AUSTRALIA AND INDIA: TURNING RHETORIC INTO POLICY
By Dr Michael Moignard, Academic Fellow
In the last 12 months the Australian Government’s focus on India has been the strongest since 2015, when Prime Minister Narendra Modi visited Australia and Tony Abbott was Prime Minister.
Back then the major issue was rejuvenating negotiations on the proposed Comprehensive Economic Cooperation Agreement (CECA), and the four-member security arrangement between the United States, Japan, India and Australia, the so-called the Quad, was still struggling to find relevance.
What a difference a few years makes!
The CECA is a huge opportunity to expand bilateral trade and investment between the two countries and has been under negotiation since 2008. Over that time interest in the deal has waxed and waned, often in tandem with the state of political relations between the two nations.
It isn’t that the relationship has ever been particularly poor, although it did have a period of stress from 2009 to 2011 over the safety of Indian students in Australia. Instead there have been times when the relationship has been neglected, with bilateral ties not seen as a top priority by either government.
However, in recent years the dialogue has become more positive with both governments calling for a special relationship. This has partly been driven by Australia’s trade tensions with China, and India being seen as an alternative export market. As well, the opportunities for bilateral investment between the two countries have strengthened in areas like medical technologies, mining and social infrastructure.
So, will this increased focus on CECA result in an agreement on CECA soon?
The CECA has a broader focus than a standard Free Trade Agreement, and includes a focus on services rather than just goods, as well as the movement of citizens, and flows of investment. And despite an atmosphere of cooperation, difficult trade issues still need to be worked through in areas like manufacturing, agriculture, processed food products, and reciprocal recognition of tertiary and specialised qualifications.
Resolving issues like these require long and often frustrating negotiations, and usually end up in drawn out timelines for change. So, even if there are some breakthroughs here, any final deal is still some time off.
We should also be mindful of India’s reluctance to join multilateral trade agreements, as evidenced by its decision not to join the Regional Cooperation Economic Partnership (RCEP) in 2020. Membership would have given India access to free trade arrangements with the Association of Southeast Asian Nations (ASEAN), China, South Korea, Japan, Australia and New Zealand.
India was wary of two things – China’s involvement, which they feared could increase imports of manufactured goods, and the potential for India to be forced into making concessions on increased agricultural trade, which is opposed by Indian farmers, a mainstay of political support for Prime Minister Modi (and who already has significant political issues with certain farming communities.)
Nor has India shown much interest in joining the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP), which involves even more countries than the RCEP. We need to appreciate this reticence when considering the outcome of the CECA negotiations.
Where there is hope for real change is in those parts of the Australian and Indian economies that are growing rapidly. Trade deals on fast growing industries are generally easier because there are less established domestic protections to overcome and interest groups are less powerful. For example, the CECA’s potential for opening agricultural trade will be difficult. The sensitivity for India has been noted, but Australian agriculture is also a powerful political lobby.
For example, economies are rapidly digitalising due to Covid-19 restrictions, and this is an area where both India and Australia can benefit. The recent agreement between Australia and Singapore on the digital economy would be a great precedent to build upon.
Other potential areas of agreement include the rapid advances being made in medical technologies, including rapid diagnostic tests, and the online delivery of medical services that in the wake COVID-19 have now become common place. Opportunities will exist for the use of these services in remote areas of both countries. The CECA could assist the growth of this area through better integration of testing and regulatory approvals.
Similarly, increasing the efficiency of the movement of citizens of both countries for education and employment is under consideration. In a post-COVID environment, it is vital that adequate systems are in place to encourage student and employment mobility.
The other change in the relationship is the rejuvenation of the Quad, which is now seen as a bedrock of Australia’s security position in the Pacific and Indian oceans – the Indo-Pacific. With the US now more wary of China as a major power, this alliance of democratic capitalist nations is being utilised to create a buffer against Chinese influence in Asia.
The importance of the Quad relationship is more in its symbolism at present, although it could morph into a genuine security grouping in the future. Its leaders met for the first time, over video conference, in 2020, in what was a significant symbol of US involvement in the Pacific region. It held its first joint exercises for the nations’ fleets in November 2020 and the Foreign Ministers of the four nations recently met in Melbourne to consider the group’s priorities in the short to medium term.
Most importantly, the Quad has moved away from being just a security response to a grouping that considers a broader agenda of support for ASEAN countries in logistics and COVID-19 abatement programs. The move of the Quad to a more economic partnership would be welcomed by ASEAN countries welcoming the US as a regional player. However, it would need to be carefully handled, especially given India’s membership.
While such moves by the Quad in Southeast Asia might be acceptable to India, any such thought of expanding into the Indian Ocean could be problematic given India perceives the area as being within its sphere of influence. Both the CECA and the Quad are manifestations of Australia’s need to build the policy-oriented special relationship with India into something more substantial than rhetoric. In a post-COVID context, India provides an opportunity for Australia to reboot its Indo-Pacific trade and security strategy.
The Quad and the CECA are also significant initiatives that emphasise the role that Australia would like to see India play in the Indo-Pacific. They represent a renewed vision of the bilateral relationship, which could bring the reality of our connection into balance with the unrealised expectations of the last fifteen years.
Finally, they are a means to bring India into the trade and security architecture of the Indo-Pacific and provide them with the means to engage with Australia and like-minded countries in the long-term future of our region.
Dr. Michael Moignard is a Non-Resident Expert and Academic Fellow at the Australia India Institute. He spent 35 years as an Australian public servant working in trade and resources policy and trade promotion, and close to 7 years in India as Senior Trade Commissioner for South Asia with the Australian High Commission. Michael is a Director of EastWest Academy Pty Ltd, a small firm involved in assisting Australian business do business in India, and became President of AIBC Victoria in March 2017.