Interim deal with Australia to boost business synergy
MELBOURNE/SYDNEY/PERTH: 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 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 more democratic Indo-pacific.
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 “will contribute to the supply chain resilience initiative of India, Australia and Japan and strengthen stability of Indo-pacific region.”
CII proposed an annual Indiaaustralia 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 billion Australian 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), and gems and jewellery (₹60,000 crore).
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.
The deal also has potential for Australian trade to boom. Perthbased 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 does 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.
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.