Trade
Realising an ‘early harvest’ for Australia–India trade
Author: Dipen Rughani and Natasha Jha Bhaskar, Newland Global Group
Former Australian prime minister and Special Trade Envoy Tony Abbott’s recent visit to India has brought the long-suspended Free Trade agreement (FTA) — officially known as the Comprehensive Economic Cooperation Agreement (CECA) — back into focus.
Both countries began negotiating the FTA in 2011. But after six years of toil, nine rounds of negotiations, and a detailed joint FTA feasibility study, the negotiations were suspended over divided sectoral interests in 2015.
Much has changed since then. China is no longer Australia’s best trading ‘friend’, India is no longer trapped by its historical reservations about Australia, and COVID-19 has spared none. The pandemic has exposed many countries to global supply chain risks, the dangers of export over-dependence and the need for economic diversification.
The appointment of Abbott reflects the Morrison government’s awareness that it will take more than plain economics to make any progress on a trade deal with India. The log-jammed negotiations need a political push by individuals who India believes can restore trust in bilateral ties. Abbott has rapport among India’s political circles because he is credited for concluding Australia’s FTAs with three of Asia’s biggest economies — China, Japan and South Korea.
With respect to the current geopolitical and geoeconomic context, there is growing recognition that expectations about pre-COVID-19 FTAs will not carry over into the post-COVID-19 world. Some countries want to build more insular economies, with a rise in economic nationalism accompanied by debates about decoupling, economic sovereignty and self-reliance.
India is currently reworking its FTA strategy to ensure it achieves economic gains while also securing its domestic interests. New Delhi also wants to offset the losses from exiting the Regional Comprehensive Economic Partnership.
But India’s past FTAs with ASEAN, South Korea and Japan contributed to the further widening of its trade deficit from US$9 billion in 2005 to US$83 billion in 2017. China accounts for over 60 per cent of the deficit, entrenching India’s hesitance towards future FTAs. Out of the five FTAs India has negotiated over the last 11 years, only one has been signed.
India’s latest attempt to revive trade talks with the European Union, United Kingdom, United States and Australia shows it understands that remaining open to global trade determines the degree to which it can attract foreign investment, drive exports, make domestic industries competitive and incentivise other countries to manufacture in India. India aims to represent 5 per cent of the world’s merchandise exports and 7 per cent of global services exports by 2025, up from 1.67 per cent and 3.54 per cent today.
In this context, an ‘early-harvest deal’ between Australia and India is promising and practical. Its prospects depend on how creatively Australia can align its export goals with India’s investment priorities and new export agenda. These prospects have improved due to six factors, all of which highlight the complementarity of the two economies.
First, India needs to embrace the best technology, innovation and R&D to manufacture globally competitive goods and increase its share in global value chains. Australia — a highly globalised economy where trade accounts for 44 per cent of nominal GDP — is an excellent partner for this.
Second, India could identify Australian companies intending to invest in Indian manufacturing by taking advantage of the Production Linked Incentive (PLI) scheme, a program designed to boost domestic manufacturing through subsidies.
Third, sustainability is at the heart of the trade and investment goals of both countries. The success of India’s e-mobility and renewable-energy goals depend on the availability of critical minerals. Australia recently released a list of 24 key critical minerals for which it might become a potential supplier, alongside a list of critical minerals projects in need of foreign investment.
Fourth, Australia’s expertise in the hydrogen industry could align well with India’s National Hydrogen Mission. Canberra’s two-year Hydrogen RD&D International Collaboration Program will support collaboration between Australian and international research organisations, as well as enabling RD&D linkages with partner countries.
Fifth, Australia is a leader in biotech R&D, while India remains the so called ‘pharmacy of the world’. This complementarity boosts the potential for…
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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