India's proposed early harvest trade deal with Australia may have a separate chapter on creating tighter supply chains between the two nations, sources say.
This will be the first time that such a move is being attempted, sources said. Australian Trade Minister Dan Tehan is set to visit India later this week for talks on the proposed Comprehensive Economic Cooperation Agreement (CECA).
The plan is basically to chart out a course through policy and industry support, by which manufacturers and importers from both sides can directly deal with each other, bypassing China, officials say.
It will encourage companies in both nations to source from and sell directly to each other.
Stronger supply chains
Along with Japan, India and Australia created the Supply Chain Resilience Initiative (SCRI) in 2020. It aims to share the best practices on supply chain resilience and massively boost investment and buyer-seller matching events to provide opportunities for stakeholders.
Currently, trade ministers from the three nations are set to convene at least once a year to push the SCRI. However, India and Australia are now exploring the possibility of zeroing in on a few supply chains across sectors, officials said.
In the past four years, the current government has increasingly pushed India as a global hub of supply chain, in which companies -- both domestic and foreign -- can seamlessly integrate into global value chains. This picked up after the onset of COVID-19, when political tension with China, along with logistic challenges, threatened supplies of many key raw materials and finished goods for India.
Commerce and Industry Minister Piyush Goyal said on September 27 that the key goal of both nations must be to strengthen international supply chains, and “fully capitalise on the currently favourable geopolitical phenomenon”.
“Incorporating a chapter on supply chains will also provide India the playbook on doing the same with other major trading partners, many of whom are currently prodding their companies to reduce reliance on China as a manufacturing hub,” a senior trade negotiator said.
The plan will be supported by parallel initiatives such as the Australian government program to help Aussie businesses trade and invest in India, launched earlier this year, sources at the Australian Embassy said.
FTA talks ongoing
Both sides had announced last month that they aim for an early harvest trade deal by December 2021. An early harvest trade deal is one in which both parties sign off on a set of relatively easily achievable deliverables. Such pacts target specific goals like tariff reduction and market access on select items while leaving more contentious items off the agenda.
Discussions on market access for Australian dairy products and meat, apart from Australia’s discomfort with opening up services exports, have proved to be major sticking points in the deal, talks on which had begun in 2011.
Senior Aussie trade officials had earlier told Moneycontrol that Australia aims to significantly expand business with India in diverse sectors such as food and grains, core minerals, and high-tech equipment.
Australia was India's 15th largest trading partner, as of 2020-21, with trade worth $12.29 billion, and a trade deficit of $4.2 billion. Earlier this month, Australia also signed the Trade and Investment Framework Arrangement with Bangladesh.
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