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India-Australia Interim Trade Agreement and FTA


India and Australia have announced that they are set to conclude an interim trade agreement in March and a Comprehensive Economic Cooperation Agreement (CECA) 12-18 months thereafter.


GS-II: International Relations (Foreign Polices and developments affecting India’s Interests)

Dimensions of the Article:
  1. What is the interim trade agreement likely to cover?
  2. How has the Quad impacted trade relations between India and Australia?
  3. What other Free Trade Agreements is India currently negotiating?
  4. India – Australia Relations, Issues in the past

What is the interim trade agreement likely to cover?

  • An interim or early harvest trade agreement is used to liberalise tariffs on the trade of certain goods between two countries or trading blocs before a comprehensive FTA (Free Trade Agreement) is concluded.
  • The interim agreement set to be announced will cover “most areas of interest for both countries” including goods, services, rules of origin, sanitary and phytosanitary measures and customs procedures.
  • Bilateral trade between the two countries stood at about $12.5 billion in FY21 and has already surpassed $17.7 billion in the first 10 months of FY22.
  • India has imported merchandise worth about $12.1 billion from Australia in the first 10 months of the fiscal and has exported merchandise worth $5.6 billion in the same period.
  • Key imports from Australia
    • coal,
    • gold and
    • LNG
  • Key exports to Australia
    • diesel,
    • petrol
    • gems and jewellery.
  • The agreement with Australia was set to bring opportunities across sectors including mining, pharmaceuticals, health, education, renewables, railways, gems and jewellery, tourism, defence and textiles.
  • India is also likely to seek easier visa access for both students and professionals visiting Australia.
  • Australia is likely to seek market access for wines and agricultural products which are not produced on a large scale in India.
  • India and Australia have also signed an MoU to boost tourism between the two countries.
  • Australia has also emphasised that the agreement would lead to deeper cooperation between the two countries in critical minerals and rare earth elements which are critical to future industries including renewable energy and electric vehicles.

How has the Quad impacted trade relations between India and Australia?

  • India and Australia are both members of the Quad (Quadrilateral Security Dialogue) along with the US and Japan.
  • Both countries have noted that the coalition has given impetus to increasing trade relations between all members of the Quad.
  • Australia noted that it already had FTAs with both the US and Japan and that all four countries could start building a framework for economic cooperation within the countries of the Quad after they announced a deal with India.

What other Free Trade Agreements is India currently negotiating?

  • India is currently in the process of negotiating FTAs with the UAE, the UK, Canada, the EU and Israel, besides Australia.
  • India is also looking to complete an early harvest agreement with the UAE and the UK in the first half of 2022.

India – Australia Relations, Issues in the past

  • The historical ties between India and Australia initiated following the European settlement in Australia from 1788.
  • Australia and India for the first time established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941.
  • Following India’s independence, the Australian leaders advocated the British counterparts to retain the strategically important Andaman and the Nicobar Islands within the British Empire.
  • During the Cold War, Australia had decided to be a close ally of the US, while India initially opted for Non-Alignment.
  • Then there was the Pakistan factor. Australia’s attempts to act as the mediator between India and Pakistan in the 1940s and 1950s were not taken well by New Delhi.
  • Over time, during the Cold War era, Australia opted for close ties with Pakistan – a close ally of the US – instead of India.
  • Following the above – India-Australia relations touched a historic low when the Australian Government condemned India’s 1998 nuclear tests.
  • Another issue that plagued the bilateral ties was the lack of people-to-people ties due to the White Australia policy that banned immigration from Asia and the Pacific Islands.
Improvements began when:
  • In 2008, the Nuclear Suppliers Group had granted a waiver to India, leading to Australia lifting its uranium ban against the NPT non-signatories
  • In 2014 Australia signed a uranium supply deal with India, the first of its kind with a country that is a non-signatory to the Nuclear Non-Proliferation Treaty, in recognition of India’s “impeccable” non-proliferation record it became evident what type of relation Australia wanted with India.
  • The end of the Cold War and India’s decision to launch major economic reforms in 1991 ensured the development of closer ties between the two nations.
  • India is among the largest contributors to Australia’s population growth. There is a massive influx of Indian students and tourists to Australia.

-Source: Indian Express

December 2023