India Australia Trade: View: India-Australia trade deal to push bilateral ties to new level


“In every adversity lies the seed of equal and greater opportunity.”

This quote came true on Saturday when Australia and India broke their 10 years of never-ending trade talks with an India-Australia Economic and Trade Cooperation Agreement (IndAus ECTA). China’s belligerence and the onslaught of COVID have forced both economies to reflect, reinvent and relaunch a long overdue deal. India’s first deal with a developed economy in a decade, and only a second trade deal in eleven years. The last agreement signed by India was with Japan in 2011, followed by the United Arab Emirates and Australia in 2022. Negotiations for the India-Australia ECTA were officially relaunched on September 30, 2021 and concluded in an accelerated manner end of March 2022.

The comprehensive IndAus ECTA provides competitive tariff elimination or reduction on a wide range of goods and opens up new service markets for suppliers in both markets. The goal is to increase two-way trade to $45 billion over the next five years (currently at $27.5 billion), with a clear focus on job creation and exports. The agreement provides duty-free market access to more than 6,000 major sectors in India, including textiles, leather, furniture, jewelry and machinery. In the services space, some of Australia’s key offerings include: a quota for yoga chefs and teachers; 2-4 year post-study work visa for Indian students on reciprocal basis; mutual recognition of professional services and other authorized professions; and work and holiday visa agreement for young professionals.

Australia has also agreed to change its domestic laws to stop taxing the offshore income of Indian companies providing technical services, including IT majors TCS, Infosys, HCL and Wipro, which will allow Indian IT players and ITeS to expand their Australian operations. Australia has taxed income generated from offshore IT services rendered from India as royalties, even when the same income is also taxed in India. The anomaly in the 1991 Double Taxation Avoidance Treaty (DTAA) between the two countries has cost Indian IT companies about $1.3 billion since 2012, according to an industry estimate.

According to the text of the IndAus ECTA, the two countries have established a Negotiating Sub-Committee “Within 75 days from the date of signature of this Agreement (ECTA), the Negotiating Sub-Committee will begin negotiations on amendments to this agreement, on a without prejudice basis, in areas such as market access for goods and services, a comprehensive list of product-specific rules, a chapter on digital trade and a chapter on government procurement, in order to transforming this agreement into a comprehensive economic cooperation agreement”, India is likely to gain access to approximately $10 billion of Australian government procurement, set at $60-65 billion per year (Australian government procurement in the sectors MSMEs and defense are protected and not covered by ECTA)

IndAus ECTA is a stepping stone to a comprehensive Australia-India Economic Cooperation Agreement (ECSC) which is expected to be concluded by the end of this year. Since the elevation of the bilateral relationship to a Comprehensive Strategic Partnership (CSP) in 2020, the engagement of both parties has grown across multiple platforms and sectors, with a clear focus on building tangible commitments and actions, to embrace a win-win partnership.

With Australia’s federal election just weeks away, Australian Prime Minister Scott Morrison, with this historic agreement, affirmed his government’s commitment to building Australia’s economic resilience and security by focusing on the need to diversify the economy and strengthen international partnerships. The trade agreement categorically reflects Australia’s ambition to establish an engaging economic relationship with the world’s fastest growing economy and foster a new understanding of the opportunities India offers. For the opponents, the signing of the trade agreement is also a lesson in “strategic patience” and “opportune timing”, a declaration on the convergence of aspirations for the relationship and new geostrategic and economic ambitions.

There has been a holistic approach to building the Australia-India bilateral story – at the political level with the announcement of annual summits at Heads of Government level. Australia is the third country with which India will hold an institutionalized annual summit for a regular review of our relations. At the economic level – the release of the Australian Government’s updated Indian Economic Strategy to 2035, which sets out a post-COVID bilateral economic engagement roadmap, focused on investment to strengthen policy ties India’s key financial institutions and increased corporate engagement. At the Diaspora level with the release of the Australian Indian Diaspora Report, a national assets report that focuses on better understanding the significance of the Indian Diaspora in Australia-India economic relations and integrates the Indian diaspora as key agents of change in bilateral relations between Australia and India. The diaspora is a living bridge between nations, with the natural advantage of language skills, cultural understanding and transnational networks that can be widely used. Australia’s investment of more than $280 million in initiatives to deepen economic and cultural ties, including the “Green Steel” partnership, critical minerals, innovation and technology, space investment and a new hub for Australia-India relations, as well as proactive ministerial engagements, memorandums of understanding and a commitment to finding shared values ​​and partnerships that meet mutual needs.

Australia and India have also launched the Australia-India Infrastructure Forum, to promote bilateral infrastructure investment and support broader bilateral trade and investment objectives. The two countries have also decided to focus on manufacturing and deploying very low-cost solar and green hydrogen technologies under the Low Emissions Technology Partnership. The aim is to have a broader economic and strategic growth strategy and access that is inclusive and respectful of the rule of law, whether with the QUAD in particular, the supply chain resilience initiative or the Indo-Pacific region as a whole.

Overall, the focus has been on preserving Australia’s history in India and India’s history in Australia consistently in public memory, involving a holistic strategy and approach multi-stakeholders that deepen mutual understanding and appreciation, driven by a nuanced understanding of dynamic factors such as consumerism, capacity and capability.

REFLECTIONS

The past 18 months of bilateral relations have been exciting and action-packed, perhaps more than ever. The constant shuttle between the gloom of COVID and the government’s ambitions to maximize options and opportunities for producers, manufacturers and industrial sectors has been an interesting lesson in how difficult times can become a lever for further gains. promising.

The ECTA IndAus establishes India’s drive for global economic integration with countries on agreements that are reciprocal, fair and non-discriminatory in nature. The New India is in a position of strength and ready to negotiate on its own terms, asking itself “What do I gain? » Preserve the interests of its national players (traders, industrialists, MSMEs, etc.), but also open up new opportunities for them. A tightrope walk, which Trade Minister Piyush Goyal led with confidence, transparency and commitment.

The recent trade deal will also help change perceptions in the developed world which has always labeled India as ‘protectionist’ and address skepticism about India’s openness to do business with the world. Domestically, it is recognized that the extent to which India opens up to world trade will determine the extent to which it can attract investment, stimulate exports, make domestic industries competitive, induce other countries to manufacture in India and stimulate economic production.

Strong economic ties between Australia and India will also pave the way for a stronger Indo-Pacific economic architecture, which is not only based on the flow of physical goods, money and people, but based on the strengthening connections, complementarities, lasting commitments and mutual dependence. across countries and sub-regions.

The timing is also opportune for India’s APEC membership; the goal of a free and open Indo-Pacific is incomplete without the presence of the world’s fastest growing major economy in APEC. This would further enhance India’s role in global governance, encouraging greater economic reforms with improved domestic competitiveness and economic integration with the region as a whole. Additionally, with the deepening of bilateral relations between Australia and India, Australia may consider lobbying for India’s membership within APEC.

The aim of professional consultancy firms (such as Newland Global Group) is to simplify and strengthen trade and investment ties between Australia and India. The journey may have been arduous, but it’s definitely moved today from ‘Why India’ to ‘How to India’ – an informed withdrawal from treating India as an option to engage with her. as an informed choice.

India has set a target to achieve a share of 5% in global merchandise exports and 7% in services exports by 2025. IndAus ECTA will facilitate the market research approaches of both countries, will help create an India brand and an Australia brand in the respective markets and build business confidence. It will place India at the center of Corporate Australia’s business aspirations and connect Australian businesses to the New India’s growth story, while witnessing tariff reductions on traded goods.

However, it is important to note that in any trade deal, governments can open the door, but it is up to companies to find the courage to walk through it, strategize and capitalize on the opportunities that exist. Governments have delivered. Will business follow?

(Dipen Roughani is Founder and CEO, and Natasha Jha Bhaskar, Managing Director, of Newland Global Group, a Sydney-based Australian business advisory firm specializing in the Australia-India space)

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