Sensitive issues to remain out of India-Aussie early-harvest deal

With India and Australia giving final touches to an interim trade deal, both countries are set to keep aside sensitive and contentious issues, steering clear of any surprise in the early-harvest agreement, people aware of the matter said.

Sources indicated that greater market access for contentious items such as agriculture and dairy are likely to be kept away from the deal, at least for now.

However, high-value items such as sheep meat and high-end carrots could form a part of the discussions in the proposed deal as these are not items of mass consumption in India.

“Products exported from Australia will not compete with locally-produced goods in India. For instance, export of items such as high-end carrots to India will not hurt the interest of small-scale farmers. It will be primarily sold to high-end hotels. Similarly, sheep meat buyers of Australian lamb (in India) are different from those buying Indian lamb,” the source said.

India and Australia had set a tight deadline of concluding an early-harvest agreement — a precursor to a free-trade agreement or Comprehensive Economic Cooperation Agreement (CECA) — by December 25, as more work is needed to be done towards the deal. Officials from both countries have been in regular touch to finalise the agreement at the earliest. Last week, commerce and industry minister Piyush Goyal met his Australian counterpart Dan Tehan virtually to take stock of the current status of the deal.

The proposed deal is likely to include lower tariff and greater market access for Indian exporters in areas such as textiles, pharmaceuticals, footwear and leather. On the other hand, Australia is seeking lower tariffs for dairy products, milk and premium wines, among other items.

Australia was India’s 15th largest trading partner in FY21. Petroleum products, medicines, polished diamonds, gold jewellery and apparels are the key items exported to Australia. On the other hand, coal, alumina and non-monetary gold are key products exported to India.

In services, major Indian exports relate to travel, telecom and computer, government and financial services, while Australian services exports were principally in education and personal-related travel.

Among the most controversial items that could be excluded from the early-harvest agreement negotiations is diary and milk.

Dairy is one of Australia’s most important rural industries, producing about 8.8 billion litres of milk as in 2018-19. Dairy, according to reports, employs around 46,200 people in Australia. It is also the country’s fourth largest rural industry, generating $4.4 billion in farm-gate value.

Australia exports approximately 35-40 per cent of its milk. A large proportion of exports are in the form of value-added products such as cheese, butter, ultra-heat treated milk and other milk powders.

Among all the items, Indian farmers and the domestic milk industry have been steadfastly opposing exports of skimmed milk powder (SMP) from Australia. Experts said in the upcoming deal, enough emphasis should also be placed on the services sector. “There is a need for a shift in focus from Mode 4 (movement of people for employment) to Mode 1 in a range of services such as healthcare and education in the proposed deal.

This could enable Australia to come up with online courses for Indian students and set up universities in India,” said Nisha Taneja, professor at Indian Council for Research on International Economic Relations (ICRIER).