Moneycontrol PRO
Open App

India misses Christmas deadline for 'early harvest' trade deal with Australia

Back in August, the government had announced that by December 2021, India and Australia would ready the details for an early harvest trade deal

December 27, 2021 / 10:33 AM IST
Sydney Opera House, Australia (File image: Reuters)

Sydney Opera House, Australia (File image: Reuters)

Despite a lot of enthusiasm from both sides, India has missed the self-imposed deadline of Christmas for concluding an early harvest trade pact with Australia. While the government had been confident of working out the details soon, officials say, existing issues have derailed the talks.

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.

An early harvest trade deal is one in which both parties sign off on a set of relatively easy-to-achieve deliverables. Such pacts target specific goals such as tariff reduction and market access for select items while leaving more contentious items off the list.

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 year, Australia also signed a Trade and Investment Framework Arrangement with Bangladesh.

A meeting between Commerce and Industry Minister Piyush Goyal and Australian Minister for Trade, Tourism and Investment Dan Tehan on August 26 had spelt out the pathway to reach an initial agreement by Christmas. On December 21, the ministers met again virtually to take stock of the process.


“They acknowledged that more time is required. The chief negotiators of both sides have been instructed to work closely and towards an early conclusion of the interim agreement,” the official said.

Issues Galore

Apart from dairy products, the deal with Australia has also suffered from difference of opinion on multiple issues, including tariff reduction on a large number of goods.

In the agri sector, Australia is ambitious about market access for fruits and vegetables, grains and dairy, along with high-value products such as premium wines. But the government remains wary of allowing Aussie companies to expand into the Indian market because it is dominated by a large number of small players.

“The final agreement of the deal is also set to have dedicated chapters on energy and resources, key areas of interest for Australia. But the main sticking point is e-commerce. Australia has said that it wants to wait for India to first spell out its official e-commerce policy,” another official said.

Australia wants to ensure that its premium food, beverage and consumer product providers are able to access e-commerce channels to better enter the Indian market.

Australia also continues to have major discomfort with opening up services exports, including the Mode 4 of services, which entails the movement of natural persons for employment purposes. New Delhi wants Canberra to allow more Indian professionals to move to the country for work.

Moneycontrol had also earlier reported that the deal could be the first one to have a formal chapter on tightening supply chains between the countries.

Back and Forth

India had officially requested Australia to restart trade negotiations for the proposed Comprehensive Economic Cooperation Agreement (CECA) after a long lull of three years.

While more than 13 rounds of negotiations have been completed so far, New Delhi is now pushing to finalise talks soon after positive signals from Canberra.

Officials say the proposal again gained steam in 2019, when  Australia adopted ‘An India Economic Strategy to 2035’ penned by former Australian high commissioner to India Peter N Varghese. It bats for more economic linkages between the nations at a time when Australian businesses have been scouting for newer overseas markets and hoping to reduce their trade dependence on China.

Apart from Australia, India is negotiating multiple trade deals, notably with the European Union, United Kingdom and the United Arab Emirates. Given the complications of foreign trade negotiations among large, complex economic powers, a common thread in these talks is that they are ‘early harvest’ trade pacts.

Officials say the concerted policy push to approach proposed trade agreements from the angle of an early harvest deal has come directly from the Prime Minster’s Office (PMO). But, despite hoping to use the route as a fast track towards trade deals, most of the dates announced by India for the completing the deals are now being pushed back, sources say.

“Usually, trade negotiations take years due to the complexities involved over reducing import tariffs, providing and securing market access for goods and setting down the rules of trade. But there is a sense within the government that in today's global trade scenario, separate deals with countries is needed at the earliest to provide our manufacturers with competitive leverage,” a senior Commerce Department official said.

Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 6 years. He has also extensively covered evolving industry and government issues. He was earlier with Business Standard newspaper.
first published: Dec 27, 2021 10:33 am
ISO 27001 - BSI Assurance Mark