India-Australia FTA Progress: Interim Deal Expected in 30 Days
India and Australia will finalize an interim trade deal in 30 days as announced on February 11, 2022. We look at the progress made on bilateral free trade agreement (FTA) talks.
India and Australia are expected to reach an interim trade deal over the next 30 days as per India’s Commerce and Industry Minister Piyush Goyal. Goyal’s Australian counterpart, Dan Tehan, has been on a visit to India to fast-track the bilateral FTA talks.
Both sides also hope to conclude negotiations for a complete India-Australia Comprehensive Economic Cooperation Agreement (CECA) in the 12-18 months after the interim deal is finalized. The full-fledged CECA would cover most trade in goods and areas such as services, investments, government procurement, and intellectual property.
The total value of two-way foreign direct investment between both countries was valued at US$1.04 billion in 2020. Bilateral trade between India and Australia was US$12.3 billion in 2020-21 and US$12.6 billion in 2019-20, with the trade balance in Australia’s favor.
An interim FTA between India and Australia will lower import duties and expand market access for a limited number of items and sectors.
Australian producers are focused on encouraging market access for products not made in India or commodities where India experiences a shortfall in supply, such as pulses, grains, and oilseeds. Indian interests lie in securing market access for its textiles, leather, and gems and jewelry.
Formal negotiations for the CECA took place during the 17th India-Australia Joint Ministerial Commission on September 30, 2021. Both sides had agreed to conclude an interim agreement or early harvest trade deal by December 2021 to be followed by a full trade deal by 2022. While these deadlines have not be struck, the pace of bilateral negotiations has been much faster than traditional timelines.
Australia and India trade negotiators are pursuing an aggressive schedule as both countries chase economic rebounds after the pandemic, are pushing for domestic jobs growth, and want access to more diverse export markets due to geopolitical factors.
What we know has been discussed
Education market prospects
In meetings held between February 10-11, 2022, Goyal and Tehan’s teams identified key items to be prioritized for greater market access. Among these, the education sector has been identified with prospects for mutual benefits for universities in both countries. As per media reports, this includes the possibility of allowing Indian students to extend visas by an additional three-five years.
Education remains Australia’s largest service export to India, valued at US$4.46 billion and accounting for around 88 percent of the total in 2020. At the end of 2020, Indian students in Australia numbered 115,137.
Meanwhile, India recently unveiled its New Education Policy to implement education reforms, which opens up increased private sector opportunities.
Previously, in January, the Indian government had confirmed that sensitive dairy and agriculture items, such as milk, butter, milk powder, or wheat, would be kept out of the trade deal. Instead, the focus would be on items not produced in the country, such as blue cheese and Australian tree nuts like macadamias.
Major bilateral trade items
India’s export basket to Australia majorly comprises of goods like petroleum products, medicines, polished diamonds, gold jewelry, apparels etc., while key Australian exports to India include coal, LNG, aluminum, and non-monetary gold.
In the services sector, major Indian exports to Australia are related to travel, telecom and computer, government, and financial services, while Australian services exported to India are primarily related to education and personal services.
Sectors like food and agribusiness, education, healthcare, infrastructure, as well as mining and resources have been gaining importance in recent years.
Indian exports to Australia in 2020-21 were worth US$4 billion and imports from the country were US$8.5 billion. In 2020, India was the seventh largest trade partner for Australia and its sixth largest export market.
During the previous year, 2019, Indian exports to Australia were worth US$3.19 billion, and included refined petroleum (US$287 million), packaged medicaments (US$277 million), and railway passenger cars (US$166 million). In 2019, Australia’s exports to India amounted to US$15.3 billion, and included coal briquettes (US$12.1 billion), gold (US$604 million), and petroleum gas (US$419 million).
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