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Last updated: 18 Sep, 2017  

Australia and India Need to Shift Focus from FTA to Trade

NewsVoir | 16 Sep, 2017

Recent visit by Australian Prime Minister Malcolm Turnbull to India during which he declared that Free trade agreement between Australia and India may not be possible has created some amount of confusion. While some considered it as a failure of diplomacy, others felt that Australian prime Minister was speaking with a clear sense of purpose. They pointed out that it was a clear signal for Australian free enterprise to take the lead.


Randeep Agarwal, Adjunct Associate Professor, University of Queensland, Australia

Some argued that it was a strategic failure while others saw it as an opportunity to engage India at operational level. According to Mr. Randeep Agarwal, Associate professor, University of Queensland, Australia, the Australian Prime Minister has signaled a major strategic shift and departure from FTA, a rhetoric of past, a welcome change.


What could possibly be targeted in FTA v2 i.e. focus on trade & action? In his opinion, three mechanisms worth focusing on are; developing a central theme to anchor our longer term relationship, enhanced operational level engagement, utilizing and extending the scope of existing mini-lateral alliances.


Firstly on the central theme of Australia-India longer term relationship; he believes that a strong Australia-India relationship should have ‘problem solving’ as the central theme rather than investments, labor migration, agricultural and the commodity exports. The India opportunities to focus on are; alarming air pollution and waste in the mega cities, water and energy accessibility for the underprivileged, malnutrition and health, sustainable industries in the rural regions, mining infrastructure and technologies and the available scale for commercialization. A need based and action oriented strategy is needed. Australia recently joined the International Solar Alliance (ISA) during PM Turnbull’s India visit. For example, bio fuels and bio waste to energy technology developments in Australia are much needed in India. Indeed, the central theme ought to be research and innovation. Both the governments have a role to play in delivering this.


The second mechanism is enhanced direct engagement at operational level. Australia already has a strong position in high quality coal, gold, gas/Liquefied natural gas & the higher education sectors. For example the high quality coal from Australia will help large scale high efficiency and low emission (HELE) power generation in India. India is also confident about doubling up its LNG intake capacity to ~50 million tons per year by 2022. The city gas distribution (CGD), LNG/gas as transport fuels, gas power generation and fertilizers are the key drivers of spiraling LNG/gas demand in India.


Another example of direct engagement operationally is regarding higher education. This is a need for millions of youngsters in India. However, the Australian universities should engage with at least 20 emerging universities in India rather than a select few. A regional penetration in India is important too. To achieve enhanced engagement the partnerships should target student and faculty exchanges and collaborative research projects.


From time immemorial India has been in love with Gold.  Australia exports a large quantity of gold to India, annually. Therefore, old could be the strongest emotional link between Australia and India and can have large “tourism value” which has never been realized.


Thirdly; mechanism to develop is an existing strategic trilateral forum between Japan, Australia and India (JAI). To date, defense and security have been areas of successful strategic partnership in JAI. To start, an aligned strategic position should be a good platform to expand business opportunities in these areas. In my view, to exploit this alliance further, the JAI should be best utilized for Skilling India program. A 500 million young workforce is to be skilled by 2030, a difficult and very complex value proposition. The two key challenges in skilling India are: the creation of world class infrastructure complemented by a world class training provision. Skilling infrastructure by Japan and the training delivery by Australia create a perfect synergy. Therefore JAI is a perfect platform to realize this opportunity of scale.


Finally, a large trade imbalance has been a cause of concern for India, another relationship baggage of the past. Of ~$20 billion per annum trade between Australia and India, Australia has more than 90% of the share. Some of India’s value propositions worth examining are spiritual and wellness tourism, khadi cotton clothing and a ground for research commercialization & scaling up. The climatic conditions in Australia are very good for khadi cotton and increased use of khadi in Australia means sustainable livelihood for millions of rural poor in India.


The new entity Asian Infrastructure Investment Bank (AIIB) should be used as a vehicle for major infrastructure projects in India to achieve desired risk mitigation. Australia is a member country of the AIIB.


The implementations of these mechanisms can double two way trade and investment. The “agreement” on free trade can wait.


The views of the author are personal.

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