An India – Australia CECA: Is this the propitious time?

Riding on the back of a decision to elevate their ties to a comprehensive strategic partnership in 2020, India and Australia are moving purposefully towards strengthening their trade and investment links and taking their economic relationship to the next level. In this context, the visit of former Australian Prime Minister Tony Abbot to India from 2-6 August as Prime Minister Morrison’s special trade envoy assumes special significance. Currently, Australia is seen by India as a key partner, both geopolitically as well as economically. Today, there are more than 400 Australian companies doing business in India. India and Australia have similar views on multilateral institutions, the rule of law and a free and open Indo Pacific. Before the pandemic, there were close to 100,000 Indian students in Australia, and the Indian diaspora has crossed the 700,000 figure. Tourism has boomed in recent years between the two countries till the pandemic hit us all. The India Economic Strategy to 2035 was launched by Australia in November 2018 and a reciprocal Australia Economic Strategy Report was released in November 2020 by Minister of Commerce & Industry and Textiles, Shri Piyush Goyal. Australia is an ideal strategic partner for India in its journey to achieve transformative and inclusive economic growth. The “Make in India” initiative, launched in 2014, and the Atman Nirbhar mission of India launched post COVID in 2020 cover sectors in which India is open to investment and collaboration. These include mining, health care and pharmaceuticals, IT, Infrastructure, defense, space, tourism, agriculture and food processing and grains storage technologies, as well as dairy modernisation. India now has a clear focus on labor intensive sectors such as electronics, food processing parks, textile hubs for apparel, footwear, furniture, kitchenware and other light manufacturing to create jobs for the masses, in many of which Australian companies are potential partners. The MSME, agriculture, banking and financial sectors in India have seen some far-reaching reforms post Covid. Mining regulations have been eased to attract foreign investments. Australia has a big opportunity here – it has reserves of 21 of the 49 minerals identified as critical for India’s future strategy, especially the e-mobility programme. Australia has announced substantial investments in cyber security in the country and India has a large technology resource pool that is complementary to Australian requirements. Most major Indian IT companies are present in Australia. The Covid 19 pandemic has highlighted the urgency for international scientific collaborations in research and development, manufacturing equipment and identifying treatments to face global health emergencies. There is a common need to develop and roll out vaccines especially in the Indo Pacific. India and Australia are collaborative partners in the bilateral as well as the Quad format in this field. Australian investments and technology have been identified for collaborations in food technology and processing and the dairy sectors. In agriculture, Australian companies will provide the right mix for grain management, rationalization of costs and logistics. Australian Super funds and infrastructure companies are presented with increasing opportunities in the infrastructure and toll roads sector. India’s large, young population and the target of training 400 million people by 2022 has thrown open a host of opportunities for the Australian educational institutions in areas such as enhancement of training curriculum, aligning Indian accreditation and assessment to global standards, and improving trainer quality. The new Education Policy in India has opened up possibilities for further collaborations with Australian Universities. India and Australia are already collaborating to integrate e learning solutions into existing curricula and their startups see immense opportunities in working together. The defense research organizations and private companies of India and Australia now need to focus on promising areas of cooperation like advanced sensors, underwater laser and hypersonic technologies. Post pandemic, more direct flights between the two countries will be a game changer both for business and tourism. Likely shifts in the post Covid global economic order in the region are visible from the Resilient Supply Chain Initiative (RSCI) mooted jointly by Australia, India and Japan. However, market access for both countries is the key – now that India has pulled out of RCEP, it is encouraging that the Comprehensive Economic Cooperation Agreement (CECA) negotiations with Australia, stalled since 2015 after nine rounds due to RCEP negotiations, have resumed. Bilateral trade, which was above the $20 billion mark over the last few years except in the pandemic year, can be scaled up quickly. Both sides need to be realistic, and think seriously about reaching a quick, interim agreement on trade in goods covering part of the bilateral trade tariff lines while committing to a comprehensive agreement including services and investment over a longer period of time. Australia will need to take into account Indian sensitivities by not demanding substantially lowered tariffs across the board for fruits, dairy, agriculture and processed food items and narrow its ambitions down to selected, niche items. India could show flexibility in tariff lines related to commodities and minerals needed for its growing economy and e mobility programme, while Australia could be accommodative in the tariff lines related to refined petroleum, medicaments, railway vehicles, gems and jewelry, auto components and made-up textile items which it imports in any case from sources around the world. India will need satisfaction on the Australian offer on services, which it sees as key to a successful comprehensive agreement. Australia needs to recognize the importance India places on partners adopting policies that streamline physical movement, including on arrival visas, and multiple entry long term business visas. Discussion on issues like Rules of origin, Customs procedures and trade facilitation including digitization, sanitary and phyto sanitary measures and technical regulations and dispute settlement will also help both sides in reaching trilateral convergence on the Resilient Supply Chains Initiative where Japan is their common partner. Unless businesses – and in particular, big businesses come together and are convinced – a limited or a comprehensive agreement cannot reach a fruitful conclusion. Outreach efforts in both countries by the negotiators will therefore need to be stepped up substantially, and the benefits conveyed convincingly. There is a lot to gain if the CECA comes around quickly for both countries.

(This article was published originally by the Financial Express Online. The author is a former Secretary (East) in the Indian Ministry of External Affairs, and has served as the Indian Ambassador to Poland, Oman, Thailand and Italy. Currently, he is a Distinguished Fellow with the Vivekananda International Foundation in New Delhi. Views expressed here are personal and do not reflect the official position or policy of Financial Express Online.)

By Ambassador (retd) Anil Wadhwa