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’An India-Australia FTA could have huge gains for both sides’

Business Standard, India

’An India-Australia FTA could have huge gains for both sides’

Q&A: Simon Crean,Trade Minister, Australia

By Sidhartha / Mumbai

13 May 2010

Australian trade minister Simon Crean is here to push a free trade agreement with India. Besides, he is talking to Australian companies in India to get an assessment of the barriers they face. In an interview, he also tells Sidhartha the new mining tax would not affect foreign investors looking at Australia. Edited excerpts:

You are talking about concluding a free trade agreement with India. What is the timeframe?
I would have concluded it yesterday. But, we have only completed a feasibility study on a possible FTA. Formal negotiations are yet to start. The feasibility study shows huge gains are possible for both sides and now the governments have to decide on whether they want to act on it. But, both of us ministers, me and (commerce and industry minister) Anand Sharma, agree we should endorse the recommendations.

The next step is to expedite the processes by which we formally agree to an FTA and then we get into detailed negotiations. We have already had lots of discussions on areas we should be looking at. The resources sector is one example. There are financial services, education and logistics. Infrastructure and manufacturing, both investment and trade in goods, are the other areas, as are automotive and aerospace.

What about agriculture?

It is obviously the sensitive area and we understand the sensitivity because there are large numbers dependent on subsistence agriculture. But, we believe we are capable of dealing with those sensitivities. Within agriculture, it’s the services dimension that opens up a huge opportunity. There is logistics, efficient distribution and storage.

Are we finding countries turning more protectionist after the crisis?
There was a fear but people were surprised that the fear did not turn into a reality. The strength of the rule-based system provided by WTO (World Trade Organisation) was an insurance against protectionism. That’s why it’s important to conclude the Doha Round. India’s relationship with Australia is not just bilateral but also on trying to see what we can do on the Doha Round.

How feasible is it to stick to the 2010 deadline for concluding the Doha Round of trade talks?
Concluding it in 2010 looks difficult but progressing in 2010 is not. What’s important is that we lay down some important markers and get engagement at the G20, so that we can move quickly in 2011 to conclude the talks.

But, is there engagement from all members, especially the United States?
The US is fully engaged but it is saying there is not enough for them to take to the Congress (the US legislature). Everyone is engaged and no one is saying this cannot be done.

Everyone’s saying this for eight years and it’s now longer than the Uruguay Round.
It’s longer than Uruguay Round but we have been dealing with it only for the last two years. And, we inherited a framework that is difficult to work. The deal is in sight but people are not going to make final offers unless they are confident that everyone is going to respond to them.

Are you and Anand Sharma on the same page on agriculture? The Cairns group, after all, has reservations on special safeguards.

It does. There are still issues to be resolved on special safeguards. But, special safeguard mechanism (SSM) in an end-game situation will not be incapable of resolution.

What about tariff cuts?
We have agreed on the formula. What we are dealing with is SSM. Here we have agreed on two fundamental issues – one, there should be access to developing countries to SSM to deal with import surges. But, it cannot interfere with normal trade. Now, how to deal with the mathematics of it is complicated because a country like India has a big gap between its bound rate and applied rate because it joined WTO early. China, on the other hand, has a smaller gap. So, there is no one simple formula that deals with it. But, the math of dealing with it is possible once you accept it.

Companies are complaining that the mining tax will make investments in Australia unviable.
I don’t believe that’s the case. What we are introducing is a resource rent tax on on-shore resources, in the same way as currently applies to offshore resources. The same arguments were made in terms of our gas operations. Look at where that has gone. It has not held back investments. Australia is now the Saudi Arabia of gas. No one likes new taxes. But, everyone needs to take a hard look at what the details are.