India and Australia have stated that an Interim Trade Agreement will be signed in March 2022, followed by a Comprehensive Economic Cooperation Agreement (CECA) 12-18 months later.
The agreement will cover "the vast majority of areas of mutual interest" for both nations, including commodities, services, origin laws, sanitary and phytosanitary measures, and customs processes. The Supply Chain Resilience Initiative was previously initiated by India, Japan, and Australia (SCRI).
Before a complete FTA (Free Trade Agreement) is signed, an interim or early harvest trade agreement is used to liberalize tariffs on the trade of particular items between two nations or trading blocs.
The government's emphasis on temporary accords might be tactical, allowing for a deal to be reached with minimal commitments and the resolution of thorny problems afterwards.
The concern is that these early harvest plans may focus on the low-hanging fruits, leaving the more difficult commodities and services for later. This technique may cause considerable delays in the completion of the broad-based FTAs, perhaps causing obstructions.
In 2004, India and Thailand signed an early harvest agreement, but the two countries were unable to reach an agreement on a broader free trade deal.
India and Sri Lanka have a goods trade agreement, however they were unable to reach an agreement on services and investments.
Early harvest agreements that do not progress to full-scale FTAs are vulnerable to legal challenges from other World Trade Organization members (WTO). Because an early harvest deal may weaken the motivation for one party to work toward a complete FTA, it is frequently advantageous to negotiate the entire deal simultaneously.
It is an agreement between two or more countries to lower obstacles to imports and exports.
Goods and services can be purchased and sold across international borders with little or no government taxes, quotas, subsidies, or restrictions to obstruct their interchange under a free trade policy. Trade protectionism and economic isolationism are the polar opposites of free trade. Preferential Trade Agreements, CECAs, and Comprehensive Economic Partnership Agreements are examples of FTAs.
In Financial Year (FY) 21, bilateral commerce between the two nations was over USD 12.5 billion, and it has already reached USD 17.7 billion in the first ten months of FY22. In the first ten months of the fiscal year, India purchased goods worth around USD 12.1 billion from Australia and exported goods worth approximately USD 5.6 billion.
Coal, gold, and liquefied natural gas are major imports from Australia, whereas diesel, petrol, and gems and jewelry are major exports from India.
Mining, pharmaceuticals, health, education, renewables, railroads, gems and jewelry, tourism, defense, and textiles are all expected to benefit from the deal with Australia. Both students and professionals from India are expected to seek easier visa access to Australia. Wines and agricultural goods that are not produced on a huge scale in India are likely to be sought by Australia. Both nations are also considering reciprocal recognition of educational credentials in order to increase the number of Indian students pursuing education in Australia and vice versa, as well as improve tourism in both countries.
The deal will lead to more collaboration between the two nations in vital minerals and rare earth elements, which are essential for future sectors such as renewable energy and electric cars.
Although Australia has a large supply of rare earths and essential minerals, it lacks processing facilities.
Along with the United States and Japan, India and Australia are participants of the QUAD (Quadrilateral Security Dialogue). The fourth meeting of the QUAD grouping's foreign ministers (India, the United States, Australia, and Japan) was recently held in Melbourne, Australia.
Both nations have said that the alliance has accelerated the expansion of commercial links among all QUAD members.
After announcing an agreement with India, Australia observed that it already had FTAs with both the US and Japan, and that the four nations could begin constructing a framework for economic cooperation among the QUAD countries.
Apart from Australia, India is currently negotiating free trade agreements with the UAE, the United Kingdom, Canada, the European Union, and Israel. In the first half of 2022, India hopes to execute an early harvest deal with the UAE and the United Kingdom.
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