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Australia and India: Growing and Prospering together

(By Patrick Suckling, Australia’s High Commissioner to India): Australia and India are negotiating a Comprehensive Economic Cooperation Agreement (CECA), or FTA, for mutual benefit. Our Prime Ministers agreed it be done by the end of this year.

Finance Minister Jaitley has this month said India is looking at trade deals which are mutually beneficial. Commerce Minister Sitharaman in the US last week reiterated India’s commitment to such agreements and the fact that India is not being left out.

Our starting point is that our CECA should provide mutual benefit; be a two way street. One way traffic, or trade, does not work. We have never thought differently. Win-win has been the basis for the FTAs we successfully negotiated last year with China, Japan and South Korea. We want India to be in this league; not left behind our key economic partners. This means a credible deal for both of us, that delivers enough each way for our peoples to think it was worth the effort.

So what are the benefits? Both ways?

The biggest benefit of opening your economy is to yourself. Even if others keep doors more closed. Open doors give more scope, ensure interactions that makes things happen. It’s that simple.

Australia is in its 26th year of uninterrupted economic growth significantly because we slashed tariffs, deregulated, reformed, and opened to the world. Liberalisation boosted GDP growth by around 3.5 per cent and wages by thousands of dollars a year. Now, 1 in 5 Australian jobs are trade related.

We also enjoy cheaper, better products sourced from the best companies around the world – including as inputs to things we make at home and sell abroad. Our products stretch across the world, way beyond the local market of 23 million people to reach hundreds of millions. And they take advantage of all the dynamism, choice, innovation and technology the world has to offer.

Increased trade and increased foreign investment often complement one another. We have created one of the world’s most attractive investment destinations with strong economic performance, ease-of-doing business, sound regulatory systems and a skilled workforce.

And it has paid off, with a AAA sovereign risk rating and Australia a top-ten destination for foreign investment, seeing more business, growth and jobs. Wealth we are now investing with similar benefits around the world. Australia has the largest pool of funds under management in Asia, and third largest worldwide.

Before this wave of prosperity washed over us, many used to say we needed a protective ring to swim –at least a little breathing space to grow. But we found that suffocating, bobbing in a bubble in the ocean. Like we are famous for our successful athletes, we have said to our businesses go and be in it to win it. No special favours. Many more than ever before are winning, in a world where the field now spans the globe.

India knows this story. The India I find now compared to my first posting here twenty years ago as the changes of 1991 were just beginning speaks for itself, everywhere you care to look. I see the Ambassador car as the best symbol. Stately and dignified yet nevertheless a product of the 50s at great expense with long waiting lists because it paddled in the bubble, I read the other day that the last one rolled off the production line. In its place is now an Indian auto industry headed to be the third largest in the world at the sharpest end of global technology and with supply chains employing millions across the country. Not just for domestic production, for the global market. Because India opened its doors.

What does Australia have to offer India? Your Prime Minister told our Parliament in his historic speech last November that he saw Australia as a natural partner in every area of India’s national priority, every sector.

We have core strengths: energy and resources, agribusiness, education and skills, infrastructure, finance, health and so on. Just as India has core strengths of interest to Australia: IT, manufacturing, engineering, textiles, agriculture, finance and so on.

There is so much potential. Already we do around $16 billion in trade together. But we do $160 billion with China. That gives some sense.

I’m sometimes asked what is the single biggest benefit the CECA/FTA will bring. It’s nice to say I don’t know. The main point of such agreements is for governments to provide the right environment for business to flourish. Just how and where it will flourish is up to business; its ingenuity, creativity and entrepreneurship. The business giants of tomorrow are scarcely imagined today. But they need the right soil in which to grow. Our CECA/FTA will help till this soil.

I do know that services will be a critical aspect. We are both services superpowers. Nine out of ten jobs in Australia are in services. They make possible all other areas of economic activity. For example, for India’s Make in India initiative every manufacturing plant will require financial, legal, accounting, logistics, maintenance, IT, marketing, packaging, storage, health and safety and numerous other services.

I also know that our Agreement will help plug us both better into global supply chains. We both seek lots of foreign direct investment to help us grow. The other side of that coin is to make sure that the inputs for the products of the investment are not jammed by tariffs or other barriers. Otherwise you spike your investments. With global supply chains you need a supportive trade policy. Someone told me the other day that your humble pack of tennis balls sources components from 9 different countries. For a Rolls Royce aircraft engine it’s from dozens of countries for around 21 000 parts. Put starkly, in 1990 20 per cent of all goods and services exported from any country ended up as inputs to other goods and services. That figure today is closer to 75 per cent. This means one’s own tariffs can hurt more than help.

At the heart of it, our CECA/FTA will help both India and Australia on our own journeys of continuous improvement for more wealth generation and jobs for our peoples. It is their hip pockets we want to help fill.

Of course there are sensitivities. There always are with such agreements and ours will be no different. One of the challenges of securing such agreements is the quiet satisfaction of the vast majority that benefit is drowned out by the vocal noise of some vested interests that stand to lose their protective ring.

Where that is not really defensible it should not really be defended. But there are always exceptions. In all our FTA negotiations we have been sensitive to such sensitivities, and are being so with India. There are some things that just can’t be done or have to wait. We understand that. But where we can both find ways through, even if not perfect, then we must not let the perfect be the enemy of the good.

Often it’s agriculture, around the world. We get that. But we also say that even if we starved the Australian people and sold everything we produced to India, it would feed 60 million of India’s 1.3 billion people.

I say this to provide perspective, not to dismiss India’s legitimate sensitivities around agriculture. We know the stakes and we are, properly, being sensitive to these. Yet, even here, if there are possible benefits then we should explore them. For example Australia’s bovine genetics and fodder technology could help lift the average milk production of an Indian cow from around 5 litres to the Australian standard of 25-30 litres. Our cows live the climate of your cows – should be easier.

Last week our negotiators met in Delhi. Our Indian counterparts were tough. As they should be. But they also had a sense of purpose and resolve which we share that, if done right and for mutual benefit, this deal will serve the interests of the Indian people. Just as we know it will for the Australian people. That in itself would bring our countries even closer together. I am confident we will get there.