The ECTA with India is the latest signed by Australia over the past two decades, often after years of negotiations. The FTA with New Zealand was signed in 1983 and since 2003 Australia has ratified around 16 FTAs including with US, China, Japan, and South Korea. Each has subsequently seen important benefits for certain agri exports, particularly beef.
For Australian agriculture, India provides a massive, evolving and unique marketplace. With a population of 1.4 billion, an eclectic mix of cultures and religions, and an increasingly affluent middle class, the Indian market provides opportunities for a range of products.
Clearly, the market is also not without its challenges. The country’s infrastructure, particularly for reaching internal metropolitan markets, is different from what many Australian exporters may have experienced before while the country’s bureaucratic process could also potentially be more elongated than Australia’s.
Importantly, the prospect of India as a major export destination for Australia’s agri products would be an important step in diversifying the number of export markets and reducing concentration risk. With a number of agri commodities having only a small number of major export destinations, this would reduce the potential for agri exports to be hit hard if an issue impacted any one market.
Outlook for commodities
In terms of individual commodities, the exports which could initially feel the greatest benefits from this FTA include sheep meat, wool, lentils, horticulture and wine.
For wool the current tariff of 5 per cent will be slashed to zero by the end of this year. At the moment, India buys around 7 per cent of Australia’s wool production, ranging from the superfine to the coarser wools. While China has long been the largest market for Australian wool, the potential for processing to increase in markets such as India and across the sub-continent will continue to grow.
For sheep meat producers, the Indian market has proved challenging to penetrate until now, due to a 30 per cent import tariff. As a result, Australia has exported only 111 tonnes of sheep meat to India over the past five years. With this tariff now forecast to be cut to zero, Australian exporters will be able to explore new opportunities in the Indian market, particularly for the Muslim population.