India-Australia edge closer to a final trade deal

Contact Counsellor

India-Australia edge closer to a final trade deal

  • Indian Commerce and Industry Minister announced that the Indian and Australian negotiators will have the final “interim agreement” ready in 30 days
  • The Australian side clarified that the interim trade agreement between India and Australia is unlikely to include items that both sides consider “sensitive” like dairy, wheat and beef
  • According to both sides the “interim agreement” is an “early harvest deal” aimed at boosting bilateral trade before the completion of the negotiations on the final CECA.
  • A new MoU was signed on tourism between both sides during the meeting which is expected to help Indian students who were unable to return to Australian campuses because of COVID travel restrictions

Reasons for inconclusive CECA

  • The Comprehensive Economic Cooperation Agreement (CECA) between both countries could not be finalised till now due to following reasons:
  • Dairy and Agricultural market access issue: India was opposed to greater access for Australian businesses in the sector of dairy and agricultural markets in the interests of its small and marginal farmers and people working in the dairy industry.
  • Visa norms issue: India demanded greater free movement and relaxed visa norms for its IT professionals, which Australia was reluctant to agree citing local unemployment as the reason.
  • High non trade barriers: India demanded Australia to soften its high non-trade barriers for Indian products
  • Legal services issues: India was reluctant to open up its doors for legal services from Australia.
  • Lack of agreement for market access of Australian products: No concrete agreement was done on greater market access for Australia’s wine, meat, auto components and financial services industries
  • Rules of origin issue: Both countries also differed in their preference towards Rules of Origin (ROO) in fixing the tariff lines for goods

Economic Cooperation between India and Australia

  • Bilateral goods and services trade between both was $24.4 billion in 2020
  • Indian exports to Australia included Passenger Motor Vehicles and Machinery, Pearls, Gems and Jewellery, Medicaments, and Refined Petroleum
  • Australian exports to India includes Coal, Non-monetary Gold, Copper, Wool, Fertilisers, and Education-related services
  • FDI: The total value of two-way foreign direct investment (FDI) between both countries was valued at US$1.04 billion in 2020
  • A Joint Ministerial Commission (JMC) was established in 1989
  • Its aim is to facilitate government-to-government and business-to-business cooperation on a wide range of trade and investment problems.
  • ‘An Indian Economic strategy to 2035’ was announced by Australia in 2018
  • It is a vision document to shape India- Australia bilateral ties which is prepared by Australian Think Tank
  • Its aim is to define a pathway for Australia to unlock opportunities offered by Indian Economic growth
  • Australia economic strategy: It was launched by India
  • It is prepared as a response to the India Economic Strategy Report, 2035 released by Australia
  • It is Prepared by the Confederation of Indian Industry (CII) team with contribution from KPMG in India.
  • Its Pillars are resources; technology & services; and research & innovations.

Defence cooperation

  • AUSINDEX: it is a bilateral naval exercise between both countries
  • MALABAR: India extended an invitation to Australia following the incident in Ladakh and an Australian force took part in the Malabar drills in 2020.

Nuclear cooperation

  • Civil Nuclear Cooperation Agreement was signed in September 2014
  • It laid the groundwork for significant new energy commerce b/w the two countries
  • India became 1st country to buy Australian uranium without being a signatory to NPT
  • It assures that Australian uranium mining businesses can export Australian uranium to India for civil use without fear of domestic legal action contesting the coherence of the IAEA's safeguards in India and Australia's international non-proliferation responsibilities.

Cooperation in Agricultural sector

  • India-Australia Grains Partnership: Its aim is to utilise Australia's post-harvest management skills to boost rural grain storage and delivery systems, reducing losses and wastage to improve Indian agriculture's resilience to climate change and climatic vulnerability.
  • The Nodal organisation from India is National Institute of Agricultural Marketing.

Strategic cooperation

  • Comprehensive Strategic Partnership (CSP) was established in 2020
  • It was in line with India's increasing engagement in the Indo-Pacific region through its Indo-Pacific vision and Australia's Indo-Pacific approach and its Pacific Step-Up for the South Pacific.
  • Its aim is to encourage expanded trade and investment flows to the benefit of both economies for global cooperation to address major challenges like COVID-19
  • Elevation of 2+2 strategic dialogue to ministerial level: It is the highest-level institutional mechanism b/w the two countries
  • Framework Arrangement on Cyber and Cyber-Enabled Critical Technology Cooperation: it was signed in June 2020
  • The areas of cooperation includes digital economy, cyber security and critical and emerging technologies

Associated Challenges in relations

  • Attack on Indian students: Increasing Racist attacks on Indians in Australia has been a major issue.
  • The bilateral relations strained over the attacks on Indian students studying in Melbourne and the resulting media coverage caused serious damage to Australia’s standing in India.
  • Security Threats: Terrorism, natural catastrophes, and pandemics are among the expanding number of non-traditional and trans-boundary security threats.
  • Trade Deficit: India has a negative trade deficit with Australia, and although starting talks in 2011 for a comprehensive economic cooperation deal, the accord has remained elusive till now
  • Australia’s heavy dependence on China: China being Australia's largest trading partner - 26 % of its trade with the world

Way Forward

  • Both countries show significant strategic convergence. Therefore, they must agree on a mutually beneficial CECA as soon as possible in order to enhance complementarity in the economic arena and further strengthen bilateral relations for mutual peace and prosperity and their cooperation is also very important for the changing Indo-Pacific region.