Why India-Australian interim FTA is more about strategy than trade ?

Published on Apr 02, 2022 08:08 PM IST

The first major factor is hidden behind the deal is India’s prowess to reject world’s largest multilateral trading block- the Regional Comprehensive Economic Partnership (RCEP) - at the eleventh hour and after couple of years forge a separate tie up with one of the key RCEP partners, which is Australia.

Prime Minister Narendra Modi with his Australian counterpart Scott Morrison(Scott Morrison/Twitter)
Prime Minister Narendra Modi with his Australian counterpart Scott Morrison(Scott Morrison/Twitter)

India and Australia have signed a comprehensive, but interim free trade agreement on Saturday. It is certainly a major trade deal at a time when geo-political situation is chaotic and volatile. 

But the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) must not be seen from the prism of business alone. It is a strategic bilateral tie-up both in terms of timing (the Russia-Ukraine war) and partners (as both are reckoned as key political powers in the world).

The first major factor is hidden behind the deal is India’s prowess to reject world’s largest multilateral trading block -- the Regional Comprehensive Economic Partnership (RCEP) -- at the eleventh hour and after couple of years forge a separate tie up with one of the key RCEP partners, which is Australia.

Secondly, this deal for India is first major FTA with a developed world after many years. Although the deal took place close on the heels of a similar agreement with the United Arab Emirates (UAE), which is valuable both strategically as well as economically because it is one of the largest trading partners of India and all set to become a gateway to Europe, Africa and Middle East.

The third crucial factor is the timing of the deal. It has happened in an unusual time when the world is divided in camps – for Ukraine and for Russia with a balanced position taken by India. The US and particularly the European Union grumble over India’s balance, but today they are not in a position to dictate their unilateral terms to New Delhi, thanks to a strong political leadership in PM Modi. The independent position of India is respected by many countries and the deal brings Australia into it.

The most important message to the world through this deal is the supremacy of India’s independent, consistent, honest and transparent thinking in terms of global politics. Even as it is a member of Quad with other powers – the US, Japan and Australia – it has guts to follow its own way when it comes to its own national interest. And the deal shows one of the members of Quad respects India’s independent position. This is despite Australia asserted that it will take further action to increase the economic costs to Russia following its illegal invasion of Ukraine by applying an additional tariff of 35% for all imports from Russia and Belarus, an ally of Russia.

The India-Australia trade agreement is due the consistent approach of PM Modi and his friend and Australian counterpart Scot Morrison towards deepening of bilateral ties between maritime neighbours sharing Indian Ocean. The two countries and leaders have similar approach to Indo—Pacific and political will to take decisive steps. This is one strategic relationship that will only grow in the coming years.

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  • ABOUT THE AUTHOR

    Author of Indian Mujahideen: The Enemy Within (2011, Hachette) and Himalayan Face-off: Chinese Assertion and Indian Riposte (2014, Hachette). Awarded K Subrahmanyam Prize for Strategic Studies in 2015 by Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA) and the 2011 Ben Gurion Prize by Israel.

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