India-Australia Relations

NOV 28

Mains   > International relations   >   India and Global Regions   >   India and Developed world

IN NEWS:

  • Recently, the Australian Parliament ratified the Economic Cooperation and Trade Agreement (ECTA) with India.
  • The Australian Parliament also amended the double tax avoidance agreement (DTAA) with India to stop taxing the offshore income of Indian information technology companies operating in Australia. This will resolve a long pending issue and lead to savings of more than $200 million for IT companies per year.

SALIENT FEATURES OF INDIA-AUSTRALIA ECTA:

  • India and Australia signed the Economic Cooperation and Trade Agreement (ECTA) on April 2, 2022.
  • The India-Australia ECTA is the first trade agreement between India and a developed country in more than a decade, after the Comprehensive Economic Partnership Agreement was signed with Japan in 2011.
  • India-Australia ECTA is a stepping-stone towards a full Australia-India Comprehensive Economic Cooperation Agreement (CECA) slated to be completed by the end of this year.
  • The aim is to enhance the bilateral trade to $45 billion in the next five years (currently at $27.5billion), with a clear focus on job creation and exports.
  • The Agreement encompasses cooperation across the entire gamut of bilateral economic and commercial relations between the two friendly countries, and covers areas like
    • Trade in Goods, Rules of Origin, Trade in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, Dispute Settlement, Movement of Natural Persons, Telecom, Customs Procedures, Pharmaceutical products, and Cooperation in other Areas.
    • Eight subject specific side letters covering various aspects of bilateral economic cooperation were also concluded as part of the Agreement.
  • Thus the pact is expected to give a big push to bilateral trade as it will not only eliminate or lower tariffs on a large number of goods but also address the non-tariff barriers such as technical barriers to trade, apart from sanitary and phytosanitary restrictions.

IMPACT OR BENEFITS OF THE AGREEMENT:

  • India will benefit from preferential market access provided by Australia on 100% of its tariff lines.
    • This includes all the labour-intensive sectors of export interest to India such as Gems and Jewellery, Textiles, leather, footwear, furniture, food, and agricultural products, engineering products, medical devices, and Automobiles.
  • On the other hand, India will be offering preferential access to Australia on over 70% of its tariff lines, including lines of export interest to Australia which are primarily raw materials and intermediaries such as coal, mineral ores and wines etc.
  • In services, Australia has offered wide ranging commitments in around 135 sub sectors and Most Favoured Nation (MFN) in 120 sub sectors which cover key areas of India’s interest like IT, ITES, Business services, Health, Education, and Audio visual.
  • Some of the key offers from Australia in the services space include:
    • Quota for chefs and yoga teachers
    • Post study work visa of 2-4 years for Indian students on reciprocal basis
    • Mutual recognition of Professional Services and Other licensed/regulated Occupations
    • Work & Holiday visa arrangement for young professionals.
  • India has offered market access to Australia in around 103 sub-sectors and Most Favoured Nation in 31 sub-sectors from the 11 broad service sectors such as ‘business services’, ‘communication services’, ‘construction and related engineering services’ etc.
  • Both countries have also agreed to a separate Annex on Pharmaceutical products under this agreement, which will enable fast track approval for patented, generic and biosimilar medicines.

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HISTORICAL PERSPECTIVE OF INDIA AUSTRALIA RELATIONS:

  • The historical ties between India and Australia started immediately following European settlement in Australia from 1788.
  • All trade, to and fro from the penal colony of New South Wales was controlled by the British East India Company through Kolkata.
  • India and Australia established diplomatic relations in the pre-Independence period, with the establishment of India Trade Office in Sydney in 1941.
  •  The end of the Cold War and simultaneously, India’s decision to launch major economic reforms in 1991 provided the first positive move towards development of closer ties between the two nations.
  •  Trade and commercial links between the two nations began to develop and this economic cooperation has continued to deepen since the turn of the century.
  • With passage of time, the relationship gained momentum towards a strategic relationship, alongside the existing economic engagement.

AREAS OF COOPERATION:

  • Bilateral Economic and Trade Relationship
    • Bilateral Trade:
      • Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner.
      • India-Australia bilateral trade for both merchandise and services is valued at US$ 27.5 billion in 2021.
      •  India’s merchandise exports to Australia grew 135% between 2019 and 2021.
      • India’s exports consist primarily of a broad-based basket largely of finished products ,which includes Refined petroleum, Medicaments , Pearls & gems, Jewelry, Made-up textile articles, Women's clothing, Other textile clothing etc, and were US$ 6.9 billion in 2021.
      •  India’s merchandise imports from Australia were US$ 15.1 billion in 2021, consisting largely of raw materials, minerals and intermediate goods.
    • India-Australia CEO Forum:
      • It is a mechanism for business from both nations to engage directly on ways to build the bilateral trade and investment relationship (It was established in 2011 and revitalised in November 2014).
      • The Forum includes heads of Indian and Australian business from a broad range of sectors, including energy and resources, agribusiness, financial sector, telecommunications, IT, education and pharmaceuticals.
      • The last meeting (CEO Dialogue) was held in Sydney in November 2018 during the visit of Hon. President of India to Australia.
    • Treasury-NITI Ayog Economic Policy Dialogue:
      • A two member delegation led CEO, NITI Ayog visited Australia (Sydney, Canberra and Melbourne) from 29 April to 01 May 2019 for the First Treasury – NITI Ayog Economic Policy Dialogue.
  • Civil Nuclear Cooperation:
    • A Civil Nuclear Cooperation Agreement between the two countries was signed in September 2014.
    • The agreement came into force from 13 November 2015 and provides the framework for substantial new trade in energy between Australia and India.
    • The Australian Parliament passed the “Civil Nuclear Transfer to India Bill 2016” on 01 December, 2016 which ensures that Uranium mining companies in Australia may fulfil contracts to supply Australian uranium to India for civil use with confidence that exports would not be hindered by domestic legal action challenging the consistency of the safeguards applied by the IAEA in India and Australia’s international non-proliferation obligations.
  • Defence Cooperation:
    • In November 2014, India and Australia decided to extend defence cooperation to cover research, development and industry engagement and agreed to hold regular meetings at the level of the Defence Minister, conduct regular maritime exercises and convene regular service-to-service talks.
    • The first-ever Bilateral Maritime Exercise, AUSINDEX 15, was conducted in Visakhapatnam and the Bay of Bengal in September 2015.4th edition of AUSINDEX was held in 2021 in the Northern Australia Exercise Area.
    • In 2018, Indian Air Force participated for the first time in the Exercise Pitch Black in Australia from 27th July – 17th August.
    • The third edition of AUSTRAHIND (Special Forces of Army Exercise) was held in September 2018.
    • Arrangement concerning Mutual Logistics Support (MLSA) and Implementing Arrangement concerning cooperation in Defence Science and Technology to the MoU on Defence Cooperation were concluded during the Virtual Summit held in June 2020.
  • Science & Technology:
    • An Australia-India Strategic Research Fund (AISRF), which was established in 2006, supports collaboration between scientists in India and Australia on cutting-edge research.
    • AISRF consists of India Australia Biotechnology Fund; India-Australia Science & Technology Fund; Grand Challenge Fund and Fellowship Schemes. Joint Committees on S&T and Biotechnology have been established to administer the Fund.
    • The Joint Working Group (JWG) on cooperation in Agriculture was held virtually on 3 December 2020 and JWG meeting on cooperation in Water Resources was held virtually on 22 September 2020.
    • The last JWG meeting on Science and Technology was held in Canberra in September 2019.
    • The AISRF Covid-19 special round projects (on Covid19 screening & diagnostic testing and cardiac marker) were announced in December 2020.
  • High-Level Exchanges:
    • India’s relations with Australia reached a new high with the first ever visit of the President of India H.E. Shri Ram Nath Kovind to Australia on 21-24 November 2018.
    • The two-way Prime Ministerial visits in 2014 gave significant momentum to the bilateral relationship.
      • Tony Abbott visited India on 4-5 September 2014. During the visit, four Agreements/ MoUs were signed.
      • Shri Narendra Modi visited Australia for G20 Leaders' Summit at Brisbane in November 2014, followed by a bilateral visit from 16-18 November 2014. “Framework for Security cooperation between India and Australia” and five other Agreements/MoUs were signed on this occasion.
    • Quad Leaders Virtual Summit: The first-ever Quad Leaders’ Virtual Summit held on 12 March 2021 saw the participation of Prime Ministers of India, Australia, Japan and President of USA.

QUAD

  • Known as the 'Quadrilateral Security Dialogue' (QSD), the Quad is an informal strategic forum comprising four nations, namely United States of America (USA), India, Australia and Japan.
  • One of the primary objectives of the Quad is to work for a free, open, prosperous and inclusive Indo-Pacific region.
  • The group met for the first time in 2007 on the sidelines of the Association of Southeast Asian Nations (ASEAN).
  • It is considered an alliance of maritime democracies, and the forum is maintained by meetings, semi-regular summits, information exchanges and military drills of all the member countries.

 

    • Foreign Ministers’ Framework Dialogue (FMFD): FMFD is the central mechanism for advancing the bilateral agenda and is held annually.
  • Resources & Energy Security:
    • Australia is one of the Founding Members of both ISA as well as the Coalition for Disaster Resilient Infrastructure (CDRI).
    • Australia has also expressed support for India’s Indo-Pacific Oceans Initiative (IPOI).
  • Indian Community in Australia:
    • The Indian community in Australia continues to grow in size and importance, with the population of about seven hundred thousand.
    • India is one of the top sources of skilled immigrants to Australia.
    • The number of Indian students continue to grow with approximately 105,000 students presently studying in Australian universities.
    • The growing significance of the community is reflected in the large-scale celebration of Indian festivals in Australia, especially Deepawali.
    • Growing tourism and sporting links, especially Cricket and Hockey, have played a significant role in further strengthening bilateral relations between the two countries.

SIGNIFICANCE OF INDIA-AUSTRALIA RELATIONS:

  • Economic :
    • The India-Australia economic relationship has grown significantly in recent years. India’s growing economic profile and commercial relevance to the Australian economy is recognized, both at the federal and state level in Australia.
    • IndAus ECTA is considered as a stepping-stone towards a full Australia-India Comprehensive Economic Cooperation Agreement (CECA) slated to be completed by the end of this year.
    • Civil nuclear deal:
      • India becomes the first country to buy Australian uranium without being a signatory to the international nuclear non-proliferation treaty (NPT).
      • The deal underlines the deepening strategic ties with Australia.
      • Australia has about 40 per cent of the world's uranium reserves and exports nearly 7,000 tonnes of yellow cake annually
  • Multilateral Cooperation:
  • India and Australia also co-operate in various multilateral fora.
  • Australia supports India’s candidature in an expanded UN Security Council.
  •  Both India and Australia are members of the Commonwealth, IORA, ASEAN Regional Forum, Asia Pacific Partnership on Climate and Clean Development, and have participated in the East Asia Summits.
  • Both countries have also been cooperating as members of the Five Interested Parties (FIP) in the WTO context.
  •  Australia supports India’s membership in the APEC. In 2008, Australia became an Observer in SAARC.
  • India-Australia Strategic Relationship:
  • In 2009, India and Australia established a ‘Strategic Partnership’, including a Joint Declaration on Security Cooperation which has been further elevated to Comprehensive Strategic Partnership in 2020.
  • The Australian foreign policy blueprint released in November 2017 sees India in the front rank of Australia’s international partnerships.
  • Indo-Pacific Region:
    • Both India and Australia borders the Indian Ocean and have a shared interest in the maintenance of freedom of navigation and trade.
    • Both the nations are concerned about rise of China and its implication in Indo-Pacific region.
    • Australia recognises India’s critical role in supporting security, stability and prosperity of the Indian Ocean region.
  •  India and Australia are partners in the trilateral Supply Chain Resilience Initiative (SCRI) arrangement along with Japan which seeks to enhance the resilience of supply chains in the Indo-Pacific Region.
  • Further, India and Australia are also members of the r Quad, also comprising US, and Japan, to further enhance cooperation and develop partnership across several issues of common concerns.

AREAS OF CONCERN:

  • One of the problems with the India–Australia relationship is that both countries have a different set of concerns about China.
    • Australian concerns have to do with China’s increased activities in the Pacific, while India is concerned about China’s greater presence and influence in the Indian Ocean.
    • Also China is significant for Australian economy as  China is one of the largest trading partners of Australia
  • Australia has long been an American ally, while India remains uncomfortable about alliances.
  • There is a deficit of military capabilities, especially on the Indian side.
    • While the two militaries have been able to showcase their prowess during exercises, their ability to come to each other’s aid during conflict remains in question. 
  • There is a need for greater agreement among the Quad member states about burden-sharing.

WAY FORWARD

  • Economic and trade cooperation
    • Both sides want to deepen the engagement and work towards a Comprehensive Economic Cooperation Agreement (CECA).
    • Both countries should reiterate their commitment to a free, fair, inclusive and rules-based trade environment.
  • Science & Technology
    • India and Australia should work together to build, strengthen and diversify supply chains and avoid supply chain disruptions.(E.g Supply Chain Resilience Initiative (SCRI))
    • Improve cooperation on cyber governance, cyber security, capacity building, cybercrime, digital economy, and critical and emerging technologies.(e.g. India-Australia Foreign Ministers’ Cyber Framework Dialogue)
    • There should be close cooperation on critical and emerging technology, and on establishing diverse and trusted technology supply chains. (E.g. India-Australia Centre of Excellence for Critical and Emerging Technology Policy in Bengaluru.)
  • Security and defence cooperation
    • There should be commitment to build upon defence information sharing arrangements to coordinate more closely across the Indo Pacific.
    •  Also both countries should enhance maritime information sharing.
    • Terrorism remains a threat to peace and stability in our region. So both countries should share information and coordinate on counter-terrorism efforts bilaterally, and in Quad consultations and in multilateral fora.
  • Regional and multilateral cooperation
    • There should be shared commitment to a free, open and rules-based Indo Pacific, supported by a robust regional architecture, with ASEAN at its centre.
    • Enhance the cooperation between India, Australia, Japan and the United States on advancing the Quad’s positive and ambitious agenda to promote regional stability and prosperity.

 

PRACTICE QUESTION:

Q. Discuss the significance of India Australia relations, with special reference to the Economic Cooperation and Trade Agreement?