India-Australia Interim Trade Agreement:
India and Australia have announced that they are set to conclude an Interim Trade Agreement in March 2022 and a Comprehensive Economic Cooperation Agreement (CECA) 12-18 months thereafter.
- The agreement will cover “most areas of interest for both countries” including goods, services, rules of origin, sanitary and phytosanitary measures and customs procedures.
- Earlier, India, Japan and Australia have formally launched the Supply Chain Resilience Initiative (SCRI).
- An interim or early harvest trade agreement is used to liberalise tariffs on the trade of certain goods between two countries or trading blocs before a comprehensive FTA (Free Trade Agreement) is concluded.
- Government’s emphasis on interim agreements may be tactical so that a deal may be achieved with minimum commitments and would allow for contentious issues to be resolved later.
- The problem, though, is that these early harvest schemes potentially target the low-hanging fruits, leaving the tougher goods and services for later.
- This strategy can lead to significant delays in wrapping up the mode broad-based FTAs, which could potentially lead to impediments.
- India had concluded an early harvest agreement with Thailand in 2004 but has not been able to conclude a comprehensive FTA with the country.
- India also has a trade agreement with Sri Lanka dealing with goods but was not able to conclude an agreement on services and investments.
- Early harvest agreements that do not graduate into full-scale FTAs are exposed to legal challenges from other countries that are members of the World Trade Organisation (WTO).
- It is often beneficial to negotiate the entire deal together, as an early harvest deal may reduce the incentive for one side to work towards a full FTA.
- Bilateral trade between the two countries stood at about USD 12.5 billion in Financial Year (FY) 21 and has already surpassed USD 17.7 billion in the first 10 months of FY22.
- India has imported merchandise worth about USD 12.1 billion from Australia in the first 10 months of the fiscal and has exported merchandise worth USD 5.6 billion in the same period.
- Key imports from Australia include coal, gold and Liquified Natural Gas while key exports to the country from India include diesel, petrol and gems and jewellery.