India-Australia interim trade agreement and FTA
- India and Australia have recently announced that they are set to conclude an interim trade agreement in March and a Comprehensive Economic Cooperation Agreement (CECA) about a year and a half thereafter.
Interim/ Early Harvest agreement:
- It is used to liberalise tariffs on the trade of certain goods between two countries or trading blocs before a comprehensive FTA (Free Trade Agreement) is concluded.
- The interim agreement set to be announced will cover “most areas of interest for both countries” including goods, services, rules of origin, sanitary and phytosanitary measures and customs procedures.
- Bilateral trade between the two countries was about $12.5 billion in FY21 and has already surpassed $17.7 billion in the first 10 months of FY22.
- Indian imports: ~$12.1 billion in the first 10 months of the fiscal
- Indian exports: ~ $5.6 billion.
- Australian exports: coal, gold and LNG
- Australian imports : diesel, petrol and gems and jewellery.
Opportunities for both countries:
- The two sides had “respected each other’s sensitivities” during trade negotiations.
- Australia would likely not seek market access for products in dairy, beef and wheat categories.
- The agreement with Australia was set to bring opportunities across sectors including mining, pharmaceuticals, health, education, renewables, railways, gems and jewellery, tourism, defence and textiles.
- India is also likely to seek easier visa access for both students and professionals visiting Australia.
- Australia is likely to seek market access for wines and agricultural products which are not produced on a large scale in India.
- Both countries are also looking at mutual recognition of educational qualifications to boost the number of Indian students seeking education in Australia and vice versa and boost tourism in both countries.
- India and Australia have also signed an MoU to boost tourism between the two countries.
- Australia has also emphasised that the agreement would lead to deeper cooperation between the two countries in critical minerals and rare earth elements which are critical to future industries including renewable energy and electric vehicles.
- Australia has plentiful supplies of these rare earths and critical minerals in Australia but does not have proper technology for their processing; India can play a major role in this sector.
Impact of Quad on trade relations between India and Australia:
- India and Australia are both members of the Quad (Quadrilateral Security Dialogue) along with the US and Japan.
- The coalition has boosted trade relations between all members of the Quad.
- Now all four countries could start building a framework for economic cooperation within the countries of the Quad after Australia announced a deal with India (The former already has FTAs with US and Japan).
Ongoing Free Trade Agreements negotiations
- India is currently in the process of negotiating FTAs with the UAE, the UK, Canada, the EU and Israel, besides Australia.
- India is also looking to complete an early harvest agreement with the UAE and the UK in the first half of 2022.
Free Trade Agreement (FTA):
- A pact between two or more nations to reduce barriers to imports and exports among them.
- Goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
- Completely opposite of trade protectionism or economic isolationism.