There seems to be a shift in Australia’s view of India. Is this shift more strategic than economic?
The Ukraine-Russia war has shown just how dangerous the world has become, particularly for small countries like Australia. And in a defence sense, we need friends. We have so many things in common with India – our history with the Commonwealth, our support for democracy, and a free and open society. We naturally gravitate towards like-minded countries. Where did the new (Australian) prime minister go on his first day on the job? He flew to Tokyo to meet with Prime Minister (Narendra) Modi. So, he obviously views it very significantly. They’ve met a number of times, and of course, the prime minister has come here for an extended stay. He missed parliament in order to come here and demonstrate his support.
On the other side of the coin, economically, we have had a range of difficulties with some of our trading partners that are sort of well publicised. We’ve decided to go down the track of trade diversification. So that means negotiating new free-trade agreements.
We negotiated a free-trade agreement last year. Critics of that agreement said we couldn’t get it through the Australian parliamentary process. In fact, we did, and we got it through in record time, and it came into force on December 29 last year. It is the start of a new relationship with India. And I think now’s the time to get in on the ground. Post-Covid, the world has changed; the geopolitical situation has changed. The economic situation has changed.
Where do you see the relationship heading in the next five years?
At the moment, two-way trade between Australia and India is about $46 billion compared with China’s $300 billion. We think we can do a lot more in an economic sense. We want to get that figure up to $100 billion, and I think that’s achievable over the next five years. It’s just going to take some effort. But what happened this week? Well, 27 of the largest companies in Australia took three or four days out to travel with the prime minister to India. That, I think, is a really positive sign. It was banks, it was mining companies, it was universities, it was a range of other businesses.
How do you see India in terms of, say, sourcing products, as Australia still sources a lot from China?
In the past, we’ve put all our eggs in one basket. We’ve learned the hard way that that’s not the most sensible economic policy. India is about to become the most populous country. By 2030, half the population will be deemed to be in the middle class. So, there’s a great opportunity there. You’ve got to look for friends in a more unstable world. Americans certainly view Indians as friends. We’ve got the Indo-Pacific economic framework being negotiated. In fact, there were some discussions here in India on that recently. That also presents an opportunity for building that relationship.
India is not part of the trade pillar under IPEF. What kind of comfort can it be offered to get it on board?
It is largely in the hands of the Americans. I know Mr Goyal met with the US commerce secretary, Gina Raimondo, this week, and I mentioned that would have been high on the list of topics for discussion. I mean, India has to make up its mind about which of the pillars it wants to come in on. They haven’t ruled out yet coming in on the trade pillar. They’ve just said at the moment they’re not comfortable joining. We would certainly encourage India to be part of all four pillars.
How are the negotiations progressing on the other three pillars?
They’re all going forward. What date will they be finished? I couldn’t tell you that. But we’ve had negotiations in Australia. We’ve had some negotiations in India. In May, I think there’s going to be a ministers’ meeting in Detroit. So, things are going in the right direction. The Americans understand the importance of re-engaging economically in the region. You never get exactly what you want in a free-trade agreement. I think if the Indians become satisfied with the trade pillar, that there is enough there, then I think they’ll give some consideration to signing up.
Australia and India are now talking about starting comprehensive economic cooperation agreement (CECA) negotiations. For India, services is a key area of interest. What can Australia offer?
Access to Australian business and government operations. The big thing that Australia has to offer in these negotiations is in the renewable energy space. The US has just implemented the Inflation Reduction Act. Companies or countries which have a free-trade agreement with the US get preferred treatment in terms of supplying to the US with all of the ingredients for batteries, electric batteries. On the one hand, people say, our critical minerals will end up going to the US. We say, that’s not right. We’ve got good friends in the region, particularly India, and we want to make sure that we share our good fortune. Australia happens to have the largest or the second largest reserves of all the critical minerals that go into these batteries. We want to make sure that we share these with our friends in the region. And that means India. So, I actually think we bring quite a bit to the table.
In terms of Mode 4 and people-to-people movement, what could Australia offer?
Obviously, this has been one of the more difficult issues to deal with. But Australia at the moment, has massive labour shortage. And you’ve got all these young people with digital skills. Australia is reviewing its approach to immigration. You’ll find a more relaxed approach by Australia, which will result in a far greater number of Indian students and workers coming to Australia.
What would be Australia’s expectations from India, particularly in areas Australia has aggressive interests, say, dairy and agriculture?
Those were things that weren’t dealt with in the first agreement. If they were easy to deal with, then they would have already been dealt with. So, they’re the harder topics for India. I appreciate that they are hard to resolve. We do want to see access for our agricultural products. We’re a great trading nation. We’re a great supplier of good food and wine. Some progress has been made in the first agreement; we think we can go further. We don’t want to flood the Indian market with our goods, but we would like greater access. And I think it’s a win-win situation. Indian consumers get advantage of wonderful food and wine that we’ve created in Australia.
What are the other interests Australia would like to be part of the outcome under CECA?
I’ve mentioned renewable space. Australia historically has been a fossil fuel superpower. We want to be a renewable superpower. So that means critical minerals. That means rare earths. That means hydrogen and green hydrogen. So, we want to be in a position to supply India with those sorts of products. In the digital space, by 2030, India will have 900 million people on the internet. You’re young people, very focused on the digital space. We need those sorts of skills. So we want to talk about that. Banking platforms – they’re not easily transferable at the moment. We think there are some opportunities there. Space – that’s the new frontier. And of course, defence. We’re in the process of significantly expanding our defence capabilities. We think India has got a role to play in that.
India recently had an agreement with Singapore in the digital payments sector. Is that something that Australia would be willing to pursue?
Yes. In fact, we spoke about it not just at the ministerial joint meeting, but also at the meeting with the finance minister last night. We think there are some terrific opportunities there. We’re structured slightly differently. In Australia, each of the banks has its own operations. So we’ve got to get a uniform system ourselves. We just need to sit down and work out exactly how we can implement that. I think discussions are well advanced in order to achieve that.
Both countries have implemented an economic cooperation and trade agreement (ECTA). How is it working on the ground? Would Australia want to renegotiate some chapters in ECTA under CECA?
Without any reason to renegotiate things that are already settled, we do want to expand our horizons in this new agreement. We do want greater access to Indian markets. In the first month of coming into operation of the new agreement, $2.5 billion worth of Australian products got into India at a lower tariff rate. Now, if that’s any indication of how this agreement is going to go, it’s a very positive start. It’s not a case of sort of looking back and renegotiating. It’s a case of looking forward and saying, we know this system is working well. How can we build on that to get a better relationship?