India-Australia ECTA: A transformative and strategically significant milestone
By Dr Amitendu Palit
India and Australia signed the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA) on 2 April 2022. The agreement will provide exporters from both countries deep preferential access to each other’s markets. Similar access will be enjoyed by service exports and the ‘Unity Agreement’, as many are calling it, will enable purposeful movement of people.
As of now, the agreement has been signed as an interim deal, as a stepping stone towards the signing of the broader Comprehensive Economic Cooperation Agreement (CECA). It will pave the way for a wider economic partnership across a number of areas. But even in its present form and scope, the ECTA has the potential of significantly enlarging the current bilateral trade of around $25 billion. Mutual tariff-free access for nearly nine per cent of the goods traded by both countries should ensure quick expansion in bilateral trade.
The larger significance of the agreement, however, is much more than the increase in trade it is going to deliver. It is a landmark deal in several respects.
In the last few years, India and Australia have experienced remarkable growth in strategic engagement and collaboration. For several years in the past, notwithstanding mutual awareness about each other’s specific regional presences and strategic roles, the bilateral relationship was largely confined to export of coal and ores, cricket, and limited exchanges on education. The strategic content of bilateral relations gathered momentum from the last decade along with the speed picked up by the Quad initiative and the traction gained by the idea of Indo-Pacific. Through the Quad, India and Australia begun working closely on a large number of subjects. These, as the context of the COVID19 pandemic outlined, include safeguarding critical supply chains, vaccines, clean energy and connectivity. Such collaborations enabled both countries to understand the critical importance of their working closely on trade and investment as well. The ECTA affirms the eagerness of both countries to widen and deepen a strategic relationship assuming exhaustive proportions.
The ECTA is also an example of how political willingness and strategic urgency can overcome roadblocks in trade negotiations. Both countries begun negotiating a bilateral trade deal in 2011. However, after nine rounds, they suspended negotiations in 2015, as neither was willing to concede market access on a number of politically sensitive sectors. The negotiations were revived after five years in 2020. The decision was taken when both countries decided to upgrade relations to a comprehensive strategic partnership. Formal negotiations for the more comprehensive agreement, simply known as CECA, commenced from 30 September 2021 at the meeting of the 17th India-Australia Joint Ministerial Commission.
It is remarkable that the interim agreement ECTA was announced in just six months from the re-commencement of talks. Sensitivities around specific domestic sectors haven’t vanished in the meantime. But both countries were determined to not let these sensitivities come in the way of reaching a trade deal that can deliver significant long-term benefits. They also showed the resolve to allow market access in some sensitive sectors. India, for example, has allowed tariff concessions for wines, fruits, vegetables and meat exports by Australia. Australia, on the other hand, has allowed easier visas and post-education working opportunities for Indian students and IT professionals.
The ECTA witnessed an astonishing degree of political support and policy commitment around its creation. Australia announced a number of initiatives for deepening ties with India a few weeks before the deal was announced. The initiatives cover cooperation in technology, innovation, skills, critical minerals, connectivity and infrastructure. The Indian Commerce and Industries Minister Piyush Goyal travelled to Australia within days of the deal for engaging on its benefits. The efforts reflect the sincerity of both countries in embedding the CECA firmly in a flourishing bilateral relationship. The intense engagement around the CECA also underlines the keenness of its stakeholders to take the deal to the people of both countries and make it an effective framework for deep and close economic exchanges.
Much work remains to be done on the full CECA which is aimed to be achieved by the end of 2022. As of now, ECTA remains an interim trade deal. It covers trade in goods, trade in services, dispute settlement, movement of people, and a foreign investment framework. Over time, more issues are expected to be brought within its fold. These would be in line with other bilateral trade agreements that both countries have recently negotiated, such as Australia’s trade deal with the United Kingdom (UK), and India’s trade agreement with the United Arab Emirates (UAE). As both countries deepen strategic engagement across a wide variety of areas, the scope of the ECTA will widen. Over time, trade rules on clean energy, digital trade, sustainable development and critical minerals, are expected to be drafted into the bilateral agreement, along with more provisions on investment and intellectual property.
At this point in time, both countries would focus on building public opinion for easy legislative ratifications of the CECA. This should not be difficult given the strategic urgency and political commitment that the deal has witnessed so far. However, more public engagement on the agreement, particularly with domestic businesses, cross-border service providers and students, are necessary. Such engagement needs to be accompanied by facilitating initiatives that would encourage greater buy-in and utilisation of the CECA. Two important steps in this regard are issuing easy visas and expanding air connectivity. Obtaining online visas without extensive documentation, and getting more airlines from both countries to connect major cities of each other with non-stop flights, are important.
Good trade deals are unable to deliver their best unless backed by enabling conditions. A lot of effort has been invested by political leaderships of both countries in the CECA. It is important to ensure that the investment is not wasted and the interim agreement ECTA builds momentum to lead to a fuller CECA, as it lives up to its promise of being a truly transformative and strategically significant milestone in India-Australia relations.
Dr Amitendu Palit is Senior Research Fellow and Research Lead (trade and economics) in the Institute of South Asian Studies (ISAS) in the National University of Singapore. He can be reached at isasap@nus.edu.sg. The views are personal.