Australia over-optimistic on duty Reduction on Aussie Wines in FTA

The India-Australia FTA is expected to be signed on March 21, according to a Report in the Mint. This seems rather optimistic under normal conditions, even though there seems to be some urgency on both sides in today’s changed circumstances due to the Chinese aggressive stance and Russian-Ukraine conflict. Trade negotiations with Australia that started in 2011 have already taken 11 years, according to a news Report in Al Jazeera

According to Commerce Minister Piyush Goyal last month, the interim Agreement is expected to be announced on 21 March and will cover most areas of interest for both countries. Bilateral trade stood at about $US12.5 billion in FY21 and has already surpassed $US17.7 billion in the first 10 months of FY22. India has imported merchandise worth about $US12.1 billion from Australia in the first 10 months of the fiscal with exports of $ US 5.6 billion in the same period. Key imports from Australia include coal, gold and LNG while key exports to the country from India include diesel, petrol and gems and jewellery.

Both countries have declared their intent to sign the full FTA, called the Comprehensive Economic Cooperation Agreement (CECA), later this year. The current interim Agreement is known as the early harvest and would cover points agreeable to both sides today and to take the process forward.   

Australia has been particularly keen to expand wine export to India for the last one year, since it was embroiled with export blocked to China which imposed duties of up to 218% for political reasons. Australia is likely to get tariff cuts on premium wines that do not compete with domestic winemakers, but perhaps not as much as they would like.

Interestingly, The EU India FTA Talks that started in 2007 and called off in 2013 by the Congress government, were resumed only last year and are still in slow gear. Wine lobby of the domestic wine producers is very strong-they want to safeguard their turf as they are not able to compete with low-end imports that sell for under $US 3 ; Australia can flood the market at that price level.

“India may be willing to lower tariffs on Australian wines over a certain monetary threshold, as it will not affect low-cost Indian wines," said an executive seeking anonymity and involved in the negotiations, according to The Mint. India currently imposes a customs duty of 150%. Varying excise duties in States and VAT which generally varies from 20-25% are other two scourges that make costs of Australian wine prohibitive enough for the industry not able to expand as much as its potential.

They have both declared their intent to ink the full pact, called the Comprehensive Economic Cooperation Agreement (CECA), later this year. PM Morrison of Australia is very keen that the treaty is signed soon, certainly before the May elections in Australia where he has to prove his capability to produce results, thanks to the political uncertainty that exists today. India and Australia have each seen mounting tensions with China, and are keen to sign the Accord.  There is also growing complementarity between the economic priorities of the two nations- India needs critical Australian minerals and Australia requires skilled labour India can offer, for instance.

https://www.aljazeera.com

The Ministry of External Affairs (MEA) announced on Thursday that PM Modi will have the 2nd India-Australia virtual summit on Monday, March 21 with his Australian counterpart, Scott Morrison. 

Meanwhile, there has been a significant improvement in the palates of Indian importers and wine connoisseurs during the Covid Pandemic and are looking forward to lower duties and the threshold of costs, to enjoy some of their high quality wines Australian wines which are too expensive because of prohibitive customs duties as of now.

Subhash Arora

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