Two-way trade between Australia and India was worth $27.5 billion last year, miniscule when compared with the $251 billion traded between Australia and China. And yet that gap only serves to illustrate the huge opportunity seized this week when the Australian Parliament passed a new trade deal with India. It signals a green light for Australia to reduce its dependency on China.
The Australia-India Economic Co-operation and Trade Agreement was more than 10 years in the making, and its significance cannot be overstated. The IndAus ECTA will allow the nations to trade goods and services almost tariff-free. India’s Prime Minister, Narendra Modi, calls it a “watershed moment for bilateral relations”.
The scale of Australia’s trade dependency on its biggest trading partner was felt hard, particularly by farmers, when China imposed economic sanctions on $20 billion worth of Australian goods. Despite the diplomatic freeze ending between both nations, following the meeting between Prime Minister Albanese and President Xi Jinping on the sidelines of the G20 Summit, China’s sanctions remain.
That makes IndAus ECTA even the more important. Home to nearly 1.5 billion consumers, India is expected to become the world’s 2nd largest economy by 2050. Regardless of China, it is high time Australia had a stronger economic relationship with India, the second fastest growing economy in the world (behind Saudi Arabia).
It has projected growth rates of 6.6 per cent this year and and 5.7 per cent next year. India recently overtook the United Kingdom to become the world’s 5th largest economy – a significant achievement given India this year celebrated its 75th anniversary of Independence from British rule.
So the ECTA ought to be turning the heads of Australia’s boardrooms and executive suites. It will provide Australian businesses with preferential access to a market full of promise.
Under the new trade deal, tariffs on a range of Australian exports to India, including coal, lentils, sheep meat, wool, lobsters and rare earths, will be eliminated. There will be a phased reduction of tariffs on wine and agricultural products including avocados, cherries, nuts, blueberries, almonds, oranges, mandarins, pears and strawberries. The deal will also benefit India’s labour-intensive sectors including apparel and textiles, leather and footwear, gems and jewellery, furniture, machinery, electrical goods and pharmaceuticals.
In the case of Australian wine and seafood exports hit by China’s sanctions, they can now find new market opportunities in India.