The bilateral relations between India and Australia are set to receive a significant boost with the impending conclusion of an Interim Trade Agreement in March 2022, giving way to a Comprehensive Economic Cooperation Agreement (CECA) by mid-2023. The agreement will span across a multitude of areas, presenting an all-encompassing economic cooperation and trading exchange between the countries.
Understanding Interim Trade Agreements
Interim Trade Agreements, also known as Early Harvest Agreements, serve as precursors to comprehensive Free Trade Agreements (FTA). These agreements mainly aim to liberalise tariffs on trade for selected goods between two countries or trading blocs. The Government tends to focus on such agreements as they require minimal commitments and allow contentious issues to be resolved at a later stage. Although these agreements offer quick wins, they often delay negotiating a full FTA, leading to potential roadblocks in the future.
The Role of Free Trade Agreements
A Free Trade Agreement is a multi-nation pact aimed at reducing barriers to imports and exports. It essentially allows for the unhindered trading of goods and services across international borders, with minimal government interference such as tariffs, quotas or subsidies. FTAs may be classified further into Preferential Trade Agreement, CECA, and Comprehensive Economic Partnership Agreement (CEPA).
Existing India-Australia Trade Relations
In FY 2021, the bilateral trade between India and Australia stood at approximately USD 12.5 billion. This has already crossed USD 17.7 billion within the first ten months of FY22. Major imports from Australia include coal, gold and Liquified Natural Gas, while key exports from India encapsulate diesel, petrol and gems and jewellery.
New Opportunities Sparked by the Agreement
The impending agreement signifies opportunities for multiple sectors including mining, pharmaceuticals, health, education, renewables, railways, gems and jewellery, tourism, defence and textiles. In addition to this, India is expected to negotiate easier visa access for students and professionals travelling to Australia. On the other hand, Australia seeks market access for wines and agricultural products, which are not widely produced in India.
Impact of QUAD on India-Australia Trade Relations
India and Australia, along with the US and Japan, are members of the QUAD (Quadrilateral Security Dialogue). The coalition has provided an impetus to increase trade relations between all its member countries. Australia has hinted at the possibility of building an economic cooperation framework within the QUAD countries following the deal with India.
Ongoing Free Trade Negotiations by India
Apart from Australia, India is currently negotiating FTAs with the UAE, UK, Canada, the European Union and Israel. It is also focusing on concluding early harvest agreements with the UAE and the UK in the first half of 2022.
Beyond Bilateral Agreements: The Global Picture
Trade agreements that do not evolve into full-scale FTAs may face legal challenges from other member countries of the World Trade Organisation (WTO). Therefore, it is often beneficial to negotiate an entire deal simultaneously, as early harvest deals can lessen the motivation for both sides to work towards a complete FTA. This context applies to the current engagements between India and Australia, affecting their wider interaction in global trade.
