Challenges in India -Australia Trade and Investment Agreement
India and Australia underwent a frosty relationship over the years, but their diplomatic exchange today witnesses fresh changes with China in the background, as a result of which, we see a shared vision for maritime cooperation, trade improvements and greater investment in the newly emergent Indo Pacific dynamic amidst growing Chinese assertiveness. Australia’s reliability and standpoint on multiple issues and its outlook towards India has begun to change, the same of which has always been a major focus of India’s concern today as well. Australia’s inhibited response to uranium sales to India post its nuclear test in 1998 and Australia suddenly walking out of the QUAD in 2008 have stayed critical points of contention and dubiousness in the Indo-Australian relationship.
Australia recognizes 10 key priority areas of trade cooperation with India which are of significant growth potential. These include education, agribusiness, tourism, resource sharing, energy and health amongst others. However, despite welcoming engagement from India, Australia’s agricultural exports have come under significant abashment from India. Largely being an agriculturally dependent economy, anything that threatens the primary sector concerns India greatly. In response to this, Australia has suggested that its agricultural exports are premium market goods, nothing that would concern the small farmers as such. This makes it an evident theme of trade and investment threat that the domestic concerns eventually crop up restricting fuller engagement. India can also not be blamed given its history of colonial trade and the general perception of trade where everything comes down to a zero sum game at the end. India’s current trade deficit of around Australian $15 billion show how it is heavily skewed to Australia’s favor which prevents greater cooperation and mutual trust. In fact 2018 negotiation led to a conclusion that the situation was far from appropriate cooperation on CECA and RCEP.
This stance has however significantly changed as of June 2020, following concerns about China. Post the virtual leaders’ summit 2020, the two nations upgraded their partnership to that of a comprehensive strategic importance. India expressed willingness to pursue Australia to lessen its dependence on China and make trade concessions wherever required. This would be considerably difficult given its domestic commitments and pre-existing concerns regarding RCEP and trade deficit. In the last decade, India-Australia trade has increased tremendously by 24% crossing the US$13 billion mark. Recognizing the significant trade barriers, FTAs have assumed importance in resolving the issue. While it is observed that FTAs for India would not do much, the fact that Australia is willing to put comprehensive tariff cuts for India is a positive sign. Australia also holds the potential to gain substantially from FTAs as India employs high tariff rates. The last year especially has been a promising year, which has laid down the clarity that the two countries now commit to delivering action in the backdrop of Australia- India business exchange. Both of them have become conscious of their newer reality. Goods, services and investment related FTAs hold the potential to boost India’s textile and auto parts exports. It will also further Australia’s investment inflows.
In order to further understand their trade relations closely, it is crucial that we consider a range of other significant determinants of this dynamic. Indo-Australian trade and investment cooperation definitely does not exist in a limbo. It is a collective expression of events on multiple fronts. With China encircling the Indian Ocean through its string of pearls strategy, India has grown affectionate to old and new allies alike. Evidently, we can witness India moving closely towards US for defense cooperation. In the same direction, Australia coming in only acts as a force multiplier. However, this requires a more proactive role by Australia which is consistent, to undo its previous inconsistencies. Australia, therefore, must increase its aid to the South Asian budget. It can also play a crucial role in supporting India’s manufacturing and dispense of Covid 19 vaccine throughout South Asia. India and Australia can forge a crucial alliance with each other in South Asia, acting as a potential enabler for Maldives and Sri Lanka forging a strong close knit South Asian alliance. It is necessary for the two countries to realize that their alliance against China’s aggressive intrusionary foreign policy is an inevitable requirement right now. Further, the emergence of QUAD has opened up new frontiers of cooperation where the center right parties of the four democracies have agreed to come together on sharing a similar course of action.
Australia enjoys the geographical disadvantage of distance as well as the capacity to nurture its maritime defense capacity that can very well pose a great challenge to any power that dares to threaten its position. Further with the reiteration of Australia coming back to QUAD, it is a must to understand the seriousness of QUAD as a regional grouping today. However, what remains to be seen is if India is ready to shed its premature hesitation towards Australia, so that the two countries can cooperate and keep up with the high level exchanges including the 2+2 dialogue which was set in tone back in 2007.
India and Australia must also be seen as two countries not only in terms of geographical partners but as nations that enjoy several points of commonality, which sets the tone for the coming together of the two countries. Both are strong stable democracies with multicultural influences in society. Not only does Australia has large bauxite reserves that India requires , but also serves as a host to a bulk of Indian students. The diplomacy of the two countries today stands at the citadel of urgency on account of multiple factors. Australia is not only a part of India’s extended neighborhood, but also at the brink of Chinese assertive expansionary strategy. While Australia enjoys a subtle economic relationship with China, Australia also must also realize the need to maintain its sovereignty and advantage of geographical distinctiveness it enjoys in the Indo-Pacific.
India and Australia enjoy a relationship that has significantly expanded over the years. While the two have been mocked at making short lived promises, one must not forget the newer reality they face today. Their contrasting security and foreign policies no longer stand ground post the Cold war dynamic, and especially in the newer Indo-Pacific realm where various concerns seem to be looming for the two nations. While some hiccups may still be persistent, the socio-cultural, trade and economic proliferation certainly holds the potential to undo the apprehensions.
Yet however, one must not forget that with differing geographies and history, their way ahead might still stand in contrast, with Australia tilting towards the US for security and China for economic gains. At the same time, their changed outlook on account of China’s assertiveness and a strong Indo-Pacific identity is something to look forward towards. What then is essential, is that the two countries firstly prioritize their consultative mechanisms, recognizing each other’s perspective and gains. Secondly, they must work to strengthen their means of interoperability so as to solidify communication which holds potential for future growth in their ties. The two must not forget that it is not the time to play safe but to act multilaterally, while nurturing their existing leverage wherever possible.
References
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7.Vinay Kamath, S. K. (2018, march 12). India-Australia trade on new pitch. Retrieved from the hindu business line: https://www.thehindubusinessline.com/opinion/india-australia-trade-on-new-pitch/article20593285.ece1
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Pic Courtesy- Dan Freeman at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
