India FTA plus for lentils, chickpeas miss out

Indian Prime Minister Narendra Modi and Australian Prime Minister Scott Morrison. Photo: @PiyushGoyal

THE Australian and Indian governments signed the Australia-India Economic and Trade Cooperation Agreement (AI ECTA) on Saturday, with lentils being the winners in the cereals space.

The Australian government has said the deal will make Australian exports to India cheaper and eliminate tariffs on more than 85% of Australian goods exported to India, rising to nearly 91% over 10 years.

“This agreement opens a big door to the world’s fastest growing major economy for Australian farmers, manufacturers, producers and many more,” the Australian Prime Minister said. Scott Morrison said in a statement.

“This is great news for lobster fishermen in Tasmania, wine producers in South Australia, macadamia farmers in Queensland, critical mineral miners in Western Australia, lamb farmers in New -South Wales, the wool growers of Victoria and the metal ore growers of the Northern Territory.”

However, this does not please Australian chickpea growers, who are effectively shut out of what used to be their biggest market by a high tariff imposed to reduce price pressure on India’s domestic crop.

Little for growers

In response to the announcement of the bilateral agreement, the Australian farmers’ representative group GrainGrowers has already called for more work to be done on a mutually beneficial agreement in the future.

In a statement, GrainGrowers said the interim FTA offers potential benefits for Australian lentils and over time will result in benefits for fava beans, canola oil and soybeans.

However, he said the Australian grain industry’s trade partnership with India would be largely “business as usual”.

“The details of the Interim Free Trade Agreement with India are a little frustrating, given the huge export potential, especially our chickpeas to this market” President of GrainGrowers Brett Hosking noted.

“After speaking to many growers across the country, we were hoping for a more positive outcome for Australian chickpeas and wheat.

“While domestic chickpea production in India is currently strong, there have been and will continue to be times when seasonal conditions cannot meet demand.

“Australian producers are perfectly positioned to be able to support the Indian population through these shortages, although under this FTA that will not be an option.”

According to the USDA’s India Grain and Feed Annual 2021, India currently applies a 40% import duty on wheat, and its imports are limited due to its high domestic production.

Trade data shows that India is a volume exporter this year due to its own bumper crop, but it is importing in smaller crop years.

India is Australia’s largest market for lentils, which are currently subject to a zero tariff.

In recent years, this tariff has been set at zero, 10% or 30%, depending on India’s domestic lentil production.

The federal government said Australia and India have agreed to undertake cooperation to promote agricultural trade and will now work towards an improved agricultural memorandum of understanding.

AI ECTA has significant benefits for the horticulture and specialty pulse markets.

Tariffs of up to 30% will be eliminated over seven years on certain fruits, nuts and vegetables, as well as broad, kidney and adzuki beans.

However, what exactly this means for lenses is unclear.

“Customs duties on almonds, lentils, oranges, tangerines, pears, apricots and strawberries will be reduced,” the federal government said.

Plans for the first three

The Australian government statement described India as the world’s largest democracy and the world’s fastest growing major economy, with GDP expected to grow by 9% in 2021-22 and 2022-23.

In 2020, India was Australia’s seventh-largest trading partner, with two-way trade valued at $24.3 billion, and its sixth-largest export market for goods and services, valued at $16.9 billion.

The Australian government has said its aim is to make India one of Australia’s top three export markets by 2035 and to make India the third largest destination in Asia for outbound Australian investment.

Services included

Australian service providers in 31 sectors and sub-sectors will be guaranteed the best treatment given by India to any future FTA partner, including: higher education; adult education; business services and research and development.

Australia will also provide new access for young Indians to take part in a working holiday in Australia.

Places in Australia’s Work and Holiday scheme will be set at 1,000 a year and Australia will have two years to implement the result.

This should help both with labor needs and boost tourism to support Australia’s post-COVID recovery.

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