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‘There’s a panda in the room’: Why Australia signed historic free trade pact with India

After 11 yrs of on & off talks, India &Australia finally signed phase 1 of ECTA to allow greater flow of goods & services, reducing Canberra’s dependence on Chinese goods.

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New Delhi: Increasing strategic and economic tensions with China, and an impending election in May, have finally made Australia sign on the dotted line to approve a free trade agreement with India that had been in the making for over a decade, a step Canberra believes will further enhance its ‘Comprehensive Strategic Partnership’ with New Delhi.

“There’s a panda in the room… India has faced border tensions, Australia has faced economic coercion, we were facing new challenges in the Pacific. Those issues are not going to disappear overnight,” Australian High Commissioner to India Barry O’Farrell said, without mentioning China, at an event organised by the Australia India Institute in Delhi Monday. 

This, according to the envoy, is why it made strategic sense for Canberra and New Delhi to sign the Australia-India Economic Cooperation and Trade Agreement (AI ECTA), a free trade agreement formerly known as the Comprehensive Economic Cooperation Agreement (CECA).

Graphic: ThePrint Team
Graphic: ThePrint Team

Negotiations for the ECTA began in 2011, and in these 11 years, the talks have undergone several ups and downs, and missed several deadlines. Phase I of the ECTA was signed on 2 April, even as Australia continues to face trade tensions with its biggest trade partner China. 

“Our geography places us squarely in the middle of the world’s strategic centre of gravity. And as the international system becomes more multi-polar, the region’s resilience will be tested. Current events in Europe serve to remind us of the profound strategic challenges and disruption the world is facing,” said O’Farrell. 

“The order that has supported peace and prosperity over decades is being challenged. And there’s no doubt the implications of the invasion of Ukraine will reverberate in our region for some time,” he added.

The envoy said that Australia and India have accepted a “shared responsibility to ensure a peaceful, inclusive and resilient Indo-Pacific. A region where the rights of all states are respected, regardless of size. Where disputes are managed peacefully, legally and without coercion. Where open markets facilitate the flow of free trade, greater investment, and stronger people-to-people ties”.

Hinting at China, he added that it is due to the “panda” that Australia, India, Japan and the US came together to revive the Quadrilateral Security Dialogue, popularly known as Quad.

O’Farrell also said that while Australia “understands” why India has taken a neutral stance in the Russia-Ukraine war, it will nevertheless have implications in the Indo-Pacific. He also referred to India’s first prime minister Jawaharlal Nehru’s policy of non-alignment.

“Australia understands India’s position… An Indian PM 65 years ago outlined a sensible doctrine where he said India was not in the business of condemnation, but in the business of creating conditions in which solutions can be found,” he said.

According to diplomatic sources, Australia was also keen to sign the deal with India at the earliest since it is heading for elections in May. This is also why Australia gave in and “accommodated” some demands India had made, especially in the services trade, or in other words, movement of professionals.

Also Read: Ancient statues, scroll, portraits — Full list of 29 antiquities Australia returned to India

How the trade talks shaped up 

Negotiations for the free trade agreement between India and Australia started in May 2011. The talks gained momentum in 2013, but continued to run into roadblocks. For example, India wanted tariff-free access for Indian agricultural goods in Australia, and a liberal visa regime for Indian professionals. Australia, meanwhile, wanted duty free market access for its processed foods, wines, dairy products and critical minerals.

In 2015, the talks stalled as the Narendra Modi government sought to start the negotiations afresh while doing away with what was agreed upon during the previous UPA regime.

However, India and Australia “started to show some amount of flexibility” as the Covid-19 pandemic struck, and both sides came closer strategically. In June 2020, New Delhi and Canberra upgraded ties to the level of ‘Comprehensive Strategic Partnership’, and signed a defence pact, the Mutual Logistics Support Agreement (MLSA), sources said.

Anil Wadhwa, former secretary at the Ministry of External Affairs, told ThePrint that the India-Australia FTA “will not just help India get more access to the Australian market”, but will also “help Canberra reduce their dependence on Beijing”.

“Australia agreed to almost all of India’s demands under the agreement because they understand the sensitivities around trade and this will also help Australian businesses diversify their offerings. This deal was also made possible because today India and Australia are much closer strategically than they were before,” he added.

Australia and China are also part of a mega trade pact the Regional Economic Partnership Agreement (RCEP) along with the 10 ASEAN members (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam), as well as New Zealand, Japan and South Korea.

India walked out of the RCEP in November 2019. Meanwhile, as Canberra made a comeback to the Malabar naval exercise in 2020, talks for the trade pact also gained momentum.

Australian Prime Minister Scott Morrison appointed one of his predecessors Tony Abbott as his special trade envoy even as Trade Minister Dan Tehan and India’s Commerce and Industry Minister Piyush Goyal revived the talks from where they were left off in September 2020, and set the target for signing the deal in December 2021.

“This is significant for Australian businesses because they have suffered from the economic sanctions that were placed (by China) on Australian farmers and producers, from seafood to barley and others. This trade deal with India enables them to have new markets here in India,” Lisa Singh, CEO of the Australia India Institute, a Melbourne-based think tank, told ThePrint.

Singh further said that the economic relationship between India and Australia “has not been as strong as it should be”.

“So, the signing of this agreement is a turning point because it does mean that both are now committed to stronger economic ties and trade liberalisation. We are now seeing convergence between the geopolitical and economic landscapes. If we look at the shared issues that both India and Australia have with China, focussing on our trade relationship now will only make for stronger ties, and hopefully for more stability.”

(Edited by Gitanjali Das)

Also Read: Keep India-China ties on ‘right track’, says Chinese envoy, pushes for ‘win-win mentality’


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