By Pradeep S. Mehta and Amit Dasgupta,
Prime minister Narendra Modi’s 2014 visit to Australia triggered rapid growth in bilateral relations, driven by shared anxieties over Chinese president Xi Jinping’s unbridled ambitions, personal agenda, and assertions of hegemonic intent. Xi’s adversarial style, coupled with blatant disregard of international law, triggered unprecedented uncertainty and turbulence in the Indo Pacific and beyond.
India quickly realised that Xi rebuffed the hand of friendship unless it was on bended knees, signifying obsequious and unqualified acknowledgement of China’s supremacy and authority. For Xi, his leadership heralded the arrival of the ‘new’ China and its preeminent role in global affairs. In such a scenario, Beijing saw New Delhi’s increasing acceptance in the international arena as an unacceptable challenge. Given the uneasy history of Sino-Indian relations over seven decades, India perceives China as a credible and immediate threat that necessitates seeking out new partnerships to counter its bullying and provocation. Australia, similarly, has come to see China as an intrusive irritant because of its interference in its domestic affairs, its government, its media, and, more recently, in its educational system. The US had already raised red flags about the theft of intellectual property by Chinese agents posing as students and researchers..
Furthermore, Beijing’s aggressive policies in the South China Sea dismayed the Australian public and government. Concerns about China’s role in triggering the pandemic that caused global disruption and the Australian government asking for an independent international inquiry added fuel to the fire. While the present government in Canberra has tried to soften its stance, suspicions of China continue to dominate the narrative. This set the stage for a comprehensive strategic partnership between India and Australia. The three pillars on which this relationship would be built are security and defence cooperation, people-to-people contact, and closer economic and trade relations. The first of these is entirely government-driven, whereas the success of the other two require the active involvement and participation of other stakeholders, where government can act only as a facilitator.
Take economic and trade cooperation, which has remained steady at an uninspiringly low level for a sustained period. Today, at Australian dollar 25 billion, it is ten times less than Australia-China trade. For India, the principal items of import from Australia are coal briquettes, gold, and copper. To a large extent, this is because of the limited interest of business and industry on both sides. Indian business saw Australia as a small (22 million population) market and too far away geographically to warrant effort. Australian business stayed focused on the China market that they had cultivated over decades and one that they were familiar with. India’s intimidating bureaucracy, complex federal structure, and protectionist market policies acted as a formidable deterrent. Post the 2014 visit of PM Modi, when the trade ministers of both countries met, the objective was to unlock the Indian market and provide access to India’s rapidly growing middle classby doubling two-way trade to Australian dollar 50 billion over the next five years, and thendoublingit further to A$100 billion, making India the second-largest market for Australia after China, overtaking the US and Japan. This is a significant goal.
The signing of the Economic Cooperation and Trade Agreement (ECTA) on December 29, 2022, ushered tariff-free entry of over 85% of Australian goods into the Indian market and 90% of Indian goods into the Australian market. ECTA is an interim or ‘early harvest’ agreement and will transition to the Comprehensive Economic Cooperation Agreement (CECA) by the end of 2023 and is expected to dramatically transform the bilateral trade landscape. However, severe challenges remain. The government has created the enabling environment, but failure is certainly an option unless a change in mindsets characterises business and industry on both sides. Years of distancing and neglect have fostered a culture where neither country truly knows the other. At a more basic level, businessmen’s lack of knowledge about taxation laws, market entry regulations, company laws, Reserve Bank guidelines, repatriation of profits, arbitration and trade dispute mechanisms, federal laws, and so on would certainly deter taking advantage of the possibilities that ECTA and CECA open up. This creates avenues for educational institutions in India and Australia to step in through capacity-building programmes that handhold the business community from both sides.
The work of governments needs to be responsibly complemented by relevant stakeholders to achieve the much-desired success. Invigorated bilateral trade would be a befitting response to the China threat, which uses trade and the market as a weapon. As markets diversify and partners multiply, China will see an erosion of its influence. This needs to be a core objective if Xi’s wayward adventurism is to be checked. This rests largely on whether Indian and Australian business can see the bigger picture and fall victim to the tempting option of business-as-usual manner of things and hence, of failure.
(The authors are Respectively, secretary-general, CUTS International and former Indian ambassador and distinguished fellow, Australia India Institute & CUTS International)
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