Interim deal with Australia to boost business synergy
The recently signed interim free trade agreement between India and Australia may become the base for enhanced cooperation in investments and other strategic engagements such as rare-earth materials and uranium supply, besides immediately opening up an over ₹6 lakh crore market for Indian automobiles, apparels, pharmaceuticals, furniture, toys and plastic goods, people aware of the development said.
Speaking about taking forward the interim but comprehensive India-Australia Economic Cooperation and Trade Agreement (ECTA), Australian trade, tourism and investment minister Dan Tehan said: “It [the pact] will evolve over time… There are many opportunities that will spring out of this agreement.” Without elaborating on the specifics, he said ECTA may lead to enhanced “geostrategic cooperation” between the two countries for a safer and more democratic Indo-Pacific region.
Replying to a specific query on the possibility of adding strategic sectors, including uranium supply to India for its energy requirements, when a full FTA is signed, commerce minister Piyush Goyal said: “Well, I think that these things are being handled by a different team in terms of rare-earths and minerals.” He said now greater collaboration in different areas is expected as India and Australia are “natural partners, natural allies” and “strategically, we have to work for greater economic engagements and greater geopolitical engagements”.
Goyal said a separate India and Australia investment agreement is possible, but the same will be negotiated by the Union finance ministry.
India and Australia on April 2 signed ECTA, a comprehensive interim agreement that provides zero duty exports to almost 100% tariff lines from India to the Australian market and 85% imports from India. The pact, which is expected to be effective in about four months, will eventually pave the way for a full Comprehensive Economic Partnership Agreement (CEPA).
Confederation of Indian Industry (CII) president TV Narendran said the interim agreement would benefit not only the two countries but also serve towards regional growth and prosperity. “It will contribute to the supply chain resilience initiative of India, Australia and Japan and strengthen the stability of the Indo-Pacific region,” he said.
“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,” said Narendran.
CII proposed an annual India-Australia Business Summit to further enhance cooperation between the two partners and connect Indian micro, small and medium enterprises (MSMEs) to the new business opportunities. “Besides, Indian automakers are keen to enter the $25 billionAustralian automobile market,” CII director general Chandrajit Banerjee said.
Commerce minister Goyal said there is a ₹2 lakh crore Australian automobile market where Indian presence is negligible. Similarly, immense opportunities are there in sectors such as pharmaceuticals (about ₹1 lakh crore), textiles, apparel and home furnishing ( ₹75,000 crore), plastics ( ₹50,000 crore), furniture, bedding and mattresses ( ₹45,000 crore), gem and jewellery, and precious stones ( ₹60,000 crore), and toys and sports goods ( ₹20,000 crore).
“Australia’s import of leather, leather products and footwear during 2020 was about $2 billion (about ₹15,000 crore) as against our exports of $74.95 million. We have a market share of only 3.79% and hence there is scope to enhance our share,” said Rajendra Kumar Jalan, vice-chairman, Council for Leather Exports (CLE). He said that CLE will take a big trade delegation to Melbourne in November to enhance exports and source raw materials (leather) from the country.
Traditionally, all above mentioned goods in the Australian markets have been dominated by China, with Indian share between 0% and 3%. But, recent embargos of Beijing on Australian imports have prompted Canberra to look for alternatives such as India. Friction between Australia’s government and Beijing has brought a series of official and unofficial Chinese trade sanctions on Australian exports including coal, beef, seafood, wine and barley, and India has been looking to boost exports, including by offering countries an alternative to China at a time when the Ukraine war has caused a deep East-West division globally.
The deal also has potential for Australian trade to boom. Perth-based Satish More, who runs a recruitment agency, said: “The trade agreement paved the way for greater cooperation in shared curricula and vocational education between Indian and Australia. It will facilitate in reducing fees by about 30%.”
Although through the ECTA deal Australia has liberalised its visa regulations for Indians for greater people-to-people connect, it is cautious in skilled labour movement, one Australian government official said on condition of anonymity. “ECTA doe not include a waiver of LMT [labour market testing],” he said. LMT would require a potential recruiter to first advertise the position in Australia as proof that such talents are not available within the country, hence they should allow Indians to take those jobs.
Taking the deal further, India and Australia are discussing possibilities in the audio-visual sector. “We are negotiating and hope to finalise the agreement for joint production,” minister Goyal said, adding that big-budget films can be produced under joint collaboration with Australian technology and Indian skills. Other potential areas are innovation, joint research, mutual recognition agreements (MRAs), joint standards so that the two partners can produce world class products for the world, he added.
Speaking about the future after ECTA, Narendran said: “We are hopeful that once the next phase of the trade agreement is finalised, Indian companies will find it easier to access government projects, particularly at the federal level in Australia. Moving forward, we could evaluate opportunities and understand compliances required to participate in Australian government projects.”
Federation of Indian Export Organisations (Fieo) president A Sakthivel said that the deal will pave the way for new opportunities to Indian entrepreneurs in government procurements and digital economy. “The $100-billion bilateral trade in goods and services is possible in next eight years,” he said.
The bilateral trade in goods and services between the two countries is about $27 billion currently. India’s merchandise exports are mainly finished products and they totalled $6.9 billion in 2021, while imports from Australia were largely raw materials and intermediary goods such as coal worth $15.1 billion that year.