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How an FTA with Australia is beneficial for India: Explained


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In 2020, India was Australia’s seventh-largest trading partner and sixth largest export destination. But, the bilateral ties between India and Australia are now expected to grow even rapidly with both the countries having agreed upon concluding the negotiations on a Comprehensive Economic Cooperation Agreement (CECA) by the end of 2022. This Free Trade Agreement has been concluded after almost a decade of negotiations and will result in a more liberalised and deepened bilateral relations between India and Australia.

The agreement is set to cover trade in goods, services, investment, government procurement, logistics, transport standards and rules of origin (criteria needed to determine the national source of a product). This will result in re-engagement and cooperation by both countries in a range of areas including critical minerals, health, critical technology, science and agriculture.

Australian Minister for Trade, Tourism and Investment Dan Tehan asserted that the move could double the bilateral trade from the current level of A$26 billion to A$52 billion once a full fledged FTA is in place.

How FTA with Australia is beneficial for India?

CECA will play a major role in expanding the base of merchandise trade, removal of non-tariff barriers, encouraging investments and addressing trade restrictions.

In 2019, while Australian exports to India stood at $15.3 billion, India could export goods worth $3.19B to Australia. In last two decades, Indian exports to Australia increased at an annualized rate of just 8.67%, i.e. from $433M in 1995 to $3.19B in 2019. In 2019, India did not export any services to Australia.

The bilateral trade in goods & services between both the nations has increased from $13.6 billion in 2007 to $24.3 billion in 2020. Moreover, Australian exports to India have grown rapidly in recent years, which further increase India’s trade deficit with Australia.

Thus, the FTA that has been finalised can bring a solution to balance this trade deficit between both the nations by removing or reducing current restrictions in both foreign investment regimes.

This can happen in more ways than imaginable, which will require both nations to hold more talks in future. An example of such a solution was seen during Australian Minister for Trade Dan Tehan’s meeting with Indian Commerce and Industry Minister Piyush Goyal. “This growth will be across all areas because of the complementarities in the two countries’ industries. Our merino wool could be used by Indian textiles makers to produce the best product,” said Tehan after having concluded the long-pending CECA. In reply, Minister Piyush Goyal reiterated that Jammu and Kashmir’s Pashmina could similarly be an attractive proposition for Australians.

According to Australia’s Dept. of Foreign Affairs and Trade, India stood as 8th most important trading partner for Australia and the fifth-largest export market for Australian services in 2018-2019. On the other side of the trade, Australia is also an increasingly important destination for Indian exports in value. India’s exports to Australia grew by 10.8% over the five years up to 2019. But in order to take this export value to an all new height, a proper trade framework like CECA with a nation as important as Australia, is mandatory for India.

Potential within markets: What to expect

The agreement will provide greater market access to exporters in both the countries. Both sides have already prepared and shared with each other their goods and services offer lists.

India, which has a fast growing and increasingly affluent consumer market, does show an appetite for Australia’s premium products and services. India’s large market, plus its expanding middle class section may also excite Australia. It would therefore be interested in accessing this market through lower Indian tariffs, given that its other Asian competitors would already have this access through FTAs with India.

Similarly, India eyes the Australian labour market. As Australia warmly welcomes skilled professionals, India would also be eying gains from increased movement of its abundant and skilled manpower. It may also want to increase its exports in textiles, diamonds, jewellery, pharmaceuticals, vehicles etc. in Australian market with the same (lower) tariffs which Australia currently gives to its FTA partners.

A comprehensive FTA will also look after increasing transparency, introducing stronger investment protection mechanisms, foster even stronger growth, including through more diverse trade and investment flows.

Prospects in Education sector

As far as the diaspora aspect is concerned, Indian community is emerging as one of the largest communities in the Australian society making a strong influence with their positive contributions & services during testing times. Reportedly, around 700,000 Indians reside in Australia and in 2019-20, over 38,000 Indians acquired Australian citizenship, a 60 per cent increase. Indians have also become Australia’s fastest-growing inbound tourists.

Australia stands as the third most-popular higher-education destination for Indian students who are pursuing education abroad. Australia has a strong higher education sector and the state can also pursue development of world-class full-spectrum universities. Thus, a strategic approach could yield major benefits for both countries. This can be done through expanding collaborative efforts in several ways, some of which are as follows:

– Indian students face issues with the recognition of their prior learning when they pursue higher studies in Australia. India also does not recognise some Australian qualifications (Eg- accelerated masters’ degrees). Thus, mutual recognition of educational qualifications is required.
– Indian government can be lobbied to allow Australian universities to open campuses in India. This would make foreign education more affordable for Indian students.
– Develop and train staff through building on programmes already running.
– Coming up with a comprehensive scholarship scheme for facilitating non-elite but talented Indian students to Australia.
– Setting up special collaborative research institutes in India around key challenges that are faced by both India and Australia

Building up on Strengths

Australia has also long been an energy exporter to India. Earlier, during an online briefing with Indian media, Australian PM Scott Morrison had said that not only will Australia continue to do that, but a whole new line will also open up. He added that India’s manufacturing capabilities, combined with the resource strengths of Australia, particularly in the field of rare earth and critical minerals, also provides a natural partnership. “We want the right deal for both countries… We will take the gains where we can take them and.. we will just keep adding and adding I think to the strength of that Comprehensive Economic Cooperation Agreement that we’re seeking,” said PM Morrison.

Thus, a Foreign Trade Agreement like CECA will be of great assistance to Indian Government, especially when the latter has set an ambitious target of achieving $400 billion in exports for the financial year 2021.

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