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India – our next Free Trade Agreement

The Australian and Indian Government's Joint Study Group have completed its feasibility study on the potential free trade agreement between the two countries.

The Joint Study Group recommends that the Australian and Indian Governments consider a comprehensive bilateral FTA that includes the trade in goods, services, investment facilitation and other cooperation measures in a single undertaking.

India is an awakening giant with a population of over 1.2 billion that includes an emerging middle class of approximately 250 million people. India has already taken the right steps to substantially reduce import tariffs and open its markets to regional trading partners. It is time for Australia to strengthen its relationship with India and take full advantage of this enormous market.

According to the Department of Foreign Affairs, trade between India and Australia has grown robustly over recent decades, reaching around US$ 16.5 billion in 2009. Trade in goods was responsible for nearly US$ 14.4 billion and services trade amounted to slightly more than US$ 2 billion in the same period.

Current Trade with India

Exports from Australia to India have grown rapidly in recent years. India was the fourth most important export market for Australian goods and the fifth largest export market for Australian services in 2008-09.

On the other side of the trade, Australia is also an increasingly important destination for Indian exports in value. However, while increasing in value over the last ten years, India’s exports to Australia as a proportion of India’s total exports declined between 1990 and 2007.

Australia needs to have equal access or, even better, preferential access to the Indian market. Australia’s financial stability has developed due to our ability to export manufacturing inputs to countries like China, Japan and Korea. As each of these strong manufacturing economies developed, benefits have flowed to Australia. India is now in our sights to become a major trading partner.

Existing Free Trade Agreements

India already has several free trade agreements in place – including the countries of the sub-continent, some ASEAN nations and Korea – and, more importantly, hopes to conclude an FTA with the 27 countries that form the European Union by December 2010.

Currently, Australia has various prospective FTA’s under either negotiation or consideration. In particular, there are ongoing negotiations with China, but after 5 years of relative slow development, there are still many issues to address.

The FTA negotiations with Korea are moving quickly and both sides hope to conclude this agreement before the end of the year. Other proposed agreements of note include Malaysia and Indonesia.

FTA’s are designed to benefit our exporters whether it be giving preferential market access for our commodities and manufactured goods, access to our services exports or improved conditions for foreign direct investment.

Potential Benefits from Australia-India FTA

The Centre for International Economics estimates that over a 20-year period an Australia-India FTA could result in a net increase in Australia’s GDP by up to US$ 32 billion and India’s GDP by up to US$34 billion.

Giving that beneficial entry rates for Australian products and services into the Chinese and Indian markets would place Australia in a strong position to maintain an equitable balance of payments, I believe that our negotiating officials should focus on finalising FTA’s with China and India.

Now that the Australia-India Joint FTA Feasibility Study has concluded in a positive manner, we should direct all efforts in getting our federal government to move quickly towards a beneficial Australia-India Free Trade Agreement.

For more information, contact Ian Bennett, Senior Manager International Trade on 02 9458 7443.

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Gary Dawes
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Senior Advisor, India
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