ASSISTANT Trade and Investment Minister Richard Colbeck is confident Australia can complete a new trade agreement with India by the year’s end, to further expand market diversity for the nation’s farmers.
Senator Colbeck said finalising the Comprehensive Economic Cooperation Agreement (CECA) with India by the end of 2015 remained the government’s ambition.
“I’ve always said it’s a pretty big task,” he said.
“(India) is quite a protected economy but I think there are opportunities to do certain things and they have aspirations, as to the development of some of their industries.”
Senator Colbeck was involved in a trade delegation to India earlier this year with Trade and Investment Minister Andrew Robb to advance the CECA talks.
This week, he also joined Mr Robb on a trade and investment delegation to Indonesia with about 360 Australian business representatives, including agribusinesses.
The delegation for the Indonesia–Australia Business Week arrived on the back of Agriculture and Water Resources Minister Barnaby Joyce’s recent visit to Jakarta for agricultural trade talks, including live cattle exports.
Mr Robb said there were currently less than 250 Australian businesses with a presence in Indonesia but he wanted to increase that number dramatically.
He said two-way trade in goods and services to Indonesia was only $16 billion which was “far smaller than some of our other trading partnerships in the region”.
Mr Robb said India also presented “enormous prospects” for Australian exporters due to having a market backed by a population of 1.2b people which included a rising middle class.
Late last month, he visited India again, with a high level cross-party delegation to continue pushing the CECA talks with Australia’s 12th largest trading partner where two-way trade is valued at about $15b, representing the nation’s seventh largest export market.
“The fact our two-way trade with our biggest trading partner China is worth more than $150b underscores the enormous growth potential in our economic relationship with India,” he said.
Mr Robb told Fairfax Agricultural Media negotiating teams were making good progress and “we’re still on track and working hard towards concluding an agreement with India by the end of the year”.
“India is less developed than other countries we’ve concluded agreements with, so this deal will focus heavily on growing our services exports to the region,” he said.
“That said, there’s scope to also improve market access for goods and to grow our two-way investment relationship.
“Like China 20 years ago, India’s population is transitioning, with millions of people relocating from rural areas into the cities.
“This presents enormous opportunity for Australia - our expertise can help them build the cities, the infrastructure and the industries they need in order to realise their full potential.
“Deepening our economic relationship with India is important to Australia, as we seek to diversify our economy in this critical post-mining boom period.”
Growing list of trade deals
The Abbott-Turnbull government has also signed other trade deals including with Japan, Korea, China and recently the Trans-Pacific Partnership Agreement (TPP) which have all been welcomed by the National Farmers Federation.
Mr Robb said he was also confident the China-Australia FTA would be ratified by the year’s end which was worth about $600 million in tariff cuts for Australia over the next year.
“If we do it this year, when we go into 2016 – so the first week of January – we get the second year of cuts, so we get a double-whammy, which will be a great start to the agreement and it will really turbo-charge deals and joint ventures that are being formed in anticipation,” he said.
On Tuesday, Mr Joyce returned to Australia after visiting China, Korea and Japan for a five day tour, to continue agricultural trade talks with those countries.
He said the Coalition government’s commitment to improving market access for agricultural producers was well demonstrated through the major trade deals they’ve secured, including the TPP.
“With the demand for agricultural products in Asia forecast to double by 2050, there is plenty of opportunity to further build agricultural trade right across the Asia-Pacific region for the benefit of farmers, food and fibre processors and consumers alike.
“Trips like this underline the responsibility of all parties to these agreements to invest in getting the best value out of them to benefit their economies, their producers and their people.”
Mr Joyce said the three big North Asian markets together accounted for around US$220b worth of agricultural, food and fishery imports from the world each year.
He said China was now the world’s second largest agricultural importer valued at US$120b.
“We should also acknowledge the continuing importance of the agricultural markets of Japan, importing US$70b each year and Korea with annual imports worth US$30b,” he said.
Negotiations on the CECA with India were launched in May 2011.
According to the Australian Trade Commission, 70pc of India’s population is involved in, and dependent on, agriculture and allied activities but the nation is challenged to feed itself in future due to depleting resources.
The Commission says India’s government has amended agriculture policy to enable the entry of private players, which has created the potential for the introduction of modern technologies, process know-how and capacity building for a more efficient pre and post farm gate value-chain.
India’s Ministry of Agriculture is also targeting a doubling of India’s share in the global agri-food trade from one per cent to 2pc which is dependent on increasing its annual agriculture production.
Focus on tariffs
Senator Colbeck says talks aimed at clinching an economic agreement with India have included illustrating why removing or reducing tariffs on cotton or wool imports could make their local textile industry more competitive, by cutting input costs.
The Tasmanian Liberal Senator said in 1990, about 17 per cent of global trade was “through-trade” where products were imported - subject to a tariff - and then manufactured into other products, to be sold and re-exported to another nation.
“In that context a tariff on an input wasn’t so much of an impost,” he said.
“But now 70pc of global trade is an input into something else that’s manufactured then re-exported.
“So tariffs on products coming into the country are actually a cost to your manufacturing sector.”
Senator Colbeck said India’s Prime Minister Narendra Modi currently had a huge "Make it in India" campaign that was particularly relevant to his nation’s plans for developing a globally competitive textile industry.
“One way to do that is to reduce or remove tariffs on inputs to the business so they’re the sorts of conversations we’re looking to have as part of the process,” he said.
Senator Colbeck said the trade agreement with China allowed Australia to set up educational facilities in that country which delivered increased knowledge in areas like livestock production, through veterinary courses.
He said that allowed China to increase its agricultural knowledge to help meet local food demand challenges and also helped to build industry relationships.
Senator Colbeck said a trade agreement with India could provide similar educational exchange programs through universities, where Indian vets, with direct exposure to handling Foot and Mouth Disease, could share those experiences with colleagues in Australia.
“I’d have thought that innate understanding would be of value to this country in the circumstance that FMD were to show up here, in Australia,” he said.
Senator Colbeck said India was also a large consumer market with a rapidly growing population but had issues meeting their own market demand.
“That’s why I think that working with India, in a service offering, to help them meet their own productivity, is a really good way to develop the relationship and then potentially providing a part of the market, like we’re looking to do in China to provide a quality safe product at the top end of the market, at a premium,” he said.
Senator Colbeck said NZ developed their relationship with China by initially providing a service offering that developed into trading goods over time and allowed them to make a strong head-start in that large export market, with dairy the “case in point”.
He said 70pc of Australia’s wool exports went into the Chinese market but India could potentially be another significant, alternative market.
“One of the fundamentals of setting up trade deals is to provide our growers with alternative markets, and ensure you’re not too reliant on one market or subject to shocks in that market,” he said.
“That’s helping farmers to get a better price at the end of the day.
“If you can’t get the deal you’re looking for in Australia you can go to other markets once we open them up and free up access and that’s starting to happen.
“Having market options is a really important element of the economics for the rural sector and that’s why these trade deals are really important.”
According to a 2013 USDA Foreign Agricultural Service report, India emerged as a major agricultural exporter, with exports climbing from just over US$5b in 2003 to a record of more than $39b in 2013 – surpassing Australia to become the world’s seventh-largest agricultural exporter.
“The Indian government’s support for both production and exports has contributed to the rapid growth in shipments, which are increasingly destined for developing nations including least-developed nations - as classified by the United Nations,” the report said.
The report said India had become an important player on the global market, especially for rice, cotton, sugar, and beef (buffalo) and a sizeable exporter of soybean meal, guar gum, corn, and wheat and a diverse range of other products.
India’s exports in rice increased from US$2.4b in 2009 to US$7.1b in 2013 while cotton exports increased from US$1.2b to US$3.8b in the same period while buffalo exports increased US$3.1b to US$4b.