Indo – Aus FTA: Signals on the matter of China, the US & the QUAD.

Since it adopted the free markets in the year 1991, India has always aspired to establish strong and robust trade relations with western countries, namely the US, UK, Europe, Australia etc. In 2020, India opted out of the RCEP (Regional Comprehensive Economic Partnership) FTA that constituted all the ASEAN countries, China, South Korea, Japan and Australia. It was said that India feared the possibility of China flooding the Indian ports with cheaper goods, which may ultimately destroy Indian industries due to the lack of competing and scaling abilities in them.

Among the parties in the RCEP FTA, India already had FTAs with South Korea, Japan and ASEAN. That made Australia the only country on the RCEP list which lacked an FTA with India. Well, that one missing puzzle in the geopolitics of Indo Pacific has finally been solved. On 2nd April 2022, after a decade long discussion, India signed the India-Australia Economic Cooperation and Trade Agreement (ECTA). This now makes China the only country on the RCEP list that doesn't have an FTA with India.

Countering & Challenging the Dragon:

Experts believe that China was the major reason for India choosing to opt-out of RCEP. It was China's unethical trade practices and discriminatory regulations that were the biggest fear for a democratic and developing country like India. By signing exclusive bilateral FTAs with every member country of RCEP, India has cleverly sidelined the dragon. This helps India to enjoy free trade with every RCEP member without the obligation of giving duty-free access to cheap Chinese goods.

The ECTA will also help India to counter and compete with China in the Australian market. The Indian exports such as textiles and apparel, select agriculture and marine products, leather, footwear, furniture, gems and jewellery, pharma and engineering products etc. will get direct zero duty access to the Australian market. Earlier, many of such products use to suffer from a tariff disadvantage of 4 to 5%, mainly losing to the Chinese goods which are cheaper due to the duty-free access under RCEP FTA.

India aspired for the FTA, Australia needed it:

The FTA is as important for Australia as it is for India. The Morrison administration has scored a goal with this deal as they are on the verge of a general election next month. The successive Australian governments have been in talks with New Delhi for an FTA for almost a decade now. It was truly a golden opportunity for the Morrison administration to show their prowess and determination against an aggressive China by upgrading the Australia – India trade relations.

The Australian government is suffering from a challenging phase when it comes to relations with China. China – Australia relations have suffered great losses in recent times due to China's unethical trade practices & its regional claims and disputes like the one in the South China Sea, Spratly & Paracel Islands. Australia has also suffered the aggression of the Chinese PLA navy in recent times. Also, the recent cases of Chinese spies infiltrating Australian politics, academia and think tanks have given rise to an anti-China sentiment among the common citizens. It was always in the greater interest of Australia to sign a comprehensive trade deal with India, China's biggest rival in the region. This deal will not only help the Morrison administration in the upcoming elections but will also help the Australian economy to reduce its dependency on Chinese imports with the help of Indian alternatives.

The US is now the only missing link in the QUAD:

After the ECTA, the US remains the only country in the QUAD group (India, Japan, Australia, US) that lacks an FTA with India, the biggest player in the Indo Pacific. Though the talks between the Biden administration and New Delhi have been going on for a long time, the discussions have failed to achieve any concrete progress in the implementation of an FTA. The ECTA deal is poised to push the Biden administration to advance the talks and convert them into an executable FTA with India.

With ECTA, India truly adopts free markets:

The India – Australia FTA shows that India has finally shed the fear of foreign competition and scepticism of foreign goods destroying the local industries. It seems to be confident enough to face competition and compete with foreign goods. India is now aiming to establish more FTAs as it is in discussion with Canada, the UK and the EU for the establishment of bilateral FTAs.

Australia, being a western country and one of the most developed economies, will pave way for more western economies to push for an FTA with India. The ECTA deal will inspire confidence in other western economies when it comes to trusting India's bureaucracy and establishing an FTA with it. The deal will also change the geopolitical landscape of the Indo Pacific as 3 out of 4 QUAD members (India, Japan, Australia) now share a close trade and security partnership with each other. The ECTA is another milestone in QUAD's pursuit to counter and challenge China's unethical upper hand in trade & commerce with smaller and weaker countries.

Keywords: RCEP, ECTA, FTA, ASEAN, United States, India, China, Australia, QUAD, Indo-Pacific, Geopolitics, Trade and Commerce, Free Trade Agreement.