• UGI USER
  • Jul 29, 2024
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INDIA-AUSTRALIA TRADE PACT YIELDS GREAT RESULTS, SAYS ENVOY

Syllabus:

GS 2:

  • India and its Neighborhood- Relations.
  • Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Why in the News?

The recent economic cooperation and trade agreement between India and Australia has yielded remarkable results, significantly boosting India’s exports to Australia and highlighting the potential for further economic collaboration. The Australian High Commissioner’s visit underscores the importance of these developments.

Source: IADN

Context and overview:

  • Great Trade Trajectory: Trade between India and Australia is on a remarkable trajectory due to the recently initiated Economic Cooperation and Trade Agreement (ECTA), which has significantly boosted exports from India to Australia, according to Australian High Commissioner Philip Green.
  • FTA Benefits: The ECTA has led to a substantial increase in trade, with India’s exports to Australia experiencing significant growth, highlighting the effectiveness of the free trade agreement.
  • Exploring Opportunities: Australia is actively exploring possibilities in developing Amaravati as the capital city of Andhra Pradesh, showcasing the multifaceted collaboration between the two nations.
  • Economic Impact: The agreement has yielded a high utilization rate by traders, with key sectors like apparel, iron and steel, and agriculture witnessing impressive export growth.
  • Diplomatic Engagement: The High Commissioner’s visit to Amaravati underscores the commitment to strengthening bilateral ties and exploring development opportunities in various sectors.
India-Australia Relations So Far

Historical Perspective

  • Early Diplomatic Relations: Established in 1941 with the Consulate General of India in Sydney.
  • Nuclear Test Condemnation: Relations soured after Australia condemned India’s 1998 nuclear tests.
  • Uranium Deal: In 2014, Australia signed a Uranium supply deal with India, recognizing India’s non-proliferation record.

Shared Values

  • Democratic Values: Both share pluralistic, Westminster-style democracies, and expanding economic engagement.
  • Common Traits: Vibrant democracies, free press, independent judiciary, and English language facilitate closer cooperation.

People-to-People Ties

  • Skilled Immigrants: India is a top source of skilled immigrants to Australia, with around 976,000 people of Indian origin.
  • Growing Community: The Indian community is the fastest-growing in Australia, with over 100,000 visas issued to Indians last year.

Strategic Ties

  • Comprehensive Strategic Partnership: Elevated in 2020 during a virtual summit.
  • High-Level Engagements: Frequent ministerial visits and key announcements on migration and skills exchange.

Defence Cooperation

  • 2+2 Dialogue: Significant engagements, including the Deputy PM and Defence Minister of Australia’s visit in 2022.
  • MLSA Agreement: Signed in June 2020 to enhance defence cooperation.

China Factor

  • Strained China Ties: Due to various issues including Huawei ban and COVID-19 inquiry.
  • Shared Concerns: Both face Chinese aggression and support a rules-based order in the Indo-Pacific.
  • Quad Participation: Demonstrates shared interests and concerns in the region.

Multilateral Cooperation

  • Shared Memberships: Both are members of Quad, Commonwealth, IORA, and other regional forums.
  • WTO Cooperation: Collaborate as members of the Five Interested Parties, with Australia supporting India’s APEC membership.

Economic Cooperation

  • ECTA Agreement: First FTA signed by India with a developed country in a decade, effective December 2022.
  • Duty Reduction: Zero duty on 96% of Indian exports to Australia and 85% of Australian exports to India.
  • SCRI Partnership: Trilateral arrangement with Japan to enhance supply chain resilience.

Bilateral Trade

  • Trade Statistics: Australia is India’s 17th largest trading partner, with bilateral trade at US$ 27.5 billion in 2021, potential to reach US$ 50 billion in five years.

Cooperation on Clean Energy

  • Renewable Energy: Signed a Letter of Intent in February 2022 for cooperation on renewable energy technologies.
  • Financial Commitments: India announced AUD 10 million for Pacific Island Countries under ISA, and both countries committed USD 5.8 million to the Critical Minerals Investment Partnership.

Economic Growth and Trade Dynamics

  • Export Surge: Over the past five years, India’s exports to the world increased by about 37%, but exports to Australia surged by 66%, nearly doubling, thanks to the ECTA.
  • Sectoral Growth: In the last four months of this year, Indian exports of apparel increased by more than 20%, iron and steel by 25%, and agriculture by 30%, demonstrating the pact’s positive impact.
  • Utilization Rate: The signing of the ECTA resulted in a 77% utilization rate by traders, indicating robust engagement and effective implementation of the trade agreement.
  • Strategic Sectors: The growth in exports highlights the strategic importance of sectors like apparel, iron and steel, and agriculture in the bilateral trade relationship.
  • Long-term Benefits: The sustained increase in exports to Australia reflects the long-term benefits of the ECTA, fostering deeper economic ties and mutual growth.

Opportunities in India

  • Congratulatory Visit: Green visited Amaravati to congratulate Chief Minister Chandrababu Naidu on his landmark victory and explore development opportunities in the region.
  • Sectoral Engagement: Australia is interested in engaging with India in various sectors, including education, agriculture, water management, green energy supply chains, and more.
  • Capital Development: Drawing parallels to Canberra’s development, Green expressed interest in Amaravati’s development plans, emphasizing Australia’s expertise in creating sustainable and beautiful capitals.
  • Clean Energy Focus: Australia is focused on exporting clean coal, critical minerals for green hydrogen, green battery manufacturing, green steel, iron ore, and solar panels needed for rooftops, aligning with India’s clean energy goals.
  • Diaspora Contributions: Green praised the Indian diaspora in Australia for their contributions in IT, business, and other sectors, highlighting their role in strengthening bilateral ties.
  • Visa Growth: The Indian community in Australia is the fastest-growing, with over one million people, and last year, over 100,000 visas were issued to Indians, underscoring strong people-to-people connections.

Geopolitical Context

  • Russian-Ukraine War: Green condemned Russia’s invasion of Ukraine as a clear breach of international law, emphasizing Australia’s strong support for Ukraine and the importance of a rules-based world order.
  • UNSC Dynamics: He pointed out that Russia, as a member of the United Nations Security Council, has signed multiple treaties with Ukraine to protect its territorial integrity, making its actions in Ukraine unconscionable.
  • Global Implications: The invasion raises concerns about larger countries invading smaller ones, with significant implications for international stability and law.
  • Oil Access: When asked about India accessing cheaper oil from Russia, Green noted it as a bilateral arrangement between the two countries, reflecting their traditional relations.
  • UNSC Support: Australia supports India’s ambition to become a permanent member of the UNSC, recognizing India’s growing influence and importance in global geopolitics.

Key Challenges in India-Australia Relations

  • Adani Coal Mine Controversy: Environmental protests against the Adani coal mine project have strained relations.
  • Visa Restrictions: Restrictive visa policies for Indian students and professionals create friction.
  • Violence Against Indian Diaspora: Attacks on Indian diaspora and temples by Khalistan supporters strain ties.
  • Trade Barriers: Regulatory and tariff barriers hinder full utilization of the Economic Cooperation Trade Agreement (ECTA).
  • Geopolitical Differences: Differing approaches to geopolitical issues, like the Russia-Ukraine war, cause diplomatic tension.
  • Economic Disparities: Imbalanced economic engagement and investments need addressing for balanced growth.
  • Public Perception: Negative stereotypes and perceptions hinder deeper cultural and social integration.

Way Forward

  • Strengthen Diplomatic Dialogue: Enhance high-level interactions to resolve issues and foster mutual understanding.
  • Improve Visa Policies: Simplify visa processes for easier movement of Indian students and professionals.
  • Protect Indian Diaspora: Ensure safety of Indian diaspora in Australia by addressing incidents of violence effectively.
  • Enhance Trade Relations: Remove trade barriers and promote investments in key sectors like technology and renewable energy.
  • Collaborate on Geopolitical Issues: Work together on maintaining a rules-based international order and support each other in multilateral forums.
  • Promote Cultural Exchange: Increase cultural and educational exchanges to improve public perceptions and build stronger ties.
  • Focus on Sustainable Development: Collaborate on clean energy and climate change initiatives to address global challenges and strengthen cooperation.

Conclusion

The India-Australia trade pact exemplifies the potential of strategic economic partnerships. It not only addresses trade but also extends to critical sectors such as clean energy and infrastructure development, fostering mutual growth and strengthening bilateral ties in an increasingly interconnected global economy.

Source:The Hindu

Mains Practice Question:

Examine the impact of the Economic Cooperation and Trade Agreement (ECTA) between India and Australia on bilateral trade relations. Discuss the potential benefits and challenges of such agreements in fostering economic growth and strategic cooperation.

Associated Article:

https://universalinstitutions.com/india-australia-relations/