected to reap big benefits from a new trade agreement with India.
The Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) which entered into force late last year establishes new and commercially significant market access opportunities for a range of Australian agricultural products.
Key benefits include:
- Reduction or elimination of tariffs on a broad range of agricultural products
- New quotas – with now lower in-quota tariffs – for lentils, oranges and mandarins, cotton, almonds and pears
- Measures to promote transparency and reduce the impact of non-tariff barriers while maintaining Australia’s strict biosecurity measures.
AI-ECTA is the first trade agreement to use the Modern Quota System. The Modern Quota system provides 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.
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.
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.
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:
- $213 million of lentils
- $157 million of wool
- $138 million of cotton
- $112 million of almonds
Australian AFF exports to India peaked at $3.38 billion in 2016-17 on the back of then-record grain and pulse production. 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.
Australian agricultural imports from India
In 2021-22, Australia imported $577 million of AFF products from India. Key imports were rice ($86 million), bread and pastry ($45 million), coffee ($29 million) and tea ($25 million).
For more information about the benefits of AI-ECTA, including key tariff reductions, visit the Department of Foreign Affairs and Trade website.