India and Australia on Thursday signed five memorandums of understanding (MoUs) for increasing bilateral investments and furthering cooperation in key sectors such as agriculture. However, both governments decided to hit the pause button on negotiations for a Comprehensive Economic Cooperation Agreement (CECA).
The MoUs were signed after Indian President Ram Nath Kovind met Australian Prime Minister Scott Morrison. Both held discussions to take forward Prime Minister Narendra Modi’s discussions with Morrison on the side-lines of the RCEP (Regional Comprehensive Economic Partnership) meeting in Singapore recently.
The five agreements build a pathway to implement the report titled, An India Economic Strategy To 2035, popularly referred to as the Peter Varghese report, which seeks to enhance Australia’s engagement with India. Former Australian high commissioner to India Peter Varghese has recommended that Australia focus on 10 sectors and 10 states to deepen and enhance its relationship with India.
Accordingly, Canberra has decided to focus its energies initially on education, agribusiness, resources (such as coal) and tourism. As part of these initiatives, it has also decided to open a consulate general in Kolkata.
The CECA, being negotiated between India and Australia since 2011, has now been officially paused for some time. The Australian government, however, has not given up hope and sees a window of opportunity for bilateral trade agreement under the aegis of RCEP, whenever it is concluded.
This was conveyed by Simon Birmingham, Australian minister for trade, tourism and investment, while speaking at the India Business Summit 2018, in Sydney. His contention was that the India-Australia CECA could then become part of the regional trade architecture achieved through RCEP.
Both governments began negotiating CECA in 2011 and the talks have progressed in spurts, held up primarily on account of two sticking points: India’s demand for free movement of professionals (or Mode-4 in trade jargon) versus Australia’s demand for enhanced agriculture market access in India.
CECA is an improvement over free trade agreements because it encompasses, apart from trade in goods, cross-border investment and services trade.
Birmingham said the Varghese report was commissioned when Australia realised that the conclusion of the CECA with India was going to be “challenging”.
Later, speaking to a group of Indian journalists, Birmingham said: “We have paused for some period of time those active negotiations. Australia would be willing to pick them up if we saw some change in the circumstances. RCEP is an amazing opportunity to form a significant Indo-Pacific trading bloc. It’s, of course, taking a lot of time and focus of trade negotiators. It is only fit and proper that in collaboration with all the other RCEP partners, we put our best efforts in getting the best possible outcomes. There is no reason why we cannot achieve a trade outcome of equal substance and meaning that a bilateral FTA would achieve through the regional processes of RCEP.”
He added that he was heartened by the fact that India had joined in the latest commitment (in the Singapore round of talks) to try to finalize RCEP by next year; in addition, he said that since India had agreed to some of the comprehensive elements of the RCEP agreement, some of the past difficulties faced in concluding CECA talks might now be overcome.
Countries did not have to make a binary choice between either CECA or RCEP, since Australia had both bilateral and plurilateral agreements with many countries, Birmingham added.
When asked about Australia taking India to the World Trade Organization (WTO) over sugar subsidies, he said that both are rules-based countries and this was the best way to settle disputes between two friendly nations. He also said that it was possible to settle the issue outside WTO and he had extensive discussions with Indian commerce minister Suresh Prabhu about it.
Birmingham also said that it was possible to look into the Varghese report for solution: The report recommends that Australia collaborate with India in weather forecasting to help in crop production and in priority areas for development. With this improved capability, India will then have a reduced need for subsidising farmers.
The author is in Sydney on the invitation of the Australian government.