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Prospects for an Australia–India trade deal



A worker watches as a loader unloads coal at a yard on the outskirts of Ahmedabad, India, 12 February 2016. India is asking the country's big steelmakers to consider converting local medium-quality coal into premium coking coal to slash an annual import bill of more than $4 billion for buying that grade from countries such as Australia (Photo: Reuters/Amit Dave).

Author: Melissa Conley Tyler, University of Melbourne

Negotiations on the Australia–India Comprehensive Economic Cooperation Agreement (CECA) are set to restart after being suspended in 2015. Australia’s new Minister for Trade Dan Tehan has flagged that a trade deal with India will be one of his top priorities.

Why were the original negotiations abandoned? And has anything changed to make a deal more likely now?

There are potential gains for both countries. The original joint feasibility study found significant tariff and non-tariff barriers to goods and services trade. It assessed the potential welfare gains of an agreement as between 0.15–1.1 per cent of GDP for India and 0.23–1.17 per cent of GDP for Australia.

Australia’s India Economic Strategy identifies 10 priority areas to grow trade with India: a flagship sector (education), three lead sectors (agribusiness, resources and tourism) and six promising sectors (energy, health, financial services, infrastructure, sport and science). India’s recently-released Australia Economic Strategy identifies significant room for growth in exports and investment in 12 focus sectors and eight emerging sectors.

But after nine rounds between 2011–2015 covering many proposed chapters, negotiations were suspended.

For India, Australia’s agricultural exports were a sticking point. With half of India’s employment tied to agriculture, anything that threatens producers is political dynamite. Australia’s argument that many of its agriculture exports are aimed at the premium end of the market and would not displace the production of India’s smallholder farmers fell on deaf ears. Similar dynamics are at play in other sectors where India’s largest corporations feel threatened by the prospect of increased market competition and will lobby hard to defend their privileged status. Proposed trade agreements are generally judged by the benefits to domestic producers, not to consumers.

India’s suspicion toward trade has deep roots, stretching back to the United Kingdom’s colonial theft of India’s wealth, which was (wrongly) justified as ‘free trade’. Trade is often framed in terms of winning or losing, so India’s trade deficit of around AU$15 billion (US$12 billion) means that trade is seen as heavily skewed in Australia’s favour, with different levels of development preventing a level playing field. Trade agreements with ASEAN, South Korea and Japan have worsened India’s trade deficit.

For Australia, one of the most politically-sensitive sticking points was India’s desire for a more relaxed visa regime for Indian workers. Other reported concerns include threats from parasites on imported mangoes and the impact on steel and food processing. Overall, the sense was that India wasn’t offering enough to make a deal worthwhile. The diplomatic description in 2018 was that ‘negotiating positions are too far apart to make the conclusion of a CECA a realistic objective in the near term’.

After talks were suspended, Australia focussed on keeping India in negotiations for the multi-country Regional Comprehensive Economic Partnership (RCEP) as a way to achieve a trade pact, with CECA to follow.

What’s different today?

The biggest change is in the wider context of the Australia–India relationship. Motivated partly by concerns about China, India and Australia elevated their relationship to a Comprehensive Strategic Partnership at the Leaders’ Virtual Summit in June 2020.

While India may want to prise Australia away from what it would see as an unhealthy dependence on China, it’s unlikely to make trade concessions for wider security benefits. India’s room for movement given domestic politics is narrow, as recent farm demonstrations show, and it’s unlikely to spend political capital on an agreement seen as anything other than highly advantageous to Indian industry.

The fact that India is also looking at reviving trade talks with the United States and with the European Union, suspended in 2013, suggests there may be some change in its orientation on trade. Reforms to reduce red tape have improved its ease of doing business ranking and it has introduced policies that seek to encourage foreign investment.

But India’s decision to pull out of RCEP suggests that concerns remain about trade deficits and unemployment, with industry and traders’ bodies playing a blocking role. While there are voices arguing for a different approach to trade agreements, this remains a minority view. Only 5–25 per cent of India’s international trade is covered…

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Fixing fragmentation in the settlement of international trade disputes



Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.

Fragmentation in Global Trade

Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.

Challenges with WTO Dispute Settlement

The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.

The Path Forward for Global Trade

Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.

Source : Fixing fragmentation in the settlement of international trade disputes

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WTO ministerial trading in low expectations and high stakes



The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Getting Vietnam’s economic growth back on track



Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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