Thanks to a sharp reduction in claims, Australia and India have managed to conclude a free trade agreement after ten years of negotiations.

At the same time, Australia is continuing to negotiate with the European Union on free trade.

For decades, Brussels has also wanted India as a partner for free trade.

Christopher Hein

Business correspondent for South Asia/Pacific based in Singapore.

  • Follow I follow

Australia hopes that the growing demand of the emerging country with almost 1.4 billion people will compensate for its difficult business with China.

New Delhi is also looking for secure trade relations, especially for the supply of raw materials in view of the threats from Beijing.

On Saturday, however, India's Prime Minister Narendra Modi and his Australian counterpart, Scott Morrison, signed a trade agreement that was severely trimmed down by European standards.

"This agreement opens a huge door into the world's fastest growing economy for Australian farmers and manufacturers and many others," said Morrison.

India is currently in trade talks with many countries

Modi, who discussed even broader trade relations with Russian Foreign Minister Sergei Lavrov in New Delhi the day before, now said during the virtual meeting: “On the basis of this agreement, together we will be able to increase the resilience of supply chains and also to contribute to the stability of the Indo-Pacific region.”

Removing tariffs under the Australia-India Economic Co-operation and Trade Agreement will double bilateral trade to nearly $50 billion in value within five years, India's Trade Minister Piyush Goyal said.

Over the next ten years, tariffs are expected to fall on 91 percent of Australia's exports to Asia's third largest economy.

India is also negotiating similar deals with New Zealand and Israel.

Just last week, the Indians signed a similar pact with the United Arab Emirates.

With Great Britain and Canada they are discussing trade agreements that are exempt from labor standards and human rights requirements.

Secretary of Commerce BVR Subrahmanyam is expected in Brussels next week to restart talks.

The Indian market has so far been closed to sheep farmers

In Australia, exporters in the agricultural and natural resources sectors are seen as the big winners from the deal.

So far, for example, Australian sheep farmers have been subject to a 30 percent duty on imports into India.

However, the tariff is now being abolished primarily on coal and copper, wool, aluminum and also lobster.

In particular, the export of coal, wine and lobster suffered from the Chinese blockade.

Beijing wanted to punish Australians for improper political behavior.

However, India already covers a quarter of its growing coal consumption from Australia, of which it is now the third largest customer.

Service providers from 31 sectors such as construction, tourism, education and medical services were granted the most favored nation clause.

Going the other way, 96 percent of all tariffs on imports from India will fall in Australia.

Indian university graduates in natural sciences will in future be allowed to stay and work for three years “down under” – with which Australia wants to close an employment gap for highly qualified people.

Thousands of visas are issued annually to Indian youth who want to work in Australia while backpacking - helping the farms.

A decade of difficult negotiations is coming to an end

Talks with Australia on a trade and economic partnership began just over a decade ago but broke down after Canberra invited India to join the Regional Comprehensive Economic Partnership (RCEP).

Negotiations stalled after Modi refused in the last few yards, straining India's relations with East Asia.

They were only resumed in September last year, also under pressure from a more aggressive Beijing.

Both countries are also part of the Quad security alliance, in which Tokyo, Washington and also Canberra have urged India to take a firm stance on Russia's attack on Ukraine.

This was avoided by New Delhi, which not only buys weapons from the Russians but also supplies medicine and technology to Russia.