Expanding horizons
Following the recent conclusion of the second India-Australia 2+2 Defence and Foreign Ministerial Dialogue, both nations are aiming for deepening the engagements on wide array of strategic, defence and security issues. Despite the strides in bilateral engagements, the Comprehensive Economic Co-operation Agreement (CECA) remains a platform for additional considerations in their evolving relationship.
India and Australia established a Comprehensive Strategic Partnership in 2020, upgrading from the 2009 bilateral strategic partnership, with a focus on expanding defence and security collaboration through innovative initiatives. Subsequently, the signing of the Economic Cooperation and Trade Agreement (AI-ECTA) in 2022 marked a significant milestone, facilitating Indian access to the Australian market and fostering trade growth. Negotiations are underway to transform AI-ECTA into CECA, building upon the 77 per cent reported utilisation rate by Indian exporters during the initial nine months of the ECTA, especially in sectors such as iron and steel products, linens, agricultural products, and electrical conductors. This expansion holds the promise of even greater gains for Indian exporters.
As part of India’s green energy strategy, 20 critical mineral blocks, including lithium are set to be auctioned, following reforms to boost private sector involvement in mineral exploration. Australia’s global leadership in mineral exploration aligns with India’s emission reduction goals, creating opportunities for robust supply chains. India’s scale and low-cost manufacturing, coupled with Australia’s raw material strengths, will lead to mutually beneficial outcomes for both countries. Australia’s advanced upstream-midstream rare earth facility can enhance India’s mining efficiency, fostering collaboration in mining equipment, technologies, services, investments, and technology transfers. To maximise these opportunities, India must expedite and deepen cooperation under existing commitments in the India-Australia Critical Minerals Investment Partnership, signed in 2022. There is a call to expand the collaboration’s scope under the CECA. Encouraging Business to Business collaboration, particularly with MSMEs, to drive transformative investments in critical mineral technologies and processes is deemed crucial. Exploring joint investment opportunities to leverage advanced mineral processing facilities in Australia can prove to be strategic move. Contemplating a more open and free trading and investment arrangement for critical minerals through a trilateral partnership with other countries possessing technical expertise in downstream processing would position India to play a significant role in the Australian mining value chain, optimising benefits from the growing demand for critical minerals.
In the India-UAE CEPA, India for the first time has included government procurement as a part of the agreement. Australia presents a huge government procurement market for India. In 2022-23, there were 83,625 published contracts with a combined value $74.8 billion. Under Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Australia has committed to opening of government procurement for the member signatory countries. This obligation does not mean that government can only use open tendering. Australian government may use pre-qualified tendering (where suppliers are pre-qualified for contracts on a registration system) or limited tendering (where only a few suppliers are considered for contracts), but only in specific circumstances outlined in the government Procurement Chapter of CPTPP. The commitment under CPTPP ensures that there is no discrimination against foreign suppliers when assessing tenders and awarding contracts. If India under the India-Australia CECA can negotiate similar benefits in the line of commitments offered by Australia under CPTPP, it would create a fresh market for Indian businesses to compete for international projects.
In Australia, innovation has been a key driver of economic growth, technological advancement, and societal progress. Under CECA, there exists significant potential for India to enhance collaboration with Australia, particularly in key sectors such as agricultural innovation, renewable energy, and digital trade. Such collaboration holds the promise of providing innovative solutions to everyday challenges, leveraging the expertise and advancements stemming from both nations. Through joint efforts, India and Australia can harness the power of innovation to address mutual concerns and foster economic growth.
The resultant increased transactions from the liberalisation can also be gauged through the settlement of trade payments in local currencies. Following the introduction of the rupee settlement system for international trade on 11 July 2022, India and Australia can encourage mutual settlements in their respective national currencies as part of the CECA. The central banks of both countries can collaborate on determining the modalities, particularly by establishing the Rupee-Australian dollar exchange rate for bilateral trade in consultation with both governments. This measure would minimise currency risk for Indian businesses.
Further to economic partnership, India and Australia are also strategically positioned in the Indo-Pacific region. The upkeeping of the region is not only important for developing trade but also for the geopolitical stability and geo-strategy. Both India and Australia recognise having an enduring interest in a free, open, inclusive and rules-based Indo-Pacific region. With a shared maritime geography and a deep and long-standing friendship, India and Australia are natural defence partners to work together towards realisation of this shared vision. Evolving geo-political landscape calls for cementing this relationship by solid commitment under CECA through programmes and projects of co-operative exchange of data, research and development, production, procurement, and logistics support to achieve specific national defence requirements and objectives of mutual concern while taking into consideration national priorities.
Thus, given the shared interests and concerns of India and Australia, the resolution can only be achieved through collective action and a strengthened partnership. A comprehensive assessment and negotiation of these opportunities within CECA have the potential to be transformative, elevating India-Australia relationship to a new and deeper level.
The authors are economists with India Exim Bank. Views expressed are personal.