Both Australia, India set to gain from Free Trade Agreement

The India-Australia comprehensive interim free trade agreement is well-timed for both partners and will ensure uninterrupted supply of key inputs to Indian industries,with Australian businesses gaining access to a more reliable alternative of China, which is resorting to sanctions against the Canberra, two people aware of the development said.

So far, China dominates key Australian markets such as pharmaceuticals, textiles, plastics, toys, footwear and leather goods. Now the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA), signed on April 2, could make India an alternative to China, the two added on condition of anonymity.

Friction between Canberra and Beijing has brought a series of official and unofficial Chinese trade sanctions on Australian exports including coal, beef, seafood, wine and barley.

Confederation of Indian Industry (CII) president TV Narendran said that for Australia, India presents a good alternatives to China, and the ECTA agreement will certainly enhance bilateral trade engagements between India and Australia. “It has huge potential and the FTA will unlock it,” he said. Narendran, who is the CEO and managing director of Tata Steel, is heading a business delegation that is accompanying commerce minister Piyush Goyal to Australia. Tata Steel imports Australian coal worth about $2 billion annually.

After the agreement comes into effect, India can import Australian coal cheaper than earlier, he said. Australian coal constitutes over about 70% of total imports from Australia to India and attracts a 2.5% duty. ECTA will allow zero duty import of Australian coal, which is a key raw material for the steel sector, Narendran added. The agreement is expected to be effective in about four months.

India and Australia on April 2 signed a comprehensive interim free-trade agreement that permits zero duty trade on several items. Largely, India imports key raw materials and intermediates from Australia and exports finished products.

After an interaction with businessmen from both countries, India’s commerce minister Goyal said that India’s manufacturing sector, particularly micro, small and medium enterprises (MSMEs) are interested in the Australian market. “Australia has a market for pharmaceuticals worth about ₹1 lakh crore or $12 billion. But Indian exports are miniscule [$345 million]. With this agreement, the regulations have been significantly eased to facilitate exports of medicines from India,” he said.

Speaking about prospects of the interim FTA between India and Australia, Council for Leather Exports vice chairman RK Jalan said: “The agreement will certainly boost India’s footwear and leather exports.”

“We currently have 3-5% market share in the about $2 billion Australian market [of footwear and leather accessories], which is largely dominated by China. After duty free exports, our products can compete with Chinese products and we can raise our exports by 25%,” he said adding that quality of Indian products are better than the Chinese products.

Goyal said the agreement unlocks huge opportunities for Indian exports of automobiles, textiles, footwears and leather products, gems and jewellery, toys and plastic products. According to the two people cited in the first instance all these markets have been so far dominated by China with negligible 1-5% markeshare of India.

Speaking to Indian students at University of New South Wales, Goyal said the trade deal will also encourage Indian investments in Australia, which would mean more employment opportunities for Indian students in their Australian facilities. “The trade deal has raised our hopes in getting internships and job opportunities in Australia,” said Kashish, a B.Com. first year student of the University who hails from New Delhi. Several students said that until now getting jobs was difficult in Australia without permanent residency.

Cochlear Ltd CEO and President Dig Howitt said the 1.3 billion-people Indian market is the major attraction for both trade and investments. Cochlear is a medical device company that designs, manufactures, and supplies hearing implants.

Goyal said that in 27 years Cochlear could sell only 27,000 implants in India. But, it can scale up its operations by setting up a facility in India, which will not only reduce the cost of implants but also provide export opportunities from India to other countries, he added. “This they can do without any commitment to technology transfer, as has been insisted by various other countries.”

Howitt said he is encouraged by the deal. “I will expand my market in India and may also consider investing in India.”