The FTA is like that elusive ‘golden snitch’ we are trying to get hold of, says Minister of Trade Dan Tehan.
Australia and India are expected to commit to a landmark investment package following a virtual summit between the nations’ leaders Scott Morrison and Narendra Modi on Monday. However, a free trade agreement (FTA) has still not been formally agreed to.
The package, worth an expected $280 million, has been described as the largest-ever investment by an Australian government in India. It will include sharing of renewable energy technology, defence and space co-operation and a new Centre for Australia-India Relations.
Both the countries will conclude an early harvest agreement by the end of this month, according to sources. An Early Harvest Scheme (EHS) is an agreement between two states which liberalizes tariffs on certain goods preceding the conclusion of a Free Trade Agreement (FTA). It was initially anticipated a free trade agreement would be inked following the virtual summit on Monday, but negotiations remain ongoing.
Minister for Trade, Tourism and Investment, Dan Tehan has compared Australia trying to secure a FTA with India to the fictional sport of Quidditch, as an agreement between the two nations was delayed once again despite being on the agenda for several years.
Mr Tehan while speaking at the Australia India Institute on Tuesday said trying to secure the interim deal was much like the sport of Quidditch from the Harry Potter franchise.
“The FTA is like that elusive golden snitch we are trying to get hold of, and every time we think we are there, it just ducks away,” he said.
He said once a FTA is signed, it would send a “global signal”.
Meanwhile, the Labor party trade spokeswoman Madeleine King has accused the government of laziness and lambasted them for causing further delays to a FTA.
“In September 2021, Trade Minister Dan Tehan gave himself a deadline of Christmas last year for an ‘early harvest’ interim trade deal, to lock in some benefits for both countries sooner rather than later,” she said on Tuesday.
“(The) leaders’ meeting was an opportunity to finally ink that deal before the election, albeit three months late. Yet the interim deal was not signed.”
Mr Tehan also launched an update to the Australia-India Economic Strategy to 2035 on Tuesday and announced $16.6 million to nourish correlation with India’s key policy and finance institutions. He also pledged $8.9 million to further business engagement and an enhanced Austrade presence in India.
“The government remains committed to the India Economic Strategy and its ambitious goals: to lift India into our top three export markets by 2035, and to make India the third-largest destination in Asia for outward Australian investment,” he said.
This economic investment package comes at a time when both nations are desperate to reduce their dependence on China. The full pact, called the Comprehensive Economic Cooperation Agreement (CECA), is supposed to be inked later this year.
China is Australia’s biggest trading partner and also the biggest source of imports for India.
According to the Australian Department of Foreign Affairs and Trade (DFAT), Beijing is Canberra’s largest two-way trading partner in goods and services, accounting for nearly one third (31 per cent) of Australian trade with the world. Two-way trade with China declined 3% in 2020, totalling $245 billion. During this same period, Australia’s global two-way trade declined 13 per cent.
However, according to experts, after Australia called for an investigation into the origins of COVID-19, Beijing retaliated with a wave of sanctions targeting 13 industries that exported $54bn worth of goods to China, causing major panic among Australian businesses.
India needs critical Australian minerals for new sectors like the development of electric vehicles (Australia has the world’s second-biggest reserves of lithium, a key component of electric car batteries), while Australia requires skilled labour that India can offer.
Australia is also looking to tap into India’s wine market, a move that could help Australian companies build a new market in place of China. The industry saw a drop by 30% when Beijing imposed tariffs of 218% as recrimination.
According to sources close to the Indian government, concern over duty-free import of coal under the proposed bilateral trade agreement with Australia is seen as the main reason for a delay for signing the FTA. Shipments from Australia to India have grown five-fold in the first three quarters last year, rising 503% year on year, to 16.5 million mt in the January-September period, according to data by Iman Resources.
Duty-free coal imports will affect India’s revenue collection and be an impediment to domestic production as well. It would also impact the Modi government’s Atmanirbhar Bharat programme where mining is seen as a major employment generator.