Trade
Prospects for an Australia–India trade deal
Author: Melissa Conley Tyler, University of Melbourne
Negotiations on the Australia–India Comprehensive Economic Cooperation Agreement (CECA) are set to restart after being suspended in 2015. Australia’s new Minister for Trade Dan Tehan has flagged that a trade deal with India will be one of his top priorities.
Why were the original negotiations abandoned? And has anything changed to make a deal more likely now?
There are potential gains for both countries. The original joint feasibility study found significant tariff and non-tariff barriers to goods and services trade. It assessed the potential welfare gains of an agreement as between 0.15–1.1 per cent of GDP for India and 0.23–1.17 per cent of GDP for Australia.
Australia’s India Economic Strategy identifies 10 priority areas to grow trade with India: a flagship sector (education), three lead sectors (agribusiness, resources and tourism) and six promising sectors (energy, health, financial services, infrastructure, sport and science). India’s recently-released Australia Economic Strategy identifies significant room for growth in exports and investment in 12 focus sectors and eight emerging sectors.
But after nine rounds between 2011–2015 covering many proposed chapters, negotiations were suspended.
For India, Australia’s agricultural exports were a sticking point. With half of India’s employment tied to agriculture, anything that threatens producers is political dynamite. Australia’s argument that many of its agriculture exports are aimed at the premium end of the market and would not displace the production of India’s smallholder farmers fell on deaf ears. Similar dynamics are at play in other sectors where India’s largest corporations feel threatened by the prospect of increased market competition and will lobby hard to defend their privileged status. Proposed trade agreements are generally judged by the benefits to domestic producers, not to consumers.
India’s suspicion toward trade has deep roots, stretching back to the United Kingdom’s colonial theft of India’s wealth, which was (wrongly) justified as ‘free trade’. Trade is often framed in terms of winning or losing, so India’s trade deficit of around AU$15 billion (US$12 billion) means that trade is seen as heavily skewed in Australia’s favour, with different levels of development preventing a level playing field. Trade agreements with ASEAN, South Korea and Japan have worsened India’s trade deficit.
For Australia, one of the most politically-sensitive sticking points was India’s desire for a more relaxed visa regime for Indian workers. Other reported concerns include threats from parasites on imported mangoes and the impact on steel and food processing. Overall, the sense was that India wasn’t offering enough to make a deal worthwhile. The diplomatic description in 2018 was that ‘negotiating positions are too far apart to make the conclusion of a CECA a realistic objective in the near term’.
After talks were suspended, Australia focussed on keeping India in negotiations for the multi-country Regional Comprehensive Economic Partnership (RCEP) as a way to achieve a trade pact, with CECA to follow.
What’s different today?
The biggest change is in the wider context of the Australia–India relationship. Motivated partly by concerns about China, India and Australia elevated their relationship to a Comprehensive Strategic Partnership at the Leaders’ Virtual Summit in June 2020.
While India may want to prise Australia away from what it would see as an unhealthy dependence on China, it’s unlikely to make trade concessions for wider security benefits. India’s room for movement given domestic politics is narrow, as recent farm demonstrations show, and it’s unlikely to spend political capital on an agreement seen as anything other than highly advantageous to Indian industry.
The fact that India is also looking at reviving trade talks with the United States and with the European Union, suspended in 2013, suggests there may be some change in its orientation on trade. Reforms to reduce red tape have improved its ease of doing business ranking and it has introduced policies that seek to encourage foreign investment.
But India’s decision to pull out of RCEP suggests that concerns remain about trade deficits and unemployment, with industry and traders’ bodies playing a blocking role. While there are voices arguing for a different approach to trade agreements, this remains a minority view. Only 5–25 per cent of India’s international trade is covered…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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