Australia – India Joint Free Trade Agreement (FTA) Feasibility Study

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Australia – India
Joint Free Trade Agreement (FTA)
Feasibility Study
Government of India
Ministry of Commerce & Industry
Department of Commerce
Joint Free Trade Agreement (FTA)
Feasibility Study
i
© Commonwealth of Australia 2010
This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part
may be reproduced by any process without prior written permission from the Commonwealth.
Requests and inquiries concerning reproduction and rights should be addressed to the
Commonwealth Copyright Administration, Attorney General’s Department, National Circuit,
Barton ACT 2600 or posted at http://www.ag.gov.au/cca
ISBN 978-1-921612-32-9
Contents
Executive Summary..............................................................................................................................................................vii
1. Introduction. ....................................................................................................................................................................... 1
1.1 Background and Objectives of Study . ............................................................................................................................ 2
1.2 Approach of Study......................................................................................................................................................................... 2
2. Overview of Indian and Australian Economies............................................................................................... 3
2.1 Indian Economy ............................................................................................................................................................................. 5
2.2 Australian Economy ................................................................................................................................................................... 9
2.3 Institutional Framework for Economic Cooperation........................................................................................ 11
3. Australia – India Trade Relationship. ............................................................................................................... 15
Bilateral Trade......................................................................................................................................................................................... 16
3.1 Overview............................................................................................................................................................................................ 16
3.2 Australia’s Exports to India ................................................................................................................................................ 17
3.3 India’s Exports to Australia ................................................................................................................................................ 19
4. India – Australia Investment Relationship.................................................................................................... 23
Investment Linkages........................................................................................................................................................................... 24
4.1 Overview............................................................................................................................................................................................ 24
4.2 Australian Investment in India ......................................................................................................................................... 24
4.3 Indian Investment in Australia ......................................................................................................................................... 26
5. Liberalisation of Trade in Goods.......................................................................................................................... 29
5.1 Existing Trade Policies and Constraints ................................................................................................................... 30
5.1.1 India . .................................................................................................................................................................................. 30
5.1.2 Australia . ........................................................................................................................................................................ 30
5.2 Impact of Liberalisation......................................................................................................................................................... 31
5.2.1 Australia . ........................................................................................................................................................................ 31
5.2.2 India . .................................................................................................................................................................................. 34
5.3 Sector Analysis............................................................................................................................................................................. 34
5.3.1 Manufactures .............................................................................................................................................................. 34
5.3.2 Agriculture, Forestry and Fisheries ............................................................................................................ 36
5.3.3 Mining ............................................................................................................................................................................... 39
5.3.4 Energy . ............................................................................................................................................................................. 42
5.4 Rules of Origin ............................................................................................................................................................................. 43
5.5 Sanitary and Phytosanitary Measures ....................................................................................................................... 44
iii
5.6Technical Regulations, Standards and Conformity Assessment............................................................. 46
5.7 Customs Procedures............................................................................................................................................................... 47
5.8Anti-Dumping, Countervailing and Safeguards Measures ......................................................................... 49
6. Liberalisation of Trade in Services.................................................................................................................... 51
6.1 Existing Policies ......................................................................................................................................................................... 52
6.1.1 India . .................................................................................................................................................................................. 52
6.1.2 Australia . ........................................................................................................................................................................ 52
6.2 Impact of Liberalisation......................................................................................................................................................... 54
6.3 Sector Analysis............................................................................................................................................................................. 54
6.3.1 Financial Services .................................................................................................................................................... 55
6.3.2 IT & IT enabled Services . .................................................................................................................................... 60
6.3.3 Telecommunications . ............................................................................................................................................ 62
6.3.4 Education......................................................................................................................................................................... 64
6.3.5 Professional Services............................................................................................................................................. 65
6.3.6 Tourism............................................................................................................................................................................. 69
6.3.7 Air Services ................................................................................................................................................................... 70
6.3.8Movement of Natural Persons, including Visas for Mode-4...................................................... 72
6.3.9 Agricultural Services ............................................................................................................................................. 74
6.3.10 Audio-Visual ................................................................................................................................................................. 75
6.3.11 Healthcare Services. ............................................................................................................................................... 76
6.3.12 Architecture, Construction and Engineering Services................................................................... 78
6.4 Conclusion....................................................................................................................................................................................... 81
7. Investment Liberalisation....................................................................................................................................... 83
7.1 Current Measures Applying to Investment.............................................................................................................. 84
7.1.1 Australian Investment Regime . ..................................................................................................................... 84
7.1.2 Indian Investment Regime.................................................................................................................................. 85
7.2 Impact of Investment Liberalisation............................................................................................................................. 89
8. Other Matters for Consideration......................................................................................................................... 93
8.1 Intellectual Property. ............................................................................................................................................................... 94
8.2 Competition Policy ................................................................................................................................................................... 96
8.3 Government Procurement................................................................................................................................................... 97
8.4 Mutual Recognition .................................................................................................................................................................. 98
8.5 Consultation................................................................................................................................................................................... 99
9. Economic Modelling..................................................................................................................................................101
iv
10.Conclusions and Recommendations...............................................................................................................105
10.1 Introduction
10.2Conclusions on the Feasibility of an FTA . ............................................................................................................. 107
10.3Recommendations ................................................................................................................................................................ 107
Annex
Annex A: Terms of Reference. ................................................................................................................................................... 108
Annex B: Centre for International Economics .............................................................................................................. 109
Annex C: Research and Information System for Developing Countries..................................................... 112
Annex D: Currency Conversion Table................................................................................................................................... 113
Annex E: Glossary of Acronyms and Abbreviations. .................................................................................................. 114
v
vi
Executive Summary
Recent years have seen remarkable growth in the trading
relationship between India and Australia, fuelled by the many
complementarities between the two economies. Over the past
five years, bilateral trade in goods and services has increased
by 24 per cent annually to US$16 billion in 2008–09. Two-way
investment is also significant, estimated at over US$1.5 billion
including portfolio investment in 2008.
Against this backdrop, Australia and India agreed in April 2008 to undertake a feasibility study for
a possible bilateral free trade agreement (FTA) to explore the scope for building an even stronger
economic and trade relationship.1
The feasibility study shows that significant barriers to goods and services trade remain in
both countries.
An FTA between India and Australia would be expected to address tariff and non-tariff barriers.
It would go beyond each country’s commitments in the World Trade Organization (WTO) and cover
substantially all trade in goods.
Services liberalisation would seek to remove barriers that impose additional costs on exporters
and erode competitiveness. A possible FTA would be expected to have substantial services
sector coverage.
Australia-India investment flows are modest relative to bilateral trade, reflecting both regulatory
and other impediments and, to some extent, a lack of awareness of business opportunities in the
other country. A possible FTA may address this imbalance by removing – or reducing – existing
restrictions in both foreign investment regimes. It could also focus on enhancing transparency and
strengthening investment protection mechanisms.
A comprehensive FTA offers scope to take the relationship to the next level to the mutual
advantage of both economies. It could foster even stronger growth, including through more diverse
trade and investment flows. Cooperation, capacity building and exchange of information on other
issues such as the protection of intellectual property rights (covering all issues including TRIPS &
CBD, and GIs inclusive of non-food GIs), SPS & TBT matters, competition policy and government
procurement could also be considered during possible FTA negotiations.
In order to make an assessment of the possible trade gains from the proposed FTA,
independent economic modelling was commissioned in both the countries for the study. The
results provide insights into how an FTA might impact on bilateral trade and investment flows as
well as economic welfare. Economic modelling is necessarily based on certain assumptions and
the results of the modelling for this study should be regarded as indicative rather than as exact
1FTA in this study is comprehensive including trade in goods and services along with investment
cooperation. In other words, it is akin to CEPA or CECA in other contexts.
vii
estimates. Different economic modelling methods, GTAP-CGE modelling and modelling based
on an analysis of complementarity, were used in the study to estimate the welfare gains to
both countries. The results indicate that the welfare of the two countries would increase with
the conclusion of an FTA. The welfare gains for both the countries could be in the range of 0.15
and 1.14 per cent of Gross Domestic Product (GDP) for India and 0.23 and 1.17 per cent of GDP
for Australia. An Australia-India FTA could result in a modest positive impact on total global
economic output.
The Joint Study Group concludes that a bilateral FTA is feasible and it recommends that both
governments consider the negotiation of a comprehensive India-Australia FTA.
viii
1. Introduction
1
1.1
Background and Objectives of Study
The economic relationship between Australia and India has developed rapidly in recent years,
particularly under the impetus of India’s far-reaching process of economic reform and the
resulting rapid globalisation of the Indian economy. In recognition of the growing synergies
between the two economies, and the commitment on both sides to further enhance the economic
partnership, Australia and India agreed in April 2008 to undertake a feasibility study for a possible
bilateral Free Trade Agreement (FTA). This would help inform a subsequent decision by the two
Governments about whether to proceed to FTA negotiations. In doing so, the study is without
prejudice to whether possible future FTA negotiations between Australia and India would take up
all issues in the forms considered in the study.
Terms of reference (TOR) for the study were developed and are set out in Annex A. Key elements of
the TOR are:
• To identify the benefits that India and Australia would derive from a WTO-consistent FTA;
• To assess the feasibility of a comprehensive FTA covering goods, services and investment as
well as other cross-cutting issues such as intellectual property, sanitary and phytosanitary
issues, technical barriers to trade, competition policy and government procurement;
• To assess prospects for expansion of trade in goods through liberalisation of tariffs and nontariff measures;
• To assess prospects for expansion of trade in services across a substantial range of sectors,
including through labour mobility and encouragement of mutual recognition arrangements;
• To explore how to create a favourable environment for investment in both directions; and
• To produce a report for consideration by Governments in the first half of 2009 or earlier.
A Free Trade Agreement (FTA), for the purposes of this Study, has a wide coverage including
goods, services and investment. In India, FTAs are commonly understood as goods-only
agreements whereas a Comprehensive Economic Cooperation Agreement (CECA) includes
goods, services, investment and other areas of cooperation. In Australia, FTAs are understood
as comprehensive agreements.
1.2 Approach of Study
The feasibility study was undertaken by the Joint Study Group (JSG) which held its meetings, with
co-chairs from the Indian Department of Commerce and the Australian Department of Foreign
Affairs and Trade. The JSG met four times between April 2008 and September 2009. It conducted
much of its work through inter-sessional contact and exchange of material between the two
departments. Both sides undertook consultations with business and other stakeholders. Written
submissions were invited and received. Economic modelling was conducted by both India and
Australia, with details provided in Annex B and C.
2
2. Overview of Indian and Australian Economies
3
Overview of Indian and Australian Economics
To set the context for the Joint Study Report, this chapter provides an overview of the Indian and
Australian economies, including their global trade and investment.
Table 2.1 puts recent macroeconomic and trade data for both countries in a broader comparative
context. It is evident that the two economies are different in various ways and similar in others.
Such similarities and divergences may provide avenues for economic interactions and cooperation.
The present joint study is an endeavour to explore such possibilities and to suggest ways and
means to harness economic synergies to the maximum extent feasible.
TABLE 2.1 | BROAD MACROECONOMIC AND TRADE INDICATORS: AUSTRALIA AND INDIA
BROAD MACROECONOMIC AND TRADE INDICATORS: AUSTRALIA AND INDIA
AUSTRALIA
GDP, average annual growth, 2004-2009, per cent
2.9
8.4
GDP, current prices, US$ billion (2009)
996
1,243
45,157
1,033
GDP per capita, current prices, US$ (2009)
Structure of output, per cent (2009)
Agriculture
2.9
14.9
Industry
26.6
28.3
9.1
15.9
of which manufacturing
Services
Population, million (2009)
62.7
56.8
22
1,203
Rural population as per cent of total (2007)
11
71
Life expectancy at birth, years (2007)
81
65
Educational enrolment, tertiary, per cent
73
12
Exports, US$ billion (2009)
Goods and services
198
198
Goods
155
163
Services
42
35
Goods and services
204
326
Goods
161
273
Services
43
54
Imports, US$ billion (2009)
Sources: Australia Bureau of Statistics, IMF World Economic Outlook, World Bank World Tables on dX Data,
Economist Intelligence Unit, DFAT STARS, CEIC database
4
INDIA
2.1 Indian Economy
The Indian economy has remained on the high growth path of recent years, despite some
moderation in recent growth projections. (See Chart 2.1) After independence, India followed the
system of a command and control economy to implement the development policies outlined in
the Five Year Plans. The principal objectives were to increase aggregate consumption, reduce
unemployment, work towards self-reliance and self-sufficiency, and reduce social disparities.
The priority among these objectives changed from plan to plan.
CHART 2.1 | GDP GROWTH IN AUSTRALIA AND INDIA
12
10
Per cent
8
6
4
2
0
Australia
India
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
-2
(a)
(a) Consensus Forecast for India
Source: International Monetary Fund, World Economic Outlook Database, October 2009
Australia: ABS, Cat 5206.0, Dec 2009, Original: CVM: Gross domestic product: ANNUAL: PCTCHG
Some policy reforms had been initiated in the 1980s, but it was not a sustained and continuous
process. The trend towards a liberal economic policy gathered steam in the early 1990s when the
Government of India announced a series of packages for autonomous structural policy reforms.
These policy reforms, guided by the need to raise productivity and economic growth, were in
part a response to the process of globalisation. The reforms were aimed at improving internal
and external competitiveness through greater private sector participation and provision of more
appropriate incentives alongside prudent governmental regulatory structures.
These policy changes were accomplished by structural reforms in the form of industrial
deregulation, tariff reduction and de-licensing policies, increasing opportunities for foreign direct
investment, public enterprise reforms and social sector policies. The main objective of these
reforms was to re-orient the Indian economy so as to make it open to market-driven forces with
the role of the State as a facilitator. The reforms were carried out in many segments of economic
activity, though their coverage and depth varied from sector to sector.
The economic reforms of the early 1990s led to an initial spurt in output growth to over 7 per cent a
year during the first phase of reforms (1992–93 to 1996–97), fuelled by growth in the industrial and
services sectors. Substantial reforms in key sectors subsequently helped shift the growth rate to
an average of 8.94 per cent per annum during the later period 2003–04 to 2007–08.2
2 Growth rate in NDP. Source: Government of India Economic Survey 2008-2009.
5
The growth rate in trade has been an integral part of India’s success story. In 1992–93,
merchandise exports were US$18.5 billion, with the compound annual growth rate touching
around 9.83 per cent per annum during 1992–2000. The acceleration in the growth of exports in
recent years has been remarkable. Total exports nearly tripled between 2001–02 and 2006–07,
with an annual growth rate of 20.81 per cent per annum during 2000–08.
The share of agriculture in output has been consistently declining. On the other hand, services has
been one of the most dynamic and strongly growing areas for India in the past decade, and has
emerged as the largest sector with a high growth rate and a more than 55 per cent share in total
real output (GDP). The emergence of India as one of the fastest growing economies in the world
during the 1990s was attributable in significant part to the rapid growth of its services sector,
which grew at an annual average of 10 per cent. In services, India pursued significant reforms,
especially in telecommunications, financial services and, to some extent, in infrastructure services,
such as power and transport.
In 2008, India was the tenth-largest services exporter in the world and the eighteenth-largest
services importer. India’s services-led export boom over the last decade fully offset India’s net
merchandise trade deficit until 20073. The result also has been that, with growth of over 17 per
cent annually in the 1990s, India’s services exports have experienced one of the fastest global
growth rates, well ahead of the world average of 5.6 per cent. This was led by exports of software
and IT-related services which have grown at around 46 per cent per year since the mid-1990s.
Services exports from India have continued to be one of the main sources of foreign exchange
earnings in the country and the sectors which have seen higher growth have included: software;
IT-enabled Services (ITeS), including financial IT services; and Business Process Outsourcing
(BPO); as well as emerging areas such as healthcare (in particular diagnostics and surgery);
telecommunications; and professional services.
India’s developmental trajectory, therefore, owes much to the broad-based growth in the
services sector of the economy. Services have contributed around 69 per cent of the overall
average growth of GDP in the period 2002-03 to 2006–07. Interestingly, services falling under the
rubric of trade, hotels, transport and communications have clocked double digit growth (Table 2.2)
since 2003-04 except in 2008–09 (period of global slowdown).
TABLE 2.2 | GROWTH IN THE SERVICES SECTOR IN INDIA
YEAR
SERVICES
TRADE, HOTEL, TRANSPORT
AND COMMUNICATIONS
FINANCE, INSURANCE, REAL
ESTATE & BUSINESS SERVICES
4.07
2000–01
5.71
7.26
2001–02
6.85
9.19
7.28
2002–03
7.52
9.44
7.98
2003–04
8.84
12.02
5.58
2004–05
9.86
10.69
8.69
2005–06
11.20
12.11
11.39
2006–07
11.30
12.82
13.78
2007–08
10.77
12.39
11.75
2008–09
9.38
9.05
7.82
Source: Reserve Bank of India’s ‘Hand Book of Statistics on Indian Economy’
3 Directorate General of Commercial Intelligence and Statistics data and RBI estimates.
6
Services exports increased threefold during the last three years. Preliminary estimates indicate
that an annual growth of 26 per cent was achieved during 2008–09. Growth has been particularly
rapid in exports of software services, business services, financial services and communication
services.
In 2008, while India’s share and ranking in world merchandise exports were 1 per cent and 26th,
respectively, its share and ranking in world commercial services exports was 2.7 per cent and 10th,
respectively. Services exports grew much faster than merchandise exports and constituted almost
60 per cent of merchandise exports in 2005–06. The composition of India’s services exports and
growth in specific sectors is represented in Table 2.3.
TABLE 2.3 | INDIAN SERVICES EXPORTS (US$ MILLION)
INDIAN SERVICES EXPORTS (US$ MILLION)
1990
–91
%
SHARE
1994
–95
%
SHARE
2000
–01
%
SHARE
2005
–06
%
2007–
%
SHARE 08 (P) SHARE
Total Services Exports
4551
6135
18870
57659
90077
Travel
1456
32
2365
39
3168
17
7853
14
11349
13
Transportation
983
22
1696
28
1913
10
6325
11
10014
11
Insurance
Miscellaneous
111
2
152
2
257
1
1062
2
1639
2
2001
44
1953
32
13,532
72
42419
74
67075
74
of which
Software Services
23600
41
40300
45
Business Services
9307
16
16771
19
Financial Services
1575
3
3217
4
Communication Services
2182
4
2408
3
Source: For 2007–08 and update to previous year’s figures: RBI monthly bulletin of June 2009 (http://rbidocs.rbi.org.in/
rdocs/Bulletin/PDFs/T43_TCS0609.pdf) For 2005–06: RBI monthly bulletin of December 2007 (http://rbidocs.rbi.org.in/rdocs/
Bulletin/PDFs/82020.pdf).
In recent years, a sectoral shift within the spectrum of service exports has also taken place.
The buoyant growth of professional, technical and business services have provided a cushion
against the slowdown in traditional services like travel and transportation. The relative share of
travel and transportation in India’s service exports has declined over the years.
While it is well known that Indian software services have been growing for some time, other
services such as management and consultancy, advertising and trade fairs, financial services,
architectural and engineering services are emerging as major foreign exchange earners
(see Table 2.4).
Business services, which also include legal, accounting and auditing services and environmental
services, achieved exports of US$12.9 billion in 2005–06 as against US$23.6 billion from
software services. This has been made possible because of the widespread expansion of the
telecommunications sector and the increasing digitisation of various services, making it possible
to supply services remotely. This is also referred to as Cross Border Supply (Mode 1).
7
TABLE 2.4 | INDIAN BUSINESS SERVICES EXPORTS 2005–06
EXPORTS OF BUSINESS SERVICES
2005–06 (US$ BILLION)
Architectural and engineering
3
Management and consultancy
1.6
Financial services
1.9
Source: NASSCOM
According to the Indian National Association of Software and Services Companies (NASSCOM),
US$10-15 billion of the US$750 billion spent globally on engineering services is off-shored, and
India’s share is around 12 per cent of this offshore market. With the global spend in this sector
expected to grow to more than US$1 trillion, and outsourcing also expected to grow, Indian service
providers have tremendous opportunity to expand given that India has the single largest pool of
engineering talent among the emerging countries.
Finally, temporary movement of natural persons (Mode 4) is an area of significance for India’s
services trade. India’s service providers, particularly in some professional services and in
the information technology sector, have earned a reputation worldwide as providers of high
quality services.
The United States (US) and the United Kingdom (UK) are the key destinations for Indian service
exports. In the European Union (EU), India has a presence in the travel services imports of France
and Italy, while in East Asia it has a presence supplying transportation services in Hong Kong.
An emerging feature of India’s economy is the growing importation of services (see Table 2.5).
India’s import of services grew more than ten-fold during the period 1990-91 to 2005–06. The
rapid growth in the import of services is being fuelled by sustained 8 per cent plus economic
growth and increased engagement by India with the world economy. The growth in services
imports is spread across most sectors.
Imports of commercial services have become important in recent years reaching US$44 billion in
2006–07 with annual growth of 29 per cent. Business services are the most important category of
services imports, followed by transportation and travel. Business services grew by 121 per cent
in 2006–07.
Temporary movement of people to deliver services is an area of great importance for India given
the growing work-age population and increasing potential to supply services through movement of
skilled persons. India identifies several domestic laws and regulations that apply to free movement
of natural persons to Australia, including in relation to the ability of Indian service providers to
visit Australia for providing different types of services. There exist other issues including the
requirement for recognition of the qualifications and experience of professionals, and other
licensing/registration requirements.
8
TABLE 2.5 | INDIAN SERVICES IMPORTS (US$ MILLION)
INDIAN SERVICES IMPORTS (US$ MILLION)
1990
–91
%
SHARE
1994
–95
%
SHARE
2000
–01
%
SHARE
2005
–06
%
SHARE
200708 (P)
Total Services Imports
3571
5533
16392
34489
52512
%
SHARE
Travel
392
11
818
15
2874
18
6638
19
9254
18
Transportation
1093
31
1863
34
3170
19
8337
24
11514
22
Insurance
88
2
181
3
122
1
1116
3
1044
2
1998
56
2671
48
10226
62
18398
53
30700
58
of which
Software Services
1338
4
3058
6
Business Services
7748
22
16715
32
Financial Services
965
3
3138
6
Communication Services
289
1
859
2
Miscellaneous
Source: For 2008–09 and update to previous year’s figures: RBI monthly bulletin of June 2009 (http://rbidocs.rbi.org.in/
rdocs/Bulletin/PDFs/T43_TCS0609.pdf) For 2005–06: RBI monthly bulletin of December 2007 (http://rbidocs.rbi.org.in/rdocs/
Bulletin/PDFs/82020.pdf).
The higher GDP growth in India has been accompanied by an increase in the investment rate and a
somewhat larger increase in the savings rate. The rate of domestic investment increased to 36 per
cent of GDP in 2007. At the same time, the rate of gross domestic savings increased from 21 per
cent of GDP in the pre-reform period to around 36 per cent.
Among the different forms of foreign capital inflows, foreign direct investment (FDI) is the most
attractive type in a large emerging economic market like India. FDI in India has accelerated in
recent years due to the adoption of various reforms, development of better infrastructure and
emergence of a vibrant financial sector, among many other determinants. On a gross basis,
FDI inflows to India reached US$23 billion in 20074.
Investment in infrastructure development, however, remains a developmental challenge that will
need to be addressed to ensure sustained high economic growth rates in India into the future.
The Government of India gives priority to the development of infrastructure such as power, roads,
ports, telecommunications and civil aviation in addition to social infrastructure.
2.2 Australian Economy
Australia has a highly open, market-based and capital-intensive economy which is currently
enjoying a prolonged economic expansion, presently in its 18th year. It grew by an average of
3.5 per cent from the early 1990s to 2009, but the global financial crisis has had an impact on
rates of economic growth in Australia from late 2008 to 2009 (see Chart 2.1).
4 UNCTAD World Investment Report 2008.
9
The strong performance of the Australian economy in recent years has been underpinned
by a series of deep and wide-ranging economic reforms undertaken since the early 1980s.
Key reforms included the deregulation of foreign exchange markets (which resulted in the
floating of the Australian dollar), a comprehensive program of tariff liberalisation (reducing
the average tariff from over 10 per cent in 1980 to 3.5 per cent in 2008), financial market
deregulation, taxation reform and labour market reforms. Reforms have also resulted in the
levels of domestic industry support falling to among the lowest in the world. These measures
have collectively made the Australian economy highly flexible and resilient to economic shocks,
as was evident during the 1997 Asian financial crisis, and has been the case during the current
global financial crisis.
Australia’s economy has also undergone substantial structural change. While the traditional
agricultural and resource industries remain important export-focused sectors, the economy has
become predominantly services-based, with services accounting for 72.9 per cent of economic
activity in 2009 and over 85.6 per cent of employment. The relative share of manufacturing to
GDP has been declining steadily for some years (from 18 per cent in 1980 to around 9.1 per
cent currently). Agriculture constitutes only about 2.9 per cent of GDP, though it is much more
important in Australia’s exports where it contributes 10.2 per cent of the total.
Although Australia’s population of 22 million people is small by Indian standards, total economic
output is of a similar order of magnitude. Australian GDP per capita is consequently relatively high
at almost US$45,157 in 2009 (A$57,067).
Like all economies, the Australian economy was not immune to the effects of the global financial
crisis. Following growth of 2 per cent in 2008, and 1.4 per cent growth in 2009, the International
Monetary Fund forecasts 2.5 per cent growth in 2010 and 3 per cent growth in 2011.
While unemployment fell from a peak of almost 11 per cent 15 years ago to 4.3 per cent in October
2008 – the lowest level since the 1970s – it has since risen to over 5 per cent with the effect of the
global financial crisis.
Australia relies heavily on imports for a wide range of products, and has a relatively high trade
intensity (defined as total trade of goods and services) of 40 per cent of GDP.
Globally, Australia ranked 21st as an importer of goods in 2008. Australia’s imports have
expanded rapidly in recent years, largely reflecting strong growth in the economy. Imports of
goods made up around 79 per cent of total imports in 2009, with services imports constituting
around 21 per cent. Imports of goods are dominated by manufactures, which made up 74 per
cent of total merchandise imports in 2009. Fuels constituted a further 16 per cent of merchandise
imports. The top ten global goods and services imports in 2009 were: personal travel services
(excluding education); crude petroleum; refined petroleum; passenger motor vehicles; gold; freight
transportation services; passenger transportation services; telecommunications equipment;
medicaments; and goods vehicles.
Globally, Australia ranked 23rd as a merchandise exporter in 2008. Australia’s export mix is
different from most other developed economies, as a result of a small population and modest
industrial base but with significant, easily extractable natural resources (minerals and fuels
make up the largest share of exports (41 per cent in 2009), with rural products constituting
a further 11 per cent). Services account for around 21 per cent of exports. The importance of
minerals, fuels and services in Australia’s exports is illustrated by the top ten exports in 2009,
that include coal; iron ore; education services; gold; personal travel services (excluding education);
crude petroleum; natural gas; aluminium ores; beef; and aluminium. However, Australia also
10
has a significant manufacturing sector, with manufactured goods accounting for around 16 per
cent of total exports and elaborately transformed manufactures making up 69 per cent of total
manufactured exports in 2009.
Foreign investment has played a key role in the development of the Australian economy, with
foreign capital helping to fund the development of Australia’s agricultural industries in the 1960s
and 1970s. More recently, foreign investment has focused on Australia’s booming resources sector
and has been important in providing the capital to open new mines, build new infrastructure and
expand Australia’s export capacity. The stock of FDI in Australia reached US$427 billion at the end
of December 2009, with a further US$980 billion in portfolio investment. Since the deregulation
of Australia’s foreign exchange markets in the 1980s, Australian companies and superannuation
funds have also become increasingly active investors in other countries. Australian direct
investment abroad totalled US$349 billion at the end of December 2009, with portfolio investment
amounting to a further US$383 billion.5 Australia is home to the fourth-largest investment fund
asset pool in the world (with a total investment fund pool of around US$1.3 trillion in the December
quarter in 2009).
2.3 Institutional Framework for Economic Cooperation
The premier trade and economic institutional link between Australia and India is the Joint
Ministerial Commission. It is an annual meeting between Australia’s Minister for Trade and
India’s Minister for Commerce and Industry which aims to strengthen bilateral economic
cooperation. It is normally preceded by an associated senior officials meeting.
The importance of the Australia-India economic relationship was underscored by the signing of a
bilateral Trade and Economic Framework (TEF) in March 2006. A number of sector-specific working
groups take forward the economic relationship across a broad front under the Trade and Economic
Framework (TEF). The TEF provides a government-to-government structure for promoting
economic development in key areas including energy and mining, infrastructure development,
information and communication technology, services, agriculture and biotechnology. The sectorspecific working groups include:
• The Joint Working Group on Minerals and Energy (led by Australia’s Department of Resources,
Energy and Tourism and India’s Ministry of Mines representing four other Indian Ministries
– Ministries for Coal, New and Renewable Energy, Petroleum and Natural Gas and Power.
The sixth Joint Working Group Meeting took place in March 2009);
• The Joint Working Group on Education and Training (led by Australia’s Department of
Education, Employment and Workplace Relations and India’s Ministry of Human Resource
Development – Agreement for an Education Exchange Programme on Cooperation in
Education and Training signed in 2003);
• The Joint Working Group on Information, Communications and Technology (led by Australia’s
Department of Broadband, Communications and the Digital Economy and India’s Ministry
of Communications and Information Technology – Memorandum of Understanding (MOU)
signed in 2005);
5 ABS 5302.0 Table 26 and 27.
11
• The Joint Working Group on Tourism (led by Australia’s Department of Resources, Energy and
Tourism and India’s Ministry of Tourism – MOU signed in 2002);
• The Joint Science and Technology Committee (led by Australia’s Department of Innovation,
Industry, Science and Research and India’s Department of Science and Technology – MOU
renewed in 2003);
• The Joint Biotechnology Committee (led by Australia’s Department of Innovation, Industry,
Science and Research and India’s Department of Biotechnology – MOU signed in 2006); and
• The Joint Working Group on Visa, Passport and Consular Issues (led by Australia’s Department
of Immigration and Citizenship and India’s Ministry of External Affairs).
Many other Australian and Indian agencies are fostering links that can aid the economic
relationship. A number of agencies have recently agreed MOUs to enhance bilateral cooperation:
• IP Australia and India’s Office of the Controller of Patents, Designs and Trademarks (MOU
signed in 2008);
• Australia’s Commonwealth Scientific and Industrial Research Organisation and India’s
Council of Scientific and Industrial Research (MOU signed in 2008); and
• Australia’s Customs Service and India’s Central Board of Excise and Customs (MOU
signed in 2006).
Air services between Australia and India are governed by an Air Services Agreement signed in
2006 and supplemented by a Memorandum of Understanding between aeronautical authorities
signed in 2004 (see Chapter 6.3.8 Air Services).
Senior officials in Australia’s Treasury and India’s Ministry of Finance established an annual
economic policy dialogue in 2008. This group shares experiences in relation to economic reform,
and exchanges information on financial sectors, regulatory architecture and the tax regimes in the
two countries.
A Double Taxation Agreement between Australia and India was agreed in 1991 to avoid duplication of
taxation payments and fiscal evasion of taxation. An Agreement on the Promotion and Protection of
Investment was concluded in 2000 to promote favourable conditions for investors seeking to invest
in the other country.
Agricultural cooperation is becoming an increasingly important part of Australia’s relationship with
India. Bilateral discussions on agriculture to progress each country’s market access issues are
conducted between relevant agencies. Australia and India have established an arrangement for the
recognition of certification of food inspection systems covering fish and fisheries products exported
from India to Australia.
A number of Australian states have established trade offices in India – Western Australia has an
office in Mumbai and South Australia has established an office in Chennai. Some Australian states
have signed MOUs with Indian states:
• The State Government of Victoria signed an MOU with the Indian State of Karnataka in 2005,
which aims to establish stronger links in education, tourism, Information Communication
Technologies (ICT), manufacturing and biotechnology, and has established an office in
Bangalore; and
12
• The State Government of Queensland signed an MOU with the Indian State of Karnataka
in 2003, which aims to promote trade and investment between the two States in tourism
infrastructure, bio-sciences, agribusiness, mining services and transport infrastructure, and
has established an office in Bangalore.
In addition, the State Government of Western Australia signed an MOU with the Sports Authority of
India (SAI) in 2004, and it has also signed an MOU covering minerals with the Government of India
(the Indian Environment and Forests Ministry, Mines Department and Indian Mineral Federation),
together with the Chamber of Minerals and Energy of Western Australia.
The State Government of South Australia signed a sister state agreement with the Indian State of
Tamil Nadu in 2006.
Business-to-business collaboration is an important facet of the economic relationship. The
Australia-India Business Council (AIBC) was set up in 1986. The AIBC has representatives and
members across all Australian states and territories. It aims to help its members capture the
benefits of the expanding trade between the two countries. In India, the Australia- New Zealand
Business Association in India (ANZBAI) assists business-to-business links and meets regularly in
New Delhi and Mumbai. The India-Australia Chamber of Commerce in Chennai is another important
organisation that brings together businesses from the two countries.
The Australia-India Council (AIC) was founded in 1992, and works closely with its counterpart in
India, the India-Australia Council. Its purpose is to broaden the relationship between Australia
and India by encouraging and supporting contacts and increasing levels of knowledge and
understanding between the peoples and institutions of the two countries. The Council initiates or
supports a range of activities designed to promote a greater awareness of Australia in India and a
greater awareness of India in Australia, including visits and exchanges between the two countries,
development of institutional links, and support for studies in each country of the other.
The Australian and Indian Governments have also supported the establishment of an AustraliaIndia Chief Executive Officers Forum.
Australia and India are committed to multilateral and regional economic cooperation processes
and work together in various fora. The two countries are members of the East Asia Summit (EAS)
which is examining a possible Comprehensive Economic Partnership in East Asia (CEPEA). India
and Australia are members of the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC),
which was established in 1997 to facilitate and promote economic cooperation among Indian Ocean
Rim countries, as well as Asia-Europe Meeting (ASEM).
Australia has recently been granted observer status at the South Asian Association for Regional
Cooperation (SAARC). This will provide another forum in which Australia and India can engage
on economic issues of shared interest. Such a partnership could assist the process of regional
economic integration. Australia is a member of the Asia Pacific Economic Community (APEC) and
is keen to see India become a member after the new membership moratorium ends in 2010.
13
14
3. Australia – India Trade Relationship
15
Bilateral Trade
3.1
Overview
Trade between Australia and India has grown strongly over recent decades, with a particularly
sharp upswing since 2002 (see Chart 3.1). Two-way trade between Australia and India in 2008–09
reached US$16 billion, of which goods trade was the largest component, at US$12.9 billion. Twoway services trade has risen markedly off a low base and amounted to US$3.1 billion in 2008–09.
The growth in trade between India and Australia is based on the complementarities between the
two economies. India has been able to use Australian exports of items, such as iron ore and coal,
to meet its growing economic demands, fill infrastructure gaps and as inputs to its own exports.
Australian companies have gained productivity and cost benefits from India’s services industries.
Rising Indian investment in Australia, including in areas as diverse as coal and copper mining,
software development and biotechnology, has also underpinned a new dimension in bilateral
goods and services trade. Similarly, increasing Australian investment in Indian sectors such as
infrastructure, financial services, telecommunications and mining are boosting important sectors
of the Indian economy.
CHART 3.1 | AUSTRALIA’S TRADE WITH INDIA IN GOODS AND SERVICES
15,000
12,500
Exports
US$ million
10,000
7,500
5,000
2,500
0
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
(a) Trade in goods is on a recorded trade basis.
(b) Financial year ending 30 June.
Source: ABS trade data from DFAT, STARS database & ABS Cat. 5368.0, December 2009
Bilateral trade cooperation has assumed new significance in the wake of the global economic
crisis which has led to a dramatic deterioration in the world economic outlook and slower
growth in both India and Australia, which has the potential to impact on future trade between
Australia and India.
16
3.2
Australia’s Exports to India
India is one of the fastest growing of all Australia’s major markets for both goods and services,
with exports growing at an annual average rate of 25 per cent during the five years to 2008–09.
In 2008–09, India was Australia’s fourth-largest goods export market and its fifth-largest services
export market. Australia is an increasingly important source of goods imports for India, with its
share increasing from 2.4 per cent of total imports in 2001 to 3.5 per cent in 2008.
Merchandise Exports
Table 3.1 shows Australia’s top merchandise exports to India in 2008–09. Commodity exports
dominate, consistent with the traditional pattern of trade. Coal, gold, and copper were
Australia’s three principal exports, with fertilisers, manganese, wool, aluminium, vegetables
and lead also significant.
While Australia’s main exports are commodities, manufactured goods exports (including semimanufactured gold) to India have also been growing strongly. Manufactured exports have grown
to US$5,169 million in 2008–09 – displaying an average annual growth of over 21 per cent over the
last 5 years.
The main products in which there is current growth for Australia’s manufactured exports to India
include fertilisers, aluminium, machinery, aircraft and associated equipment, and perfumery and
cosmetics or toilet preparations. The main imports from India where there has been significant
growth include machinery, and pharmaceutical products.
It is interesting to note that the bilateral trade relationship between Australia and India is
to a significant extent characterised by India’s imports from Australia of raw materials and
intermediate products which are used by India to produce final goods for exports, a part of which
in turn is imported from India by Australia. This export-import linkage between the two countries
is illustrated below.
For example some Australian merchandise goods are essential to India’s jewellery industry.
Australia exports to India significant quantities of diamonds (through a third country) and gold.
At the same time, India’s jewellery exports to the world have increased markedly from US$1700
in 2003 to US$7441 in 2008, including to Australia, which imported US$47 million in 2008 (up from
US$12 million in 2003).
Australia’s wool exports to India have also played an important role as an input to India’s
exports. India is Australia’s third largest export market for wool with exports of US$98 million in
2008–09 representing around 50 per cent of India’s wool imports. India uses Australian wool to
make clothing and textiles exported around the world. Australia imported textiles, clothing and
footwear from India totalling US$239 million in 2008–09.
17
TABLE 3.1 | AUSTRALIA’S PRINCIPAL MERCHANDISE EXPORTS TO INDIA
HS
CODES
270112
2007–08
US$M
2008–09
US$M
Bituminous coal, whether or not pulverised, but not agglomerated
2,445
4,991
7108
Semi-manufactured gold
3,620
4,270
2603
Copper ores and concentrates
892
586
3105
Mineral or chemical fertilisers
44
365
9999
Confidential items3 (incl wheat,
155
223
2602
Manganese ores and concentrates
73
117
5101
Wool, not carded or combed
129
98
071320
Dried shelled chickpeas (garbanzos)
42
88
7601
Unwrought aluminium
13
76
7801
Unwrought lead
79
73
2704
Coke and semi-coke of coal, of lignite or of peat, whether or not
agglomerated; retort carbon
41
62
7204
Ferrous waste & scrap, remelting scrap ingots of iron or steel
58
54
0802
Other nuts, fresh or dried, whether or not shelled or peeled
19
39
7407
Copper bars, rods and profiles
80
39
2709
Petroleum oils and oils obtained from bituminous minerals, crude
157
36
7602
Aluminium waste and scrap
42
32
7408
Copper wire
13
22
Pigments and preparations based on titanium dioxide
23
21
7
16
320611
8474
071310
Machinery for sorting, screening, grinding, mixing etc. of mineral substances
Dried shelled peas (Pisum sativum)
Total merchandise exports
17
14
8,383
11,610
Source: DFAT, STARS database consistent with ABS Cat 5368.0, February 2010
Services Exports
As with merchandise exports, services exports to India have grown rapidly, from US$306 million in
2002–03 to US$2.5 billion in 2008–09.
Australia’s dominant services export to India in 2008–09 was education related travel services
(US$2.1 billion), a reflection of the number of Indian students studying in Australia.
It is important to note that services trade data does not take account of services delivered by
Australian companies with a commercial presence in India. Australian companies have established
a presence in a range of Indian services sectors such as engineering, infrastructure design, health,
financial services and mining services industries.
18
TABLE 3.2 | AUSTRALIA’S SERVICES EXPORTS TO INDIA
Travel services:
2007–08
(US$M)
2008–09
(US$M)
2,253
2,322
1,765
2,076
Personal travel excluding education
166
147
Business
104
99
Education related
Transportation services
77
61
Personal, cultural & recreational services
46
34
Business services
50
31
Telecom. computer & information services
24
21
Insurance & pension services
5
7
Charges for the use of Intellectual property n.i.e.
5
4
Source: ABS Cat No. 5368.0 International Trade in Goods and Services, Australia. Consistent with September 2009
3.3
India’s Exports to Australia
Australia is an increasingly important destination for Indian exports. In 2008, India’s goods
exports to Australia reached US$1.45 billion, while its services exports to Australia were almost
US$529 million.
Merchandise Exports
Australia is India’s 14th-largest trading partner in terms of India’s total merchandise trade (2008).
Australia ranked 34th as a destination of India’s total goods exports, which amounted to US$1.45
billion (A$1.7 billion) in 2008.
While increasing in value over the period (see Chart 3.3), India’s exports to Australia as a
proportion of India’s total exports declined over the period 1990 to 2007 as shown in Chart 3.4,
from 1.44 per cent in 1991-92 to 0.73 per cent in 2006-20086 (although, on a calendar basis, Indian
exports to Australia as a proportion of India’s total exports rose slightly between 2006 and 2008).
The trend to 2006 reflects the rapid growth in Indian exports to other markets, including services
to the US and resources to China.
6 Based on India’s Officials Trade Statistics; Government of India, Department of Commerce, MOC&I,
April 2008
19
CHART 3.3 | INDIA’S EXPORTS TO AUSTRALIA
2,500
2,000
US$ million
1,500
1,000
500
0
1999
2000
2001
2002
2003
2004
2005
Merchandise (a)
(a) Trade in goods is on a recorded trade basis
2006
2007
Services
2008
Total exports
Source of data: DGCI&S, Ministry of Commerce & ABS
Trade in goods is on a recorded trade basis, as at Apr 2010
Financial year ending 30 June.
Note: Services data is Australia’s imports from India and converted to USD using the IMF annual average exchange rate.
CHART 3.4 | INDIA’S EXPORTS TO AUSTRALIA AS A SHARE OF TOTAL
1.4
1.2
US$ million
1
0.8
0.6
0.4
0.2
0
1997
1998
1999
2000
2001
2002
2003
Year
Source: Ministry of Commerce and Industry, Government Of India
Note: Financial year ending 31 March.
20
2004
2005
2006
2007
2008
2009
India’s key merchandise exports to Australia by broad product groups are shown in Table 3.3.
The major product group in 2008–09 among India’s merchandise exports to Australia was
machinery and equipment, constituting a share of around 29 per cent. The other major items
in India’s exports to Australia included textiles and garments (14 per cent), gems and jewellery
(8 per cent), base metals (10 per cent), chemicals (12 per cent), vegetables products7 (7 per cent),
plastics and rubber (4 per cent) and leather and leather products (4 per cent). Over recent years
the percentage of textiles and garments from India as a proportion of Australia’s total merchandise
imports has fallen.
TABLE 3.3 | AUSTRALIA’S KEY IMPORTS FROM INDIA
AUSTRALIA’S KEY IMPORTS FROM INDIA
2006–07
US$M
2007–08
US$M
2008–09
US$M
123
320
449
Clothing
56
68
97
Diamonds, unmounted
83
96
84
Iron and steel products
45
53
68
Medicaments
26
41
53
Jewellery
30
55
44
Soft furnishing articles, including bedspreads
27
29
36
Carpets and rugs
29
36
35
Tea
23
25
27
Machinery & equipment
Leather apparel and clothing accessories
11
18
23
Miscellaneous & confidential items
24
19
22
Cases, bags and wallets
18
22
21
Rice
Heterocyclic compounds with nitrogen hetero-atom(s) only
Leather Footwear
8
15
19
12
11
16
9
15
15
15
11
14
Parts and accessories of motor vehicles
13
19
13
Worked building stone
14
17
13
Tractors
Furniture
11
15
13
Equipment for physical exercise
16
16
13
Source: DFAT, STARS database consistent with ABS Cat. 5368.0, Feb 2010
India’s market share of Australia’s imports divided into broad product groups is shown in Chart 3.5.
7 Based on WTO HS classifications, under which “vegetable products” include fruit, tea and coffee
and cereals.
21
CHART 3.5 | INDIA’S MARKET SHARE OF AUSTRALIA’S IMPORTS IN 2008–09
8.0
Per cent share
7.0
6.0
5.0
4.0
3.0
2.0
1.0
Works of art & confid items
Miscellaneous
manufactured articles
Arms & ammunition
Transport equipment
Optical & photographic & clocks
& musical instruments
Base metal products
Machinery & mechanical &
electrical equipment
Pearls
Stone & ceramic &
glass products
Textile products
Footwear & headgear &
Umbrellas & feather products
Wood products
Paper & paperboard
products
Raw hides & skins &
leather & fur skins
Plastic & rubber articles
Chemical products
Mineral products
Prepared foodstuffs
Vegetable products
Animal or vegetables
fats oils & waxes
Live animals
0.0
Source: DFAT, STARS database consistent with ABS Cat. 5368.0, Feb 2010
Services Exports
India exports a range of services to Australia, including ITeS, software and BPO – see Table 3.4.
India’s exports to Australia have grown over the last decade. The balance of services trade is in
Australia’s favour. The major Indian exports to Australia, by sector, are: travel services, IT and IT
enabled services and other business services.
The growth in travel services indicates increasing interest in India towards Australia as a tourist
destination, as well as travel from India to visit Indian origin residents in Australia or students from
India studying in Australia.
TABLE 3.4 | INDIA’S SERVICES EXPORTS TO AUSTRALIA
2007–08
(US$M)
Travel services:
2008–09
(US$M)
500
593
287
280
Business
60
39
Education related
10
10
5
109
Telecom. computer & information services
75
102
Business services
36
43
Insurance & pension services
23
6
3
3
Personal travel excluding education
Transport services
Personal, cultural & recreational services
Source: ABS Cat No. 5368.0 International Trade in Goods and Services, Australia. Consistent with September 2009.
NB. Data does not take account of services delivered by Indian companies with a commercial presence in Australia.
22
4. India – Australia Investment Relationship
23
Investment Linkages
4.1
Overview
Australia has a long history as a destination for global investment, particularly FDI, while India has
increasingly emerged as a major FDI destination over the past two decades. This chapter outlines
two-way investment to allow the report to examine the potential for bilateral investment flows to
be enhanced through a possible FTA in a subsequent chapter.
4.2
Australian Investment in India
Total FDI into India since the onset of the Indian liberalisation process has reached US$133.6
billion up to June 2009.
India’s FDI policy has been liberalised in recent years as a result of a comprehensive review of
policy in 2006, including liberalisation of a number of sectors in 2008 and the revision of norms
for calculation of total foreign investment and for transfer of ownership and control from resident
Indian citizens to non-resident entities in 2009. The result has been a marked upswing in FDI
inflows, from US$2.22 billion in 2003–04 to US$24.58 billion in 2008–09.
An analysis of FDI flows into India from Australia reveals that investment from Australia has
risen off a low base (Table 4.1) since the announcement of India’s new industrial policy in
August 1991. Australia’s FDI in India as a percentage of total Indian FDI has remained low and
relatively constant.
TABLE 4.1 | FDI FROM AUSTRALIA TO INDIA
SL
NO
YEAR
FDI FROM AUSTRALIA IN
US$ MILLION
%AGE OF INDIA’S
TOTAL FDI
From 1991 to Dec.1999
68.51
1
2000
9.50
0.33
2
2001
14.07
0.38
3
2002
18.42
0.49
4
2003
19.90
0.79
0.43
5
2004
18.45
0.49
6
2005
5.95
0.14
7
2006
41.04
0.37
8
2007
43.81
0.23
9
2008
71.39
0.22
10
2009
21.20
0.20
Grand Total
332.24
0.30
Source: India FDI Fact-sheet, DIPP, Government of India, April 2009
Table 4.2 shows the principal Indian sectors receiving Australian FDI inflows. Australian
investment has benefited India’s metallurgical industries, services, telecoms, consultancy and
hotel and tourism sectors.
24
TABLE 4.2 | P
RINCIPAL SECTORS IN INDIA ATTRACTING FDI INFLOWS FROM AUSTRALIA
FROM 2000 TO 2009
S.NO
SECTOR
VALUE OF FDI INFLOWS
(US $ MN.)
(IN US$)
SHARE OF SECTOR IN
AUSTRALIA’S TOTAL FDI
IN INDIA %
1
Services Sector
62.31
23.63
2
Metallurgical Industries
56.04
21.25
3
Telecommunications
36.69
13.91
4
Consultancy Services
15.70
5.95
5
Automobile Industry
15.40
5.84
186.14
70.58
Total
Note: amount includes inflows received through FIPB/SIA, acquisition of existing shares and the RBI’s automatic route
Source: India FDI Fact-sheet, DIPP, Government of India, April 2009
Box 1: Tata BlueScope Steel
An equal joint venture between Tata Steel of India and BlueScope Steel of Australia, Tata
BlueScope Steel was formed to promote steel usage in the construction industry in the
South Asian region. It is a good example of the powerful synergies which can be achieved
when Australian and Indian firms partner for joint ventures. In the short time since starting
its operations in India, the company has generated new employment in India through its new
Indian factories.
The Australian company, BlueScope Steel was keen to expand its Asian and global footprint,
and in order to do that, it chose to partner with a strong Indian company that shared the
same fundamental values. Tata Steel was also looking for a strong like-minded partner.
Tata Steel is the world’s 6th largest steel company, the world’s second most geographicallydiversified steel producer and a Fortune 500 Company. The technical expertise of BlueScope
Steel combined with the local knowledge and reach of Tata Steel have proved to be a winning
formula for a diverse market.
Source: Tata BlueScope Steel (Chennai facility)
25
Box 1 (continued)
Tata BlueScope Steel has three business divisions, the Building Solutions, Building
Products and Distribution and the Coated Steel division. The Buildings Solutions
business markets pre-engineered buildings, the Building Products and Distribution
business markets roll-formed roof and wall cladding solutions and related building
components and the Coated Steel business markets metallic coated and pre-painted
steel, for the building and construction industry.
Tata BlueScope Steel’s Buildings Division, which comprises Building Solutions and
Building Products and Distribution divisions, has three manufacturing facilities located at
Pune, Chennai and Bhiwadi and a network of 20 sales offices. They produce pre-engineered
steel buildings and a range of other steel building solutions. Coated steel products include
pre-painted steel and metallic coated steel. The coated steel manufacturing facility at
Jamshedpur will be operational from the first quarter of 2010. This facility will have
an annual metallic coating capacity of 250,000 million tonnes and paint line capacity of
150,000 million tonnes.
4.3
Indian Investment in Australia
As a highly globalised economy, Australia is a major destination for foreign investment. At the
end of December 2009, the total level (i.e. accumulative stock) of foreign investment in Australia
was US$1729 billion, and the total level of inward FDI was $427 billion.
Historically Indian investment in Australia has been low and below levels which might be
expected between two economies with such strong complementarities, as reflected in the strength
of growth in trade. With the recent opening of the Indian economy, however, flows of Indian
investment into Australia have been rising, albeit off a low base. The stock of inward investment
(including portfolio investment) increased almost nine-fold to approximately US$758 million
during the period 2002-078 reflecting average annual growth of 55 per cent.
FDI forms only a relatively small portion of total two way investment and is relatively low in both
directions. The stock of India-sourced FDI in Australia was around US$48 million in 2008, while
the total stock of India-sourced foreign investment into Australia was US$481 million in 2006.
Australia is a more significant source as well as recipient of global FDI than India (Chart 4.1),
although Indian global FDI flows (inward and outward) are growing fast.
Chart 4.1 reveals the relative significance of bilateral FDI stocks for each country, as a proportion
of the total stock of FDI in each case.
8 DFAT estimate from published Australian Bureau of Statistics (ABS) data, based on historical cost.
26
CHART 4.1 | STOCK OF BILATERAL AUSTRALIA–INDIA FDI (PERCENTAGE OF TOTAL)
Stock of Australian FDI in India
Stock of Indian FDI in Australia
0.9
0.3
Per cent of total FDI stock
Per cent of total FDI stock
0.8
0.2
0.2
0.1
0.1
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
0.0
2001
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
As a percentage of global Indian inward FDI
As a percentage of global Indian outward FDI
As a percentage of global Australian outward FDI
As a percentage of global Australian inward FDI
Source: ABS 5352.0 (various years), UNCTAD Foreign Direct Investment Database (online) and CIE calculations (see footnote
28 of full Economic Modelling Report for fuller explanation of calculations).
Indian companies are required to obtain Indian Government approval before making significant
investments in other countries. Approved overseas investment by Indian corporations between
financial years 1999 to 2007, stands at over US$12 billion, with 42 per cent in the manufacturing
sector and 44 per cent in the financial and non-financial services sector. Actual outflows in
2006–07 were US$11 billion, with US$8.2 billion in non-financial services and US$3.7 billion in
the manufacturing sector.
As Chart 4.2 shows, Indian investment in Australia has increased in recent years. There are
now a number of high-profile Indian investments in Australia across the resources, hospitality,
manufacturing, software, banking and telecommunications sectors. The majority of Indian
investment in the Australian natural resources sector is aimed at establishing greater reliability
of supply for the rapidly growing Indian economy. Coal, copper, LNG and uranium exploration
are areas of particular interest for Indian investment in this sector. Indian software development
companies have a growing presence in Australia and are significant employers. Some Indian ICT
companies use their Australian offices to service Asian business clients.
27
CHART 4.2 | AUSTRALIA-INDIA INVESTMENT RELATIONSHIP
5,000
4,000
US$ million
3,000
2,000
1,000
0
(a)
2001
2002
2003
2004
2005
Stock of Indian investment in Australia
(a) DFAT estimate
Source: ABS, Cat. 5352.0, May 2008
28
2006
2007
2008
Stock of Australian investment in India
5. Liberalisation of Trade in Goods
29
5.1 Existing Trade Policies and Constraints
Australia and India enjoy a healthy economic relationship and there is scope to further
strengthen trade links. A range of tariff and non-tariff impediments to bilateral flows for trade
in goods remain, even taking into account the efforts India and Australia have undertaken to
reduce these barriers.
5.1.1 India
Within the ambit of trade liberalisation, reduction in import tariffs has remained central to India’s
broader economic reforms. The Government has continued to reduce applied Most Favoured
Nation (MFN) tariffs especially on non-agricultural products to meet its goal of reaching ASEAN
tariff levels on these products. Applied tariffs have steeply declined in India since its reforms of
the early 1990s. The overall average applied MFN tariff has fallen from over 32% in 2001-02 to less
than 16% in 2006–07, with the average tariffs for non-agricultural products at 12.1% a few years
back (WTO, Trade Policy Review: India, 2007). India’s peak customs duty (Table 5.1) has fallen to 10
percent in 2008–09. Customs duty as a percentage of imports has also declined tremendously over
the years, reflecting comprehensive tariff policy reforms. Furthermore, India abolished quantitative
restrictions (QRs) on her imports in 2000–01.
TABLE 5.1 | INDIA’S PEAK CUSTOMS DUTY REDUCTIONS
PEAK DUTIES (PER CENT)
CUSTOMS DUTY AS A PERCENTAGE
OF IMPORTS
1999-00
40
21.88
2000-01
38.5
21.25
2001-02
35
17.23
2002-03
30
15
YEAR
2003-04
25
13.6
2004-05
20
11.08
2005–06
15
9.64
2006–07
12
9.64
2008–09
10
9.65
2008–09
10
7.4
Source: Government of India, Economic Survey 2010 based on DGCI&S, Kolkata, Budget of Union of India and Budget
Speeches of Finance Minister.
5.1.2 Australia
Tariffs have been one of the main instruments of Australian economic policy since the nineteenth
century. However, since the 1980s, Australia has pursued successive rounds of unilateral tariff
reductions and applied tariffs are currently low by global standards. In 2010, Australia’s simple
average applied tariff (most favoured nation basis – MFN) was 3.1 per cent. Australia’s average
WTO bound tariff rate is 9.9 per cent and 97 per cent of Australian tariffs are bound. More than
30
96 per cent of Australia’s tariff lines were applied at an MFN rate of 5 per cent or less, with over
46 per cent of all tariff lines with tariff-free treatment on an MFN basis. Following unilateral tariff
reductions implemented on 1 January 2010, Australia now has 46 per cent of its tariff lines with
tariff-free treatment, and 96 per cent with tariffs of 5 per cent or less.
India is listed in Schedule 1 of the Customs Tariff Act 1995 as a developing country whose originating
goods may receive preferential rates of duty, known as ‘DCS’ rates of duty. As Australia applies
developing country preferential tariffs on a range of goods from India, the average applied tariff on
goods from India is 2.8 per cent, lower than the MFN average.
In February 2008, Australia announced a comprehensive government review of Australia’s export
policies and programs (the Mortimer Review). As part of this review, a group of experts considered
Australia’s approach to the negotiation of FTAs and proposed new benchmarks for the negotiation
of future FTAs. The review was completed in September 2008 and concluded that FTAs should form
an integral part of Australia’s future market access strategy and that Australia should pursue a
strategic FTA agenda. However in assessing possible future FTA partners, the Government should
consider several objectives, including the potential for achieving substantial trade liberalisation
in a more timely way than is possible through other negotiating mechanisms, the need to ensure
WTO consistency while also ensuring that agreements go beyond current WTO commitments and
the need to enhance foreign and security relations.
The Government’s ‘New Car Plan for a Greener Future’, released in November 2008, provides
a comprehensive plan to make the Australian automotive industry more economically and
environmentally sustainable. The Plan features a US$1.1 billion Green Car Innovation Fund to
stimulate research, development and commercialisation of technologies that significantly reduce
the fuel consumption and greenhouse gas emissions of passenger motor vehicles. Tariffs in
the Passenger Motor Vehicle sector fell to 5 per cent on 1 January 2010, giving Australia the
third lowest tariff regime among economies with a well developed automotive industry. Tariffs
in the Textiles, Clothing and Footwear (TCF) sector range between 5 and 10 per cent. Tariffs for
apparel and certain finished textile goods were reduced to 10 per cent on 1 January 2010 and are
scheduled to be reduced 5 per cent on 1 January 2015. In 2008 Australia’s imports of TCF products
from India were valued at approximately US$241 million, or 3 per cent of Australia’s total imports
of TCF products.
5.2 Impact of Liberalisation
India and Australia have carried out far-reaching trade liberalisation over recent decades. The next
two sections indicate that the trade liberalisation carried out to date has had net positive impacts
in both countries, indicating that further liberalisation associated with a bilateral FTA will benefit
the two economies.
5.2.1 Australia
Australia’s experience with trade liberalisation has been unambiguously positive. The economy has
been transformed since the mid-1980s as successive governments have moved to liberalise trade
and implement microeconomic reforms.
31
Tariffs were increased during the 1940s, 50s and 60s as governments sought to establish a
strong local manufacturing industry after the Second World War. However, in the early 1970s the
real costs of tariff protection had begun to be recognised. Australian industry fell behind world
best practice and annual productivity growth averaged just 2.7 per cent between 1950 and 1973,
compared with the Organisation for Economic Co-operation and Development (OECD) average of
3.8 per cent.
It was in this context in the mid-1980s that Australia commenced a process of trade and
economic reform which has delivered substantial benefits to the Australian economy and the
living standards of Australians. Key reform measures have included the removal of controls
on foreign exchange transactions, the floating of the Australian dollar, the reduction of tariffs,
the liberalisation of the banking sector, widespread competition reforms in non-traded product
markets (including transport, communications and utilities) and the move away from centralised
wage fixing in favour of enterprise-level bargaining, in some occupations, so that wage rises
reflect productivity gains.
Australia’s experience has been consistent with that of many other countries – as trade barriers
were lowered living standards rose. Since 1988, Australia’s trade-weighted average MFN tariff has
fallen from 15 per cent to 3.1 per cent. While tariffs have fallen, manufacturing output (industry
value added in chain volume terms) has grown by 27.5 per cent and the value of manufacturing
exports has risen almost four-fold. Overall employment grew by 2.9 million jobs between
December 1988 and December 2007 – a 46 per cent increase – and GDP per capita has risen
around 47 per cent in real terms to US$47,001 in 2008 (A$54,955).
Tariff liberalisation has also led to higher trade intensity in the economy. Exports of goods and
services now account for around 20 per cent of Australia’s total net output (GDP), up from 16 per
cent in 1988. In the automotive sector despite the reduction of tariffs, exports have risen strongly.
In the 1980s tariffs were as high as 57.5 per cent and vehicle exports were worth approximately
US$110 million (in 1988). By 2007, however, tariffs had been reduced to 10 per cent and vehicle
exports had risen to approximately US$3 billion.
Trade reform has helped lower the cost of capital goods and other inputs for business, increasing
the efficiency and international competitiveness of Australian industry. It has also given firms
access to the best available products produced globally. At the same time, Australian consumers
have been able to obtain a wider range of goods and services at lower prices, enhancing living
standards through greater choice and buying power.
Many of the reform measures to-date have been directed at inefficient behind-the-border
regulations and industry structures. Addressing such inefficiencies improves the domestic
business and investment environment by allowing markets to operate as efficiently as possible
and lowering the cost of doing business. Removing unnecessary regulation and facilitating
competition in domestic markets remains a high priority for the Australian Government.
Domestic reform creates productivity growth which in turn lifts living standards and enhances
international competitiveness. As a result, Australia has been able to maximise the economic
gains from its participation in the increasingly globalised trading system (see Box 2 below).
A 2006 OECD report cites Australia’s approach to regulation as a best practice benchmark for
other OECD countries.
32
Box 2: Australia’s Dairy Industry
The Australian dairy sector provides a good example of the positive impact of reform on
international competitiveness and export growth.
Until the 1980s, the dairy industry was highly protected. Federal and State Governments
maintained price support programs and strict regulations to ensure constant supply and to
regulate the price of milk on the domestic market. Farmgate prices were fixed by law and
trading between regions was restricted. Milk sold for processing and subsequent export
received a lower price than milk sold for consumption on the domestic fresh milk market
– discouraging exports. Governments paid out large amounts of public funds in industry
support and consumers and industry paid premium prices for milk and other dairy products.
Reform of the dairy sector was initiated by the Australian Government in the late 1980s with
a series of deregulation measures leading to complete liberalisation of both federal and
state regulation of both domestic and export markets. All price support mechanisms were
removed in July 2000.
Consumers gained immediately. In the first year of the fully deregulated market, the
average price received for milk declined by 18 per cent in the state of Queensland and
12 per cent in New South Wales. A consumer-funded restructuring package was provided
by the Australian Government, in consultation with industry, to help the sector adjust to the
pressures of the deregulated trading environment. Farms consolidated, grew in size and
became more efficient and productive. Herds expanded and approaches to feed, pasture
management, fertilizers and irrigation were all streamlined. Producers have become
more cost efficient and innovative, recognising the need to compete for a share of the
consumer dollar.
The reforms, though complex, ultimately helped Australia push down its costs of production,
to the point where the state of Victoria is now the second largest dairy exporter in the world
after New Zealand. In 2008–09, Australia’s dairy exports were worth US$1.9 billion.
Australia has undertaken successful economic reform, with short term costs being outweighed
by medium and long term benefits. Broad community support for reforms and the introduction of
appropriate adjustment packages have underpinned the success of economic reform in Australia.
As a consequence, Australian business and the community more broadly, generally accept that
further economic reform, including trade and investment reform, can provide benefits. However,
industry and consumer support for specific reforms, including those negotiated in any future high
quality FTA with India, will be subject to an assessment that the medium to long-term benefits of
further liberalisation in Australia and the additional access provided in the Indian market outweigh
the shorter-term costs of adjustment. A comprehensive and transparent explanation of the costs
and benefits is necessary if broad community support is to be forthcoming.
33
5.2.2 India
It is widely recognised that India’s highly protective trade regime, which was in existence before
the trade reforms of the 1990s, created anti-export bias which had an adverse effect on India’s
export performance, however this was attuned to the imperatives of India’s economic development
and stage of development then. The subsequent liberalisation of imports and reduction in tariffs
significantly reduced this anti-export bias. Reductions in tariff rates and removal of quantitative
restriction in this period were accompanied by rapid export growth. India’s total exports of goods
rose from US$18 billion in 1991 to US$123.6 billion in 2006.
In the early 1990s, some important export incentives were either rationalised or abolished along
with devaluation of the Rupee.
India has had a consistent policy of moving towards comparable East Asian tariff rates. In February
2007, India announced a reduction in the peak rate for non-agricultural products from 12.5 per
cent to 10 per cent.
5.3 Sector Analysis
5.3.1 Manufactures
Manufacturing goods trade
India’s largest export sector in its trade with Australia is manufacturing. Indian manufacturing
exports rose from US$386 million in 1996-97 to US$745 million in 2006–07, constituting around
80 per cent of India’s total exports to Australia.
While Australia’s manufactured exports (including non-monetary processed gold) to India are
substantial, at around US$3.4 billion in 2006, they constituted a somewhat smaller portion (52 per
cent) of Australia’s total exports to India during that year.
Major product groups in India’s exports to Australia (during 2006–07) were textiles and garments,
base metals, gems and jewellery and machinery as shown in Chart 5.1. The composition of India’s
export basket to Australia is not significantly different from India’s global export profile. However,
the profile of India’s exports to Australia has significantly changed over time. In 2000–01, textiles
and garments constituted 40 per cent of India’s manufacturing exports to Australia, but declined
to 22 per cent in 2006–07. Base metals, gems and jewellery and machinery have shown significant
increases over the same period.
Australia’s largest manufacturing export to India is non-monetary processed gold, which
represented 83 per cent of Australian manufactured exports in 2008–09. Other key manufactures
that Australia exports to India are fertilisers, base metals, paints, machinery and instruments,
electronic circuits and perfumery and cosmetics (see Chart 5.2 which compares main Australian
manufactured exports to India with its exports of those products to the world).
34
CHART 5.1 | INDIAN EXPORTS BY PRODUCT GROUP (TO THE WORLD AND AUSTRALIA)
PERCENTAGE SHARE (2006–07)
25
To the world
To Australia
Percentage of total
20
15
10
5
Works of art
Arms
Other
manufactured
Instruments
Vehicles
Metals
Machinery,
electrical
Jewellery
Stone/glass
Textiles
Footwear
Wood
products
Wood/pulp,
paper
Plastics
Animal hides
Chemicals
Minerals
Foodstuffs
Animal/
vegetable fats
Vegetable
products
Live animals
0
Source of data: Department of Commerce, Government of India
CHART 5.2 | AUSTRALIA’S TOP 10 MANUFACTURES (EXCLUDING GOLD) TO INDIA & WORLD
2008–09
45
40
% share
35
30
25
20
15
10
5
Share of Australia’s exports to the World
Perfumery & cosmetics
(excl soap)
Nickel
Aircraft, spacecraft
& parts
Measuring & analysing
instruments
Pigments, paints
& varnishes
Specialised machinery
& parts
Copper
Lead
Aluminium
Fertilisers
0
Share of Australia’s exports to India
Source: DFAT, STARS database consistent with ABS Cat. 5368.0, Feb 2010.
Tariffs and other measures affecting trade
Tariff rates are generally defined in the form of ad valorem duties but Australia and India apply
specific tariffs to a small range of products. In Australia, these include certain cheeses, certain
fruit and vegetable juices and used passenger motor vehicles. India applies specific tariffs for
certain products, including textiles and garments.
35
India also provides a number of exemptions from import duties for certain sectors or importers
depending upon the industrial use of the import.
Australia provides assistance to its food processing industry in the form of income support and
sustainability grants. The Automobile Competitiveness and Investment Scheme (ACIS) provides
import duty credits to eligible Australian automotive producers earned on the basis of eligible
production, investment in plant and equipment and research and development activities as well
as some grants for research and development. A new re-targeted Automotive Transformation
Scheme, to replace ACIS from 2011, will provide assistance in the form of grants rather than
duty credits.
5.3.2 Agriculture, Forestry and Fisheries
Agricultural goods trade
Trade between Australia and India in agricultural products, including forestry and fisheries
products, is modest relative to other sectors. Two way agricultural trade between India and
Australia totalled US$456 million in 2008–09. Nevertheless, India’s agricultural exports to Australia
increased by an annual average of 15% over the last 5 years to 2008–09. India’s global exports of
agriculture have increased by 25 per cent a year (trend growth) over the past five years to 2008.
Australia’s agricultural exports to India have increased slightly over the past five years.
Principal Indian agricultural exports to Australia include tea, rice, cashew nuts and tobacco (see
Chart 5.3). Australia’s principal agricultural exports to India include wool (for which Australia is
India’s largest supplier), pulses (particularly chickpeas), almonds, paper and paperboard (see
Chart 5.4), and in previous years, wheat. While still small, wine exports from Australia to India are
increasing, and accounted for 15 per cent of India’s total wine imports in 2008.
CHART 5.3 | INDIA’S TOP 10 AGRICULTURE EXPORTS TO AUSTRALIA – 2008–09 (US$M)
Tea
$27
Rice
$19
Cashew nuts
$10
Tobacco
$10
Mucilages, thickeners
$8
Coffee
$8
Sesamum seeds
$7
Biscuits, bread etc
$4
Food preparations
$4
Cucumbers & gherkins
$3
Source: DFAT, STARS database consistent with ABS Cat.5368.0, February 2010
36
CHART 5.4 | AUSTRALIA’S TOP 10 AGRICULTURE EXPORTS TO INDIA – 2008–09 (US$M)
Wool
$98
Chickpeas
$88
Almonds
$38
Dried peas
$14
Dried beans
$13
Paper scrap
$10
Kraft paper
$4
Cotton
$4
Fresh or dried
$4
Cotton-seed oil
$4
Source: DFAT, STARS database consistent with ABS Cat.5368.0, February 2010
Role of agriculture in both economies
The agriculture sector (including forestry and fisheries) accounted for only 2.9 per cent of
Australia’s GDP in 2009, though due in part to Australia’s strengths as an efficient, low cost and
innovative producer of agricultural products, it contributed a larger proportion of Australia’s
exports – 14 per cent of total goods exports. Around two-thirds of Australia’s total agricultural
production is exported. Approximately 1 per cent of Australia’s agricultural exports go to India,
well below India’s share of total Australian goods exports (6.7 per cent).
CHART 5.5 | COMPARISON BETWEEN AUSTRALIAN AND INDIAN GLOBAL AGRICULTURAL EXPORTS
30,000
25,000
US$ million
20,000
15,000
10,000
5,000
0
2002
2003
2004
2005
Australia
2006
2007
2008
India
37
India is the world’s third-largest agricultural producer. Agriculture makes up a significant
proportion of Indian GDP, 17 per cent of total production in 2008, though this has been declining in
significance – in 1990-91 it constituted 29 per cent of total production. About 60 per cent of India’s
population continues to depend directly or indirectly on the agricultural sector.
CHART 5.6 | INDIA’S GDP GROWTH BY KEY SECTORS (% PER ANNUM GROWTH OF
VALUE ADDED TO GDP RATIO)
12
10
8
Growth Rate (%)
6
4
2
0
-2
-4
-6
-8
1998
1999
2000
2001
Industry
2002
2003
Agriculture
2004
2005
2006
2007
2008
Services
Source: CEIC database from Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation India
India’s agricultural exports have grown in value terms considerably since 2003 (Chart 5.5). They,
however, have been declining as a proportion of total merchandise exports, from around 14
per cent in 2000-01 to 10 per cent in 2005–06. India’s imports of agriculture products are low in
relative terms. They fell from 7.6 per cent of total merchandise imports in 2000-01 to below 5 per
cent in 2005–06.
Tariffs, tariff rate quotas and other measures affecting agricultural trade
Tariff barriers to agricultural imports into Australia are low by world standards. Most Australian
agricultural tariffs are applied at rates of between zero and 5 per cent. The simple average
applied tariff for agricultural goods is less than 2 per cent. Most agricultural products are
imported duty-free. All Australian agricultural tariff lines are bound under the WTO at rates from
zero to 29 per cent, and the average bound tariff rate is 4 per cent.
India’s agricultural tariffs have been progressively reduced over the past few years. Its current
simple average applied MFN tariff for agriculture is 36 per cent.
Australia’s WTO schedules contain two limited tariff rate quotas (TRQs) for agricultural products
– selected cheeses and tobacco. The tobacco TRQ is no longer effective as the applied tariff rate is
zero. India maintains bound tariff rate quotas on items such as milk powder, maize, rape, colza or
mustard oil, sunflower seed and safflower oil.
38
Opportunities and complementarities
There are high levels of complementarity in agricultural trade between the two countries.
These include the ability of Australia to meet domestic shortfalls in Indian production, agri-trade
opportunities (outlined below) and the opportunity to trade seasonal items on a counter-seasonal
basis, in both directions (which would provide consumers with access to high quality fruit and
vegetables at a lower price year round).
Mutually advantageous opportunities in the agricultural trade relationship are only likely to grow.
Due to changing structure of demand, India is likely to become a more regular importer of certain
food items, some of which Australia will be well placed to provide, such as high-value dairy
products. In addition, as India’s food processing sector continues to expand and look for export
opportunities, Australian inputs (potentially facilitated under an FTA) could become an increasingly
important part of India’s supply chain.
There are limits, however, to the extent to which Australia’s agricultural goods exports to India
could increase. Australia faces substantial capacity constraints due to the limited availability
of arable land and water. Australia has existing agricultural export markets that it will need
to continue to service. Australian agricultural exports are also not likely to compete with
subsistence farmers in India, and are more likely to target distinct niche markets in urban high
population centres.
Agricultural trade is affected not only by tariffs and similar measures, but also by the sanitary and
phytosanitary (SPS) requirements that most countries have in place to control pests and disease.
In the case of Australia and India, SPS requirements have an impact on agricultural trade. SPS
issues are addressed more fully in Section 5.5.
Prospects for cooperation
In light of the complementary nature of Indian and Australian agricultural exports, trade
liberalisation through an FTA which liberalised tariff and non-tariff barriers, would bring
significant benefits to both countries. Such benefits would be commensurate with the level of
liberalisation undertaken. However, because of the important role of agriculture in both countries,
the potential impacts of greater liberalisation would need to be fully discussed in the event FTA
negotiations commence.
5.3.3 Mining
Australia and India are richly endowed with mineral and energy resources. Mining is a major
part of Australia’s economy contributing 7.4 per cent of GDP in 2009 and figures even more
prominently in its exports with mining exports accounting for approximately 41 per cent of total
exports. Australia’s mining know-how covers the full life-cycle of mining activities: investment,
mine operation, general mine occupational health and environmental management, and logistics
– including for exports. Mining exports accounted for approximately 21 per cent of India’s total
goods exports in 2008. Australia is a reliable supplier of minerals and energy and deeper trade
engagement would enhance India’s energy and minerals security.
39
Mining trade
Mining exports are the largest component of bilateral trade between Australia and India. India’s
imports of mining commodities from Australia totalled US$6 billion in 2008–09 excluding nonmonetary gold, representing 6 per cent of Australia’s total minerals exports up from 4 per cent in
1999. In 2008–09, India was Australia’s third largest export destination for both coking coal (US$3.6
billion) and copper ore (US$586 million) (see Table 5.3). Australian exports of diamonds to India
are also significant, many of which are then cut and polished before they are re-exported by India.
Australia accounted for 53 per cent of India’s coking coal imports and 52 per cent of India’s total
coal imports. Australia imported mineral commodities worth US$10.9 million from India in 2008,
with key imports being crude minerals, stone, sand and gravel (see Table 5.3).
Tariffs and other measures affecting trade
India’s and Australia’s tariffs on mining and energy imports are low (see Table 5.3 and 5.4). In 2006,
Australia’s average bound tariff rates for metals and mineral products were 6.7 per cent and its
average applied rate was 2.7 per cent (see Table 5.4).
TABLE 5.3 | TARIFFS APPLYING TO INDIA’S MINING IMPORTS FROM AUSTRALIA
PRODUCT
VALUE OF IMPORTS FROM
AUSTRALIA 2008 – US$M
INDIA’S APPLIED TARIFF PER
CENT
Coking Coal
4,442
0-5
Thermal Coal
149
5
Copper ores and concentrates
815
2
Manganese ores and concentrates
190
2
Ferrous waste and scrap
41
Free
Aluminium waste and scrap
38
Free
Source: DGCI&S, Ministry of Commerce, Government of India
TABLE 5.4 | TARIFFS APPLYING TO AUSTRALIA’S MINING IMPORTS FROM INDIA
VALUE OF IMPORTS FROM
INDIA 2008 – US$M
AUSTRALIA’S APPLIED TARIFF
0.0
Free
Industrial diamonds
1.5
Free
Bentonite
2.2
Free
Sandstone
0.6
Free to 5
PRODUCT
Calcified petroleum coke
Source: DGCI&S, Ministry of Commerce, Government of India
Investment in mining
There is significant potential for investment in each other’s resource sectors.
All investment proposals by foreign investors in Australian resource processing, oil, gas and
mining sectors need prior approval by Commonwealth Government authorities where they exceed
US$35 million for acquisitions of substantial interests in existing businesses, US$7 million for
establishment of new businesses and US$35 million for offshore takeovers.
40
Australian states and territories are principally responsible for the regulation of onshore mining,
including coal and petroleum. Commonwealth laws regulate management schemes and licensing
systems for the mining and exploration of minerals and petroleum offshore, and ensure matters of
national environmental significance are not impacted by proposals.
The success of direct Indian investment in the Australian mining sector, which has included the
listing of Indian companies on the Australian stock market, has been a prominent feature of India’s
overall investment in Australia. Direct Indian investment in the Australian mining sector including
for exploration covers LNG, copper, coal, platinum mineralisation, phosphates, ammonia, oil
and gas and uranium. Indian companies have indicated an intention to increase their level of
investment in Australian mineral and energy projects.
Australian mining companies are keen to invest in India, but to date have come up against a range
of regulatory and administrative obstacles. It is generally acknowledged that domestic obstacles
inhibit mining investment and much of India’s mineral wealth remains untapped. Some of the
regulatory and administrative obstacles include:
• state regulations requiring that resources mined in one state also be processed in that state;
• state government regulations in relation to issues such as zoning, land-use and environment
frequently vary markedly from state to state, creating uncertainty, increasing compliance
costs and adding to delays in approvals;
• multiple approvals are required for most aspects of mining and approval times are typically
long by international standards;
• rules governing foreign investors in joint ventures are cumbersome and reduce the
commercial viability of a project;
• state governments have considerable discretion to terminate leases, reducing security of
tenure for foreign firms; and
• taxes and cesses at both the central and state level are sometimes raised unpredictably,
impacting on the commercial viability of the project.
Other challenges facing the Indian mining industry are the small scale of many new and existing
operations and a lack of investment in technology and supporting infrastructure like ports, rail
and shipping.
Prospects for cooperation
Australia and India have established a number of bilateral mechanisms to enhance cooperation
on mining and energy issues. The Joint Working Group on Minerals and Energy aims to provide
a framework for long-term resources cooperation, including five action plans covering coal,
renewable energy, petroleum & natural gas, mining and power.
An FTA between Australia and India could look into lowering existing trade barriers and addressing
behind-the-border barriers impeding investment to further boost trade and investment flows to
the benefit of both economies. Additionally, tariff reductions could reduce inflationary pressures on
core inputs to growth in India.
Australia will continue to rely on investment by Indian companies in the Australian mining sector
(see additional discussion of mining investment in Section 7.2 “Impact of Investment Liberalisation”).
41
Similarly, investment by Australian mining companies in India, including through joint ventures
with Indian partners, would enable Australian firms to bring international best practice to India in
the full range of mining activities, including environmental management and logistics.
5.3.4 Energy
Energy collaboration between Australia and India is likely to increase as India’s economic
expansion leads to higher demands for power. It has the potential to expand further including
through both trade and investment at a time of further development and expansion of Australia’s
energy sector.
India
India is well endowed with reserves of thermal coal, oil and gas, though it is a significant importer
of different forms of energy. It imports around 70 per cent of its petroleum consumption, and its
coking coal imports of 30.7 million tonnes in 2007 are expected to rise by over 10 per cent in 2008.
The Indian Planning Commission estimates that in order to sustain 8 per cent GDP growth through
to 2031, India will need to increase its primary energy supply three to four fold.
In order to meet India’s projected future energy needs, the Government has taken a range of
measures to encourage investment, including by the private sector. As a result, 100 per cent
foreign investment is allowed in all petroleum-related activity, including exploration, production
and marketing.
Measures have also been taken to encourage exploration and production of gas. As of 1997, 100
per cent foreign investment is permitted in all types of exploration.
Under the Petroleum and Natural Gas Regulatory Board Act 2006, a Regulatory Board is to be set
up to regulate the refining and marketing of petrol, petroleum products, and natural gas, but not
exploration and production of crude oil and natural gas.
Australia
While states and territories are principally responsible for the energy sector in Australia, it is
increasingly governed by national regulation by the Australian Energy Regulator and Australian
Energy Market Commission, which also regulate Australia’s gas market.
Australia has substantial energy reserves and is a major net exporter of energy products. In
contained energy terms from all sources (thermal coal, crude oil and condensate, naturally
occurring LPG, natural gas, uranium and renewables), Australia consumes less than a third of the
energy it produces (over 17,000 petajoules in 2004-05). Energy consumption more than doubled
over the thirty years to 2004-05, to around 5500 petajoules a year.
Thermal coal dominates Australia’s energy exports, amounting to over 126 million tonnes in 2008,
whereas Australia is a net importer of liquid hydrocarbons (though also a significant exporter).
It is an increasingly significant exporter of LNG.
Australia accounted for almost 20 per cent of global uranium production in 2007, of which almost
all was exported.
Australia applies zero tariffs on all energy products except for ethanol, with a duty of 5 per cent.
42
While Australian currently does not export significant energy products to India, it has the potential
to play a greater role in helping to meet India’s growing energy needs, especially through greater
exports of thermal coal and LNG, and by the provision of leading edge mining technology services
which could improve India’s extractive capacity. Exports to India face tariff levels of 5 per cent on
both thermal coal and LNG.
Prospects for cooperation
Collaboration in the energy sector is beginning to expand through investment. Petronet LNG, India
recently signed a historic agreement for the long term supply of 1.5 million tonnes per annum of
liquefied natural gas from Australia’s Gorgon LNG Project in Western Australia. Australian and
Indian firms are bidding for oil and gas exploration licences in India and Australia respectively. An
FTA could seek to facilitate further intensification of such links.
5.4 Rules of Origin
It would be necessary to develop preferential Rules of Origin (ROO) in order to implement an FTA
between Australia and India. ROO are used to determine whether a good traded between parties to
an FTA qualifies for access to the preferential tariffs negotiated under the agreement. They ensure
that the benefits negotiated under an FTA accrue primarily to the FTA parties.
In order to qualify for preferential tariff treatment, a good has to be either wholly obtained in
the territory of the FTA parties, or any non-originating materials or sub-components used in
its production must be substantially transformed within the territory of the FTA parties. There
are a number of tests which may be used separately or in combination for ascertaining whether
substantial transformation has occurred.
Australia’s approach to ROO
To facilitate trade, Australia supports ROO that are objective, liberal and easy to administer.
Australia’s preferred approach is to utilise a product specific rules (PSR) approach whereby a
specific rule is applied to each product line. Australia prefers to base these rules largely on the
CTC method but it should be supplemented as required by the other two methods in order to
confirm substantial transformation.
Australia’s more recent FTAs with Chile (entered into force on 6 March 2009), the US and Thailand
(both of which entered into force on 1 January 2005) utilise PSRs based largely on the CTC method
to establish substantial transformation. ROO in Australia’s earlier FTA with Singapore (which
entered into force on 28 July 2003) is based on the value-added approach. On 1 January 2007,
Australia and New Zealand introduced new ROO for the Australia New Zealand Closer Economic
Regional Trade Agreement (which entered into force in 1983) utilising PSRs based largely on the
CTC method.
Australia’s FTA with ASEAN and New Zealand, which entered into force on 1 January 2010, uses a
“co-equal” approach to ROO, under which for the vast majority of goods, the exporter can choose
either a CTC-based test or an equivalent Regional Value Content (RVC) test. For a small number of
tariff lines, only a single test – either CTC or RVC – is offered.
43
India’s approach to ROO
India considers that rules of origin, if formulated adequately, alongside checking trade deflection,
could serve as an instrument of development as they emphasise on domestic manufacturing and
value addition. ROO provisions in India’s existing agreements are based largely on a ‘general rule’
comprising CTC plus value-added requirements. In its more recent agreements, India has also
adopted a PSR approach.
Under the South Asian Free Trade Agreement (SAFTA)9, goods covered by the agreement have to
meet a general rule which incorporates a CTC requirement (CTH at HS 4-digit level as well as a
value-added requirement). However, for a few (191) tariff lines (where both inputs and outputs are
at the same 4-digit HS level) exporters can meet either a general rule or another specified PSR,
denoting transformation as Change in Tariff Sub-heading (CTSH).
In the Comprehensive Economic Co-operation Agreement between India and Singapore (which
was signed in January 2004) a similar approach was adopted. The general ROO provisions of that
agreement combine a CTC requirement (CTH at HS 4-digit level) with a value-added requirement
of 40 per cent. The agreement’s ROO take into account the production system of Singapore and
provide a list of 380 tariff lines which are exempted from the agreement’s general ROO provisions.
For each of these products exporters must meet a PSR.
In the India-Sri Lankan FTA (which was implemented in 2000) the general ROO criteria are based
on both CTC (CTH at HS 4-digit level) and value-added criteria.
It is apparent that the approaches most recently adopted by Australia and India have many
commonalities and cooperation would be facilitated by the proposed FTA.
5.5 Sanitary and Phytosanitary Measures
Both Australia and India apply SPS measures on imported plants, animals and their products
to the extent necessary to protect human, animal or plant life or health from risks associated
with pests and diseases, as provided for under the SPS Agreement of the WTO to which both
countries are parties.
Australia
Australia bases its SPS measures on international standards where they exist and where they
achieve Australia’s appropriate level of protection (ALOP). However, where such standards do
not achieve Australia’s ALOP, or relevant standards do not exist, Australia exercises its right under
the SPS Agreement to apply measures based on a scientific assessment of the risks. Australia’s
ALOP is expressed as providing a high level of sanitary or phytosanitary protection aimed at
reducing risk to a very low level, but not to zero.
Australia’s policy and regulatory activities under the SPS Agreement fall within the responsibilities
of several government portfolios. These are primarily the Australian Government Department of
Agriculture, Fisheries and Forestry (DAFF), which is responsible for animal and plant quarantine;
9 Members of SAFTA were: Bangladesh, Sri Lanka, Nepal, Pakistan, Bhutan, Maldives and India, in 2006,
when it was implemented.
44
and the Australian Government Department of Health and Ageing and its associated statutory
authorities (notably Food Standards Australia New Zealand – FSANZ) which are responsible for
public health and food safety. The Department of Foreign Affairs and Trade is responsible for trade
policy and legal aspects of Australia’s rights and obligations under the WTO SPS Agreement.
Biosecurity policy is developed by Biosecurity Australia (a prescribed agency within DAFF) and
implemented by the Australian Quarantine and Inspection Service (AQIS) whose responsibilities
include ensuring border quarantine security, issuing import permits and providing export health
certification. Biosecurity Australia uses a science-based import risk analysis (IRA) process to
develop biosecurity policy. IRAs identify the quarantine pests and diseases relevant to an import
proposal, assess the risks posed by them and, if those risks are unacceptable, identify and
evaluate risk management measures that might be applied to reduce those risks to a level that
achieves Australia’s ALOP. Australia is in the process of implementing the recommendations of the
independent review of Australia’s Quarantine and Biosecurity Arrangements—the Beale review.
The recommendations include the development of new biosecurity legislation and streamlining the
functions currently undertaken by AQIS, Biosecurity Australia and elements of DAFF.
India
A range of laws and agencies exist to frame and implement India’s SPS regime. In India, import
control requirements are the responsibility of the Bureau of Indian Standards (BIS), the Directorate
General of Foreign Trade, the Ministry of Health and Family Welfare (MoHFW) and the Ministry of
Agriculture (MoA). The Export Inspection Council (EIC) is responsible for export inspection and
certification of commodities.
Import control in India for the food sector is operated under the Prevention of Food Adulteration
Act by the MoHFW for health and safety aspects and the MoA for quarantine aspects. In addition,
all products which are under compulsory certification by the BIS for the domestic market should
conform to BIS standards when imported.
The EIC is the only agency in India responsible for export inspection and certification of a range of
commodities in areas such as food, chemicals, leather, engineering and footwear as commodities
notified under the Export (Quality Control & Inspection) Act, 1963. The EIC also operates export
inspection and certification on a voluntary basis by developing suitable inspection/ certification
schemes. The export inspections and certification are based on standards recognised under the
relevant notification. These standards may be international standards, standards of importing
countries, national standards prescribed in the notification, or even contractual specifications.
Both sides acknowledged that it would not be appropriate for science-based SPS measures to
be the subject of negotiations under an FTA. However, it was recognised that further work at the
bilateral level should be undertaken to improve an understanding of each other’s SPS regimes and
their impact on trade. An FTA could possibly consider appropriate mechanisms to:
• enhance consultation and cooperation between the parties on SPS matters;
• provide a forum for reviewing progress on sanitary and phytosanitary matters; and
• address issues of transparency through providing a forum for information exchange.
45
5.6Technical Regulations, Standards and
Conformity Assessment
Both Australia and India regulate the production and sale of certain goods for a variety of reasons
including consumer protection, safety and the environment. Technical regulations may require
the goods to meet a published standard and undergo a conformity assessment procedure before
the goods can be sold in the market. Increasing globalisation has made technical regulations,
standards and conformity assessment an important aspect of international trade. A widely
accepted international standards system can play a key role in protecting fair market competition,
expediting commercial transactions and promoting international trade. Excessively strict or
unreasonable regulations may, however, create unnecessary obstacles to trade.
Australia and India are both signatories to the Technical Barriers to Trade Agreement
(TBT Agreement) of the World Trade Organization, actively involved in the development of
international standards through bodies such as the International Organisation for Standardization
(ISO) and International Electrotechnical Commission; and members of international conformity
assessment bodies including the International Laboratory Accreditation Cooperation and the
International Accreditation Forum. They are also both active members of so-called specialist
regional bodies that facilitate cooperation in the fields of metrology, laboratory accreditation
and product certification.
India
The Bureau of Indian Standards (BIS) is responsible for formulating and enforcing standards
in a large number of Indian sectors. Some apply to all sectors, though there are also sectorspecific standards for automobiles, pharmaceuticals and cosmetics, among others. BIS also give
certificates for products which meet its standards. Although, BIS standards are voluntary, it is
compulsory to notify BIS of compliance with standards relating to health and consumer safety for
certain products. Product certification can also be granted to companies outside India. In addition
to products certification BIS grants license of “eco mark” to environmentally friendly products.
Australia
Australia has developed an extensive framework for addressing standards and conformance
issues. Several government and non-government bodies provide Australia’s measurement,
standards and conformance infrastructure:
• Standards Australia, the peak non-government standards writing body, is responsible for the
formulation and publication of the majority of voluntary standards in Australia. Standards
Australia is a signatory to the Code of Good Practice for the Preparation, Adoption and
Application of Standards, which is an Annex to the WTO TBT Agreement. There are also at
least 16 private sector bodies that prepare industry standards, codes and guides.
• In the area of technical regulations, the Council of Australian Governments operates in
accordance with a binding guide that ensures regulations are compatible with relevant
international standards and consistent with international obligations.
• The Joint Accreditation System of Australia and New Zealand provides accreditation of
certification bodies, inspection bodies, and auditor training course providers.
46
• The National Association of Testing Authorities accredits the competence of calibration and
testing laboratories and inspection bodies.
• The National Measurement Institute is responsible for establishing and maintaining
Australia’s units and standards of measurement and for coordinating Australia’s national
measurement system.
• Some government agencies develop and enforce industry-specific standards and technical
regulations, for example, the Therapeutic Goods Administration, the Australian Quarantine
and Inspection Service and the Department of Infrastructure, Transport, Regional
Development and Local Government.
Prospects for cooperation
Building on this existing foundation of international and bilateral cooperation an FTA would offer
further opportunities to develop cooperation on standards and conformance issues between
Australia and India. A chapter on technical regulations, standards and conformity assessment
procedures would complement commitments relating to liberalisation of trade in goods between
the Parties and would also facilitate trade by committing the Parties to arrangements that are
transparent, provide certainty and minimise transaction costs.
Possibilities for collaboration could include:
• improving access to necessary information on technical regulations, standards and
conformity assessment procedures;
• establishing communication links between agencies in the parties and fostering cooperation
and greater mutual understanding of each other’s approaches at the regulatory level;
• building on existing cooperation between standards, accreditation and conformity
assessment organizations for the purpose of promoting recognition and acceptance of the
results of conformity assessment; and
• encouraging reduction of transaction costs between the parties to the extent possible.
5.7 Customs Procedures
Consistent and transparent customs procedures play an important role in the practical facilitation
of trade. The harmonisation and streamlining of such procedures have been long-standing
priorities for governments and the international trading community.
Australia and India work closely together as members of the WTO and World Customs
Organization (WCO). Both have signed the WCO’s Revised Convention on the Simplification
and Harmonization of Customs Procedures, which reflects modern practices of customs
administration. The Convention aims to simplify and harmonise customs procedures and provides
the core principles for modern, efficient and effective customs procedures. In accordance with
international standards, it provides for the creation of a uniform system of customs valuation,
duties and documentation in all ports of entry in signatory countries. Australia and India are also
signatories to the WTO Customs Valuation Agreement and the International Convention on the
Harmonized Commodity Description and Coding System.
47
The additional costs arising from administrative paperwork and procedures – including customs
requirements – can constitute a substantial percentage of the value of goods traded. Consultations
and submissions to this study indicate these costs would be important issues to consider in any
FTA between Australia and India.
India
In recent years, India has taken steps to bring its customs procedures up to best international
practice, including the introduction of electronic systems. Such measures have been designed
to ensure consistency and transparency in the application of customs procedures, including the
payment of customs duties, throughout India. India has set up a Fast Track Scheme under which
certain categories of importers have been allowed to pay duty and clear the imported goods on
a self-assessment basis. India also operates an electronic data interchange (EDI) system under
which qualified importers, identified on the basis of past performance, are given a waiver of
inspection of imported cargo through a “green channel” facility. At present, about 75 per cent of
India’s international trade is covered by 23 automated customs stations. Other initiatives, like the
installation of the Interactive Voice Response System (IVRS) and touch screen kiosks are designed
to allow traders to ascertain the status of their documents. A number of other steps have been
taken to reduce irritants, particularly in the area of documentation.
Australia
The Australian Customs and Border Protection Service (Customs and Border Protection) is
responsible for preventing the illegal movement of people and harmful goods across Australia’s
border while supporting legitimate trade and travel. Customs also administers Australia’s antidumping and countervailing systems and collects duties and taxes.
Australia’s customs procedures are readily accessible, with all relevant information available on
the web. It is regularly updated. This information includes up to date information on tariff rates,
trade statistics, customs-related laws and regulations, customs procedures and administrative
rules. For specific inquiries such as cargo, product classification and origin criteria, traders can
utilise enquiry points and an advance ruling system.
A customs declaration is required for most imports to Australia. Australia has developed an
integrated cargo system (ICS) for imports. To use the system all customers must be registered
with ICS. This clearance can be taken by importers or custom brokers (holding a license). Almost
all custom entries are electronically processed, and preference is given to electronic processing.
Imports subject to quantitative restrictions require a clearance from Australian Customs and
Border Protection as well as AQIS
Prospects for cooperation
Both countries face new challenges in customs administration and trade facilitation. These include
reconciling greater security scanning based on sound risk management with swift clearance of
increasing levels of legitimate cargo, and enforcing complex rules of origin as the provisions of
preferential trade agreements take effect. There is always a risk that customs procedures can
cause unnecessary delays and restrictions on trade. Every effort should be made to streamline
customs procedures to minimise the time required for goods to pass borders.
48
Cooperation and exchange of information between customs administrations provides greater
transparency, improves understanding of processes and procedures and assists customs
administrations operationally in undertaking enforcement responsibilities. The Indian Central
Board of Excise and Customs has forged a strong and cooperative working relationship with its
Australian counterpart, including through an MOU signed on 6 March 2006. Nevertheless, further
cooperation between Australian and Indian customs administrations may help to expedite trade
between Australia and India. Areas that could be discussed in an FTA might include:
• the establishment of contact points in both countries to respond to customs-related
inquiries and provide timely and accurate information;
• the exchange of information on technical customs matters;
• improved channels for information exchange on intelligence issues, including more
timely provision of information for the prevention, investigation and combating of customs
offences; and
• the promotion of increased dialogue between Australian and Indian customs administrations
and businesses.
5.8Anti-Dumping, Countervailing and
Safeguards Measures
Under WTO rules, Members have recourse to trade remedies (anti-dumping, countervailing duty
and safeguard measures) in certain situations where imports cause or threaten to cause injury
to the domestic industry in the importing country. Anti-dumping and countervailing measures
allow governments to take remedial action to address material injury caused by ‘dumping’ and
subsidisation of imported goods. Safeguard measures allow for emergency action where there is
a surge of imports that cause serious injury to the domestic industry and are intended to facilitate
industry adjustment.
Australia and India, as Members of the WTO, are both subject to the WTO rules relating to trade
remedies as set out in the relevant WTO agreements (Anti-Dumping Agreement, Agreement on
Subsidies and Countervailing Measures and Agreement on Safeguards).
Australia
In Australia, anti-dumping and countervailing investigations are carried out by the Australian
Customs and Border Protection Service in accordance with the governing legislation. The two
key pieces of legislation are the Customs Act 1901 (‘Customs Act’), which sets out the general
inquiry process, and the Customs Tariff (Anti-Dumping) Act 1975 (‘Anti-Dumping Act’), which makes
provision for the imposition of anti-dumping and countervailing duties. Such investigations are
initiated following the receipt of an application from Australian industry.
Australia’s safeguards investigation procedures are contained in the Commonwealth Gazette
No S 297 of 25 June 1998 and amended by Commonwealth Gazette No GN39 of 5 October 2005.
Following a decision by the Australian Government to initiate a safeguard investigation, the
Productivity Commission conducts a safeguard inquiry in accordance with the published general
procedures. These procedures reflect the WTO Agreement on Safeguards.
49
India
Anti-dumping in India is based on a strong legal framework of laws and procedures. They include
Sections 9A, 9B and 9C of Customs Tariff Act, 1975, Customs Tariff (Identification, Assessment and
Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995
and also Article VI of GATT 1994 and the Agreement on Anti-Dumping.
In India, anti-dumping inspection is initiated by the Directorate General of Anti-dumping and Allied
Duties (DGAAD). Anti-dumping measures are only considered at the request of industry. India’s
Directorate General has been active in imposing anti-dumping cases.
India has a separate safeguards legislation, and investigation is conducted by the Directorate
General of Safeguards. A case has to be initiated on the request of industry.
In India, the decisions of the Directorate General of Anti-dumping and Allied Duties as well
those of the Directorate General of Safeguards can be challenged by taking appeals to higher
appropriate authorities.
Prospects for cooperation
In the context of a possible FTA, Australia and India could consider:
• informal consultations and dialogue on trade remedy measures; and
• technical exchanges, including the exchange of officials between respective trade remedy
authorities.
50
6. Liberalisation of Trade in Services
51
6.1 Existing policies
6.1.1 India
Deregulation of services sectors has been one of the highlights of the Indian reforms.
Telecommunications has been substantially opened up to competition. Newer sectors broadly
defined as Information Technology and IT Enabled Services10 are largely open. Knowledgebased segments have been prominent among the faster growing services sectors, assisted
by technological advances and a low-cost educated workforce with good English language
capabilities. Significant changes have occurred in the financial sector although foreign
investment in banking and insurance remains relatively less open. Transport, power, business
services such as accountancy and legal services remain protected from foreign competition,
as does the retail sector.
India has made services commitments in the WTO Uruguay Round. It made partial commitments
in 42 subsectors – or about 23 per cent – across six of the 12 major services groupings (business,
communications, construction, financial, health and tourism) in the Service Sectoral Classification
List. India made no commitments on distribution, educational, environmental, recreational,
transport or other services not included elsewhere. However, since the commitments in the
Uruguay Round at the WTO, India has autonomously opened up its services sectors and this is
reflected in its Offer at the WTO wherein it has offered 11 out of the 12 services sectors as per the
Services Sectoral classification of the WTO. The details are reflected in India’s Revised Offer of
2005 at the WTO.
In 2008, India’s services exports were US$106 billion while the imports were US$92 billion.
Thus, India has trade surplus in services. India’s services exports to Australia have grown over
the last decade. The balance of services trade is in Australia’s favour. The major Indian exports
to Australia, by sector, are travel services, transport services, IT and IT enabled services (or
computer and information services), and other business services. IT and IT enabled services
have a share of more than 50 per cent of total services exports.11 Within the travel services exports
from India, Education related travel services (60% of Australia’s total services imports from India
as per Reserve Bank of India figures; 80% as per Australian Bureau of Statistics) constitute an
important segment.
6.1.2 Australia
Services are increasingly important in trade and investment worldwide, both directly as a
component of trade, and indirectly by enabling or facilitating international business through
communications, travel and professional services. A liberal services sector brings economy-wide
benefits by facilitating innovation, efficiency and improved quality.
In part as a result of unilateral regulatory reform, services have grown strongly in Australia.
Services accounted for 73 per cent of economic activity and over 85 per cent of employment in
2009. Services growth in the economy generally has translated into booming services exports.
In 2009, Australian services exports exceeded US$42 billion.
10 Computer Related Services (CRS) is a subset of IT and IT related services for the purposes of this study.
11 A large number of services provide by Indian IT services providers are not captured by CRS and,
therefore, Australian and Indian figures on IT/CRS services trade do not match.
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By international standards, Australia’s services sector is considered to be open with few barriers
to foreign services suppliers. Where immigration and qualification (registration/accreditation/
licensing) requirements have been met, national treatment is generally extended to foreign
suppliers of services.
In its WTO commitments Australia has bound a high proportion of services sectors and modes of
delivery as defined by the WTO General Agreement on Trade in Services (GATS), with commitments
in all 12 sectors in the Service Sectoral Classification List.
In Australia, certain services sectors are regulated by the Australian Government while others
are regulated by state and territory Governments (some services are regulated at both the
Commonwealth and state/territory levels.
Australia’s existing FTAs all contain services commitments.
Bilateral trade in services
Australian services exports to India have grown rapidly, from US$262 million in 2002 to
US$2.5 billion in 2008–09. In 2008–09, India was Australia’s fifth-largest services export market.
Travel services (mainly education-related travel to Australia) account for 93 per cent of Australian
services exports to India. Australia’s education exports to India have increased at an annual rate
of 39 per cent over the past five years. Services delivered by a range of Australian companies with
a commercial presence in India are also significant, although they are not captured by official
trade data.
CHART 6.1 | BILATERAL TRADE IN SERVICES BETWEEN AUSTRALIA AND INDIA
3,000
2,500
2,000
1,500
1,000
500
0
1998-99 1999-00
2000-01
2001-02
2002-03
2003-04 2004-05
Exports
2005-06
2006-07
2007-08 2008-09
Imports
Source: ABS Regional Services series, Cat. 5368.0 Dec. 2009
53
6.2 Impact of Liberalisation
Liberalisation of services trade will be an important and mutually beneficial component of a
possible FTA between Australia and India. Consumers benefit from the greater range of products
and lower prices that result from services liberalisation. Access to new technologies and expertise
can also boost economic growth. Services trade liberalisation should seek to remove barriers
in domestic regulations relating to foreign service providers that impose additional costs for
importers and erode competitiveness.
The lessons from existing services liberalisation are clear. There are a few barriers, for instance,
in the IT services trade between India and Australia, and as a result IT trade flows between both
countries have grown rapidly, strengthening the efficiency and export competitiveness of IT sector
in both countries. Similar is the case with regard to outsourcing administrative and technical
services to companies in India. Growth in such outsourcing has benefited Indian services providers
as well as the productivity of Australian companies. Gains could be expected from services
liberalisation in other sectors as part of an FTA. For example, access to a wider range of banking
and insurance services and services providers in India would be to the benefit of Indian consumers
– who have already benefited from liberalisation in financial services.
Any future FTA negotiations on services should take an ambitious approach, aiming for
commercially meaningful ‘GATS –plus’ outcomes. The utility of the services commitments would
be judged by the content of new commercially-meaningful market access provided. A decision
would need to be taken on whether to adopt a ‘negative’ or ‘positive’ list approach. A negative
list approach means that all services except those listed in a defined schedule of exemptions are
subject to market access and national treatment obligations as outlined in the FTA. A positive
list approach means that only the services included in a FTA schedule will be subject to market
access and national treatment obligations. In all its completed FTA’s (with Singapore and South
Korea) and ongoing negotiations India has followed a positive list approach which corresponds to
the approach taken in services negotiations at the WTO under GATS, while Australia has followed
a negative list approach in some recent FTAs (such as with Singapore, the US and Chile). Each of
these approaches has its merits.
Facilitation of enhanced mutual recognition of professional qualifications by competent authorities
and professional registration bodies in Australia and India to strengthen services trade and more
closely integrate the two economies could also be an important objective. A possible FTA could
seek to address issues relating to mobility of natural persons which is one of the modes of trade
in services.
In summary, an FTA that liberalises and facilitates trade in services would create new
opportunities for business and help accelerate growth in both countries. Such gains would be
commensurate with the level of liberalisation undertaken in each sector, in which context the
level of development of both countries may be a relevant consideration.
6.3 Sector Analysis
The list of services sectors contained in this chapter is not exhaustive.
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6.3.1 Financial Services
There are considerable opportunities to promote further trade and investment in bilateral financial
services to the benefit of both countries. An FTA that liberalises financial services would stimulate
capital flows between Australia and India. By allowing capital to move where it can best be used,
an FTA would lead to a more efficient allocation of financial resources. Financial services linkages
would deepen, providing access to new managerial expertise as well as a greater range of
services and financial products. Businesses and retail customers both stand to gain. However, the
imperatives of prudential regulations and best business practices should be considered, as they
are considerations of importance against the backdrop of the current global financial crisis.
Australian financial services sector
Finance and insurance is the largest sector in the Australian economy in terms of gross value
added, generating 10.7 per cent of real gross value-added in 2009, up from 9.8 per cent in 1999.
This sector has been one of the country’s best performing industries, achieving an average annual
growth rate of 4.6 per cent a year between 1999 and 2009. This growth rate is well above the GDP
growth rate for the same period (3.2 per cent) and reflects the growth in Australia’s service-based
economy during the period.
The major regulatory reforms that have taken place over the past two decades have played a
vital role in underpinning the strength of the Australian services sector. The Australian financial
services sector has developed markedly since the reforms of the early 1980s when the previously
regulated Australian dollar was floated (1983) and the Australian banking sector, which had been
closed to foreign banks since 1942, was opened to foreign investors in 1984. Further reforms were
implemented in the 1990s. As a result of these reforms, the Australian financial services sector
is at the forefront of world best practice. It has high standards of governance, deep and liquid
markets, a skilled workforce strategically located in the East Asian time zone and advanced IT
integration. Australia has particular strengths in funds management.
The regulation of the Australian financial services sector is principally conducted by three
independent Commonwealth statutory bodies: the Australian Prudential Regulation Authority
(APRA); the Australian Securities and Investments Commission (ASIC); and the Reserve Bank
of Australia. This financial regulatory framework divides responsibility for supervision along
functional rather than institutional lines, promoting efficiency and certainty in the financial system.
Indian financial services sector
Banking and insurance services in India accounted for around 5.6 per cent of GDP in 2006–07,
with its share being relatively stable between 5.5 and 6.5 per cent over the preceding five years.
Between 2000-01 and 2006–07, the sector grew at an average annual rate of 10.8 per cent, well
above the GDP growth rate. Regulation of the financial services sector in India is outlined in the
following sections.
55
Banking
India
Significant steps to liberalise the financial sector have been taken in India since 1991, when the
sector operated in a heavily regulated environment, for example state-owned banks controlled 90
per cent of bank deposits, a high proportion of funds were channelled to the government and credit
was allocated on the basis of government policy. Foreign banks have since been allowed some
access to the Indian market.
The financial sector reforms in India since the early 1990s initially focused on ensuring existing
financial institutions operated in an environment of operational flexibility and functional autonomy.
From the second-half of the 1990s, they focused on strengthening the financial system consistent
with the movement towards global integration of financial services.
In recent years, the Reserve Bank of India (RBI) has outlined a road map for presence of foreign
banks in India (phase I from 2005 to 2009 and phase II after 2009). The next phase of the RBI
roadmap (after 2009) will commence after a review of the experience gained and after due
consultation with all the stakeholders in the banking sector.
As per the road map from March 2004 foreign banks have been permitted to hold a total of 74 per
cent foreign equity in Indian private banks, while there has been an aggregate cap of 20 per cent
for Indian public sector banks. However individual foreign banks are restricted to holding less than
5 per cent equity of any one bank, unless a bank is identified for restructuring. It is worth noting
that for non-banking finance companies, FDI up to 100 per cent is allowed automatically subject to
minimum capitalization norms.
India has a WTO commitment to allocate 12 new bank branch licences per year to foreign banks,
subject to a minimum initial capital requirement. The grant of a licence to operate an ATM is
not counted in the WTO commitment of 12 bank branches of foreign banks. The grant of ATM is
governed by the Branch authorisation policy of September 2005. There are more than 280 foreign
bank branches in India and more than 800 ATM’s of foreign banks in India.
Implemented reforms have led to a significant improvement in public sector banks performance.
The introduction of best international practices and norms, refinements in the supervisory
practices, tightening of risk weights/provisioning norms in regard to sectors witnessing high
credit growth, market discipline brought about by listing on the stock exchanges and interest rate
deregulation are key factors in this improved performance. Simultaneously, greater competition
has been induced with the introduction of new generation private sector banks.
A number of Australian banks are active in the Indian market, including the Commonwealth Bank
(which has received in principle approval for a banking branch licence), the ANZ, the National
Australia Bank, Westpac and Macquarie Bank.
Australia
Prior to 1985, foreign-owned banks had only a limited involvement in the Australian banking
system, largely via wholly or part-owned merchant banks. The relaxation of foreign-bank entry
restrictions in 1984 led to the rapid entry of 15 overseas banks to the Australian market. These
banks were required to incorporate locally as subsidiaries, and to hold capital in Australia.
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Further liberalisations in the early 1990s allowed foreign banks to operate as branches in
Australia. Branches were not required to hold capital locally. These reforms led to a significant
growth in foreign-owned bank participation in the Australian market. A restriction precluding
foreign banks from acquiring smaller Australian banks was removed and this was ultimately
followed by the removal of a blanket prohibition on the foreign takeover of major Australian banks.
As at July 2008, there were 58 authorised banks in Australia, of which 44 were foreign-owned (with
34 of these operating as branches and 10 operating as subsidiaries) and 14 were domestic.
Foreign investment in the banking sector needs to be consistent with the Foreign Acquisition and
Takeovers Act (FATA), the Banking Act, the Financial Sector (Shareholdings) Act and banking policy,
including prudential requirements. Any proposed foreign takeover or acquisition of an Australian
bank is considered on a case-by-case basis and judged on its merits.
A foreign acquisition (other than by a US investor) of 15 per cent or more of an Australian bank
requires prior approval from the Treasurer under the FATA. The FATA provides the Treasurer with
the power to prohibit a foreign acquisition of an Australian bank if he is satisfied that it would be
‘contrary to the national interest’.
Acquisitions of more than 15 per cent of an Australian bank also require prior approval under the
FSSA. Domestic and foreign investors are subject to this requirement alike. Australia also has a
‘four pillars’ policy, which prohibits mergers among the four major Australian banks.
Subject to APRA authorisation, foreign banks may establish one of three kinds of commercial
presence in Australia – a representative office, a branch of a foreign bank, and a foreign subsidiary
bank. A foreign bank wishing to establish a representative office in Australia must obtain the
written consent of APRA. Minimum entry standards must be met and the representative office
must comply with certain operating conditions set by APRA. A foreign bank that operates a
representative office in Australia is not permitted to undertake any banking business, including
advertising for deposits in Australia.
Foreign banks wishing to operate in the ‘wholesale market’ may operate through a branch
structure and thereby not be required to maintain endowed capital in Australia or be subject to
any capital-based large exposure limits (as these are the responsibility of the regulator in the
bank’s own country). As APRA does not have direct oversight of the capital adequacy of foreign
bank branches, foreign bank branches are not subject to the depositor protection provisions of the
Banking Act and are not permitted to accept retail deposits of less than $250,000.
A foreign bank wishing to operate in the retail deposit market in Australia is required to seek
authorisation from APRA as a locally incorporated subsidiary for that purpose. The requirements
for authorisation of the locally incorporated subsidiary are non-discriminatory and also apply to
Australian-owned authorised deposit-taking institutions. There is an entry requirement of $50
million start-up capital (which applies for all locally incorporated banks).
While relevant licences must be sought and banks must satisfy APRA of their capacity to operate
consistent with Australia’s prudential requirements, there are no limits on foreign bank numbers.
Nor is the country of origin relevant in APRA’s assessment of a licence application.
Only one Indian bank, the State Bank of India, has a branch licence in Australia while, the Bank of
Baroda and Union Bank have representative offices in Australia. Thus, there exist opportunities for
more Indian banks to open up branches in Australia with the trade likely to be increased with both
sides entering into a FTA.
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Securities/funds management
Australia
The Australian Securities Exchange (ASX), Australia’s largest financial market operator, is in the
top ten listed exchanges in the world as measured by market capitalisation. The ASX imposes
rules on participants including liquid capital requirements. Responsibility for the supervision of
transactions which occur on Australia’s financial markets, including the ASX, will be assumed by
ASIC in the third quarter of 2010.
While financial products, services providers and financial market operators are required to
be licensed under the Corporations Act, a streamlined route is provided for financial markets
regulated overseas under comparable regulatory regimes. That is, overseas financial markets can
operate in Australia if comparable regulatory regimes exist in the home jurisdiction.
In Australia, investment houses wishing to conduct a brokerage business on the ASX must be
licensed by ASIC. Foreign stockbroking firms wishing to participate on ASX markets can conduct
business without the need to establish an office or shopfront in Australia.
India
Guidelines for the issue and valuation of securities in India are set by India’s RBI/ Securities and
Exchange Board guidelines. The India Portfolio Investment Scheme is incorporated under the
Foreign Exchange Management (Transfer and Issue of Securities to a Person Resident outside India)
Regulations, 2000. With progressive economic reforms, the policy on portfolio investment has been
liberalised. Foreign Institutional Investors (FIIs) registered with Security Exchange Board of India
(SEBI) are eligible to purchase shares and convertible debentures under the Portfolio Investment
Scheme (PIS).
In the case of FIIs, total holdings of each FII/SEBI approved sub-account shall not exceed 10 per
cent of the total paid up capital or 10 per cent of the paid up value of each series of convertible
debentures issued by an Indian company, and the total holdings of all FIIs/sub-accounts of FIIs
put together cannot exceed 24 per cent of the paid-up capital or paid-up value of each series of
convertible debentures. However, the limit of 24 per cent can be increased to the sectoral cap/
statutory limit by the company’s board of directors passing a resolution followed by a special
resolution being passed by the general body of the company
Portfolio investments abroad for all Indian mutual funds are limited to US$5 billion. Individual
funds can invest up to 10 per cent of net assets, up to US$200 million each. Residents and
corporates are limited to US$200,000 a year and 50 per cent of their net worth respectively.
Global depositary receipts/American depositary receipts investment policy
An Indian company can issue rupee-denominated shares to a person resident outside India (being
a depository for the purpose of issuing Global Depository Receipts (GDRs) and/or American
Depository Receipts (ADRs)). There are no end-use restrictions except for deployment/ investment
of these funds in real estate and the stock market. There is no limit up to which an Indian company
can raise ADRs/ GDRs.
A limited two-way fungibility scheme is available under which a stockbroker in India, registered
with the Security Exchange Board of India (SEBI), can purchase shares from the market for
conversion into ADRs/GDR.
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Re-issuance of ADRs/GDR would be permitted to the extent of ADRs/GDRs, which have been
redeemed into underlying shares and sold in the domestic market.
An Indian company can sponsor an issue of ADRs/GDRs by offering its resident shareholders a
choice to submit their shares back to the company so that on the basis of such shares, ADRs/GDRs
can be issued abroad. The proceeds of the ADR/GDR issue is remitted back to India and distributed
among resident investors who had offered their rupee-denominated shares for conversion.
Box 3: Macquarie Bank/State Bank of India Joint Venture
A recent example of cooperation between leading businesses in India and Australia is the
announcement in April 2009 that the State Bank of India (SBI) and Macquarie Group Limited
(Macquarie) had launched the Macquarie-SBI Infrastructure Fund (MSIF).
SBI and Macquarie bring a unique combination of local and international expertise to the
joint venture. SBI is the largest project finance arranger in Asia and the largest lender in
India with a deep knowledge of the country’s infrastructure sector.
Macquarie is a leading owner and operator of infrastructure assets globally and brings
to the joint venture its global expertise in the financing, development and operation of
infrastructure assets.
The fund will invest in infrastructure projects in India, with total capital anticipated to be
between US$2 and US$3 billion. The fund will bring together foreign capital, including
Australian institutional investors, and domestic Indian capital which will be invested together
into Indian infrastructure products. MSIF will be managed by the SBI and Macquarie joint
venture, with the International Finance Corporation, a member of the World Bank Group, as
a cornerstone investor in the fund and minority shareholder in the management company.
This joint venture demonstrates the capacity for financial services to deliver mutually
beneficial outcomes for both countries – which could be further increased through a
bilateral FTA.
Insurance
India
India has carried out significant reform in the insurance sector. Most significantly the previously
nationalised insurance sector in India was opened to private investment in April 2000 and a foreign
ownership cap of 26 per cent was put in place. Further liberalisation occurred in 2007 with some
relaxation of pricing tariffs which were fully abolished on 1 January 2008. These latest reforms
have resulted in lower insurance costs for Indian business and private consumers. In the general
insurance sector in particular, the number of licensed general insurers has increased from the
four state-owned entities in 2000 to 22 currently, many of whom have a foreign partner.
A number of Australian insurers are actively pursuing opportunities in the Indian market, including
the QBE, which has announced a joint venture with India’s Rajan Raheja Group, and Insurance
Australia Group Limited, which announced in November 2008 that it and SBI had signed a joint
venture agreement to establish a general insurance company in India.
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Australia
The Australian general insurance sector has undergone significant reform in the last decade.
These reforms, combined with significant industry consolidation, have produced an advanced and
sophisticated insurance sector. The Australian general insurance sector is the 12th largest in the
world. In Australia, the minimum capital requirements for general insurers are determined on a
case by case basis, with a minimum capital requirement of US$4 million.
Recent reforms, which commenced on 1 July 2008, now require all direct offshore foreign insurers
operating in Australia to be authorised by APRA and subject to Australia’s prudential regime.
However, there is limited exemption arrangements that allow some insurance business to be
placed with offshore insurers not authorised in Australia. The exemptions are for high-value
insured, atypical risks and a customised exemption as assessed by a licensed insurance broker.
Approval of non-resident life insurers is restricted to subsidiaries and must meet a minimum US$8
million capital requirement. An authorised non-life insurance company operating in Australia as
a non-incorporated entity must appoint either an Australian resident or a company incorporated
in Australia as agent of the insurer. The Corporations Act requires all general and life insurance
participants (including agents and brokers) to be licensed by ASIC and to comply with specific
disclosure, compliance, ongoing training and dispute resolution requirements. The Corporations
Act also sets out the requirements for financial reporting by companies which could include
general and life insurance companies.
Most state and territory governments maintain restrictions, by way of provisions covering
monopolies, licensing and associated controls on premiums and other terms of policies and in
some areas of insurance, such as workers compensation and third-party motor insurance.
Financial services are an area where enhanced commercial engagement and cooperation between
India and Australia – facilitated through the reduction of barriers under an FTA and enhanced
dialogue between both countries’ would clearly deliver substantial benefits to both sides.
6.3.2 IT & IT enabled Services
India
The Indian IT sector is a pillar of strength for the Services economy of the country and has
seen robust growth in recent years. Indian service providers provide competitive software and
solutions to various sectors of various countries including Australia. The IT industry has emerged
as the fastest growing sector of the Indian economy both in terms of production and exports.
Growth of software services from India has been the highest, with business IT growth at over
21 per cent during the 1990s, and similar high levels of growth this decade. Offshore markets for
Indian software companies are typically developed countries, traditionally to the west and have
tremendous scope to expand towards the east including to Australia. Global exports contribute
63 per cent of Indian IT and ITES sector output. Exports rose from US$4 billion in 2000 to
US$17.9 billion in 2005, US$23.6 billion in 2006, US$31.1 billion in 2007, US$40.4 billion in 2008,
and are estimated to reach $US47 billion in 200912 and US$ 55-60 billion by 2010.
12 According to data from the Industry association NASSCOM: http://nasscom.org/upload/5216/IT_
Industry_Factsheet-Mar_2009.doc
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Keeping up with the continued growth in IT and ITES exports, the domestic market in India has
also seen a significant growth. Strong demand over the past few years has placed India amongst
the fastest growing IT markets in the world. India maintains its distinctive lead as an off shoring
destination. Having aligned their internal process and practices to international standards
such as ISO, CMM, and Six Sigma, companies in India are achieving the quality and productivity
benchmarks more suitable for remote service delivery, hence meeting the standards of their
business partners outside India. Indian firms are expanding their service offerings to compete
internationally by also shifting from low-end business processes to higher value-added services.
They are also enhancing their global service delivery capabilities through a combination of
greenfield initiatives, cross-border mergers and acquisitions, partnerships and alliances with
local players.
The enhanced reach of Indian companies has enabled many Australian companies to expand into
international markets. An example is the use by Australia of the automatic teller software system
provided by India’s largest software exporter, Tata Consultancy Services.
Box 4: Business Process Outsourcing (BPO)
India’s success in IT services and the BPO sector is well-known. India now aims to become a
global ICT research and development (R&D) hub.
Industry analysts estimate the R&D outsourcing market in ICT is expected to grow to
over US$13 billion by 2010 with significant technology diffusion effects. As a result of
new technologies it has become possible to trade in previously un-tradable services. The
expansion of BPO is an indicator of this phenomenon. New services, which can be supplied
through the BPO route, include financial engineering, equity analysis, and R&D services.
These are areas in which India is already a market leader.
A number of Australian companies have utilised Indian BPO services to foster their own
productivity and growth prospects through enhanced global competitiveness. Equally,
Australia has a well-developed market for business process outsourcing, with many
Australian companies providing such services to clients locally and offshore.
Both Australia and India have open markets to facilitate business process off-shoring.
Australia
Australia’s information and communications technology (ICT) sector spans a diverse array
of businesses in areas including computer software and hardware, telecommunications
and multimedia.
It is illustrative to consider both goods and services for ICT. Australia’s exports of all ICT goods and
services totalled US$4 billion in 2008–09, accounting for 2 per cent of total exports. Imports of ICT
goods and services totalled US$21 billion, accounting for 10.3 per cent of Australia’s total imports.
The high demand for ICT goods and services reflects Australia’s e-readiness, a measure of
the quality of a country’s ICT infrastructure and the ability of its consumers, businesses and
governments to use ICT to their economic and social benefit. In 2008, the Economist Intelligence
Unit ranked Australia fourth in the world in terms of overall e-readiness, up from ninth position
in 2007.
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In the field of software and information technology enabled services, firms located in Australia
have expertise in areas that include financial services, energy efficiency, radio frequency
identification in logistics and supply chain management, agricultural and mining services
applications and digital content.
Australia has an open foreign investment regime which is reflected by the number of Indian
companies present in this sector in Australia. As of 2006, there were 26 Indian IT firms with a
significant established presence in Australia supplying both domestic and overseas markets.
To assist cooperation in ICT, Australian and Indian Governments have established a Joint Working
Group on ICT which meets regularly at official level (a bilateral MOU was signed in 2005).
The potential for Australian and Indian organisations to partner on important IT projects is
demonstrated by the cooperation agreement signed between Indian ICT company Infosys and
Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) in 2005.
It encompasses cooperation in research and development in information engineering and
commercialisation of CSIRO’s intellectual property.
While there are currently no tariff restrictions for this services sector, an FTA may be able to
further boost trade and cooperation by addressing non-tariff barriers.
6.3.3 Telecommunications
Australia
Australia has a liberal and open domestic regulatory framework for telecommunications for all
providers. In recent years, the Australian Government has carried out significant liberalisation and
deregulation of the telecommunications market leading to increased competition in the sector. In
the context of the proposed National Broadband Network, the Australian Government has recently
announced reforms to the telecommunications regulatory regime.
These reforms will drive future growth, productivity and innovation across all sectors of the
economy by:
• addressing Telstra’s high level of integration to promote greater competition and consumer
benefits;
• streamlining and simplifying the competition regime to provide more certain and quicker
outcomes for telecommunications companies;
• strengthening consumer safeguards to ensure services standards are maintained at a high
level; and
• removing redundant and inefficient regulatory red-tape.
The Australian telecommunications sector is highly developed by world standards. For example,
the number of mobile services in operation as a proportion of the Australian population was at
107 per cent in June 2007 (more than one per person). Approximately 64 per cent of households
had internet access in 2006–07 – with 68 per cent of those households connected to a broadband
service. Australian telecommunications providers are active in a number of foreign markets,
particularly in Asia.
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Australia’s telecommunications framework differentiates between ‘carriers’ and ‘service
providers’. Carriers are those entities that own and operate infrastructure and are subject to
regulatory obligations and carrier licence fees. Carriage service providers are those entities that
provide carriage or content services to the public by using this infrastructure. Service providers are
not subject to licence fees.
Australia’s telecommunications regime is the responsibility of the Australian Government.
The main legislative instruments governing Australia’s telecommunications industry are the
Telecommunications Act, the Telecommunications (Consumer Protection and Service Standards) Act,
the Telstra Corporation Act, parts of the Trade Practices Act and the Telecommunications (LowImpact Facilities) Determination. This legislative framework provides for strong competition in
the Australian telecommunications sector. The major regulatory features include no restrictions
on the number of providers or installers of network infrastructure, ensured access rights for
carriers and service providers, competitive safeguards and the separation of regulatory and
operational functions.
Australia applies no market access restrictions on foreign providers for telecommunications,
except in relation to Telstra (the former government-owned monopoly). Foreign ownership of
Telstra is limited to 35 per cent of shares. The maximum individual foreign ownership allowed in
Telstra is five per cent of shares.
All of Telstra’s major competitors are foreign owned. Telstra maintains a dominant position in the
Australian telecommunications market especially with regards to fixed line services. However,
other sectors of the telecommunications market are increasingly competitive. For example, there
is strong competition in the mobile market, with the market split between four infrastructure
owners, Telstra with a market share of around 44 per cent, Optus with 32 per cent, Vodafone with
17 per cent and Hutchison with 7 per cent. The retail segment of the broadband market is also
strongly competitive with over 400 Internet service providers operating in Australia, 200 of which
are wireless broadband providers.
India
In India up until the mid 1990s, the Government was the sole provider of telecom services.
There has been gradual deregulation, starting with the announcement of the National
Telecommunications Policy in 1994 allowing private entry into various telecom sub-sectors,
and the Indian Government also established an independent regulator, the Telecom
Regulatory Authority in 1997. The major breakthrough came with the initiation of the National
Telecommunications Policy in 1999 which opened up telecoms services to the private sector
without any restrictions on the number of operators except in the cellular mobile market due
to frequency constraints. Since 1999 reforms have continued including in relation to internet
telephony, long distance service and modernisation of Radio Frequency spectrum Allocation.
Since liberalisation of the telecommunications sector commenced in India in 1992, the sector
has experienced very strong growth. India now has the fifth-largest telecommunications services
market in the world and it continues to grow rapidly. Foreign investors – including Australian firms
– are already active in India.
Market access for telecommunications for foreign providers in India remains subject to certain
restrictions. India raised the foreign equity limit for telecommunications from 49 to 74 per cent in
2005, with some qualifications. For instance, foreign carriers are not permitted to use overseas
networks to link Indian cities. The Government allows up to a maximum of 74 per cent foreign
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equity in basic, cellular mobile, paging and value added service and global mobile personal
communications by satellite; up to 74 per cent (beyond 49 per cent requiring government’s
approval) in internet service (with gateways), radio paging services and end-to-end bandwidth;
and up to 100 per cent in manufacturing of telecommunication equipment and services such as
electronic mail and voice mail.
Trade in telecommunications between Australia and India is limited, with exports from Australia to
India of US$8 million in 2006 and exports from India to Australia of US$8 million in 2004 (the most
recent year for which figures are available), despite the strength of the sector in both economies.
This suggests that this is an area with potential for growth. A possible bilateral FTA could help
improve access for telecommunication service providers and stimulate investment in both markets
and help harness the potential for bilateral cooperation in this sector.
6.3.4 Education
Education levels have a direct bearing on the sustainability of a country’s competitiveness and
economic growth. Against the background of economic globalisation, the development of human
capital very much depends on the internationalisation of education services.
India
In India, the technical and higher education sector is regulated by the All India Council for
Technical Education (AICTE) Act and the University Grants Commission (UGC) Act. Foreign investment
is allowed in institutes of higher education and technical training, but only on a franchisee and
affiliation basis.
The AICTE has released a set of regulations for entry and operation of foreign universities in India.
At present, technical institutions need to obtain accreditation from AICTE, and AICTE through
procedures set out in legislation which provides for the procedures and conditions for the entry
of foreign universities in India. There is no current regulatory framework in India which allows
foreign tertiary education providers to deliver courses in India (apart from in relation to technical
education). The Government of India is yet to allow any foreign higher education institution to
establish a branch campus or create a legally recognised degree program in India.
The AICTE issued regulations to govern foreign providers of technical education in India in April
2003. Foreign investment and collaboration with foreign institutes has proliferated in India
in professional and vocational courses (i.e. areas such as business and hotel management,
engineering, medicine, fashion design and in very limited numbers in general education) on a
franchisee and affiliation basis.
The Ministry of Human Resources Development has actively encouraged foreign students to come
to India to pursue higher studies.
Primary and secondary education in India is controlled by the Government. However, 100 per cent
FDI is allowed for international schools under the automatic route, subject to certain domestic
regulations and norms being followed.
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Australia
Australia views India as a natural education partner and there is significant potential to expand
academic and commercial opportunities. India is already Australia’s fastest growing export market
for education services. Indeed, total student enrolments in Australia from India reached just over
120,000 for calendar year 2009, representing an increase of 25 per cent in a single year (from
2008), and making India Australia’s second largest source of foreign students (see chart 3.2 in
section 3.1.2.2 “Services Exports”). Australia’s broader economy and education sector significantly
benefit. There is an increasing interest in delivery offshore of education, particularly for the
strongly-growing vocational education market.
Foreign education and training service providers are able to enter the Australian market and
supply services providing they comply with Australia’s non-discriminatory regulatory requirements
for establishment and operation including:
• national Protocols for Higher Education Approval Processes (2007), which provide the
criteria and standards to assess applications for recognition of higher education institutions
and courses;
• legislation for the provision of vocational education and training and for primary and
secondary schooling within Australia, which is maintained by State and Territory
Governments. All accredited vocational education and training within Australia must also
conform to the Australian Qualifications Framework and the Australian Quality Training
Framework (2007); and
• measures for provision of education and training services to overseas students studying in
Australia under the Education Services for Overseas Students (ESOS) Act 2000.
Australia’s schools sector is currently open and foreign providers are able to establish schools in
Australia subject to meeting the relevant legislative requirements. The establishment and funding
of primary and secondary schools in Australia is controlled by legislation of the Commonwealth
Government and State and Territory Governments.
To assist cooperation between Australia and India for education, the Joint Working Group on
Education and Training has been established. It meets regularly at officials-level (a bilateral
Agreement for an Education Exchange Programme on Cooperation in Education and Training was
signed in 2003).
A possible bilateral FTA could:
• facilitate access for researchers engaged in short/long term work of a collaborative nature;
• explore the ways to facilitate the recognition of qualifications in both countries by their
concerned organisations; and
• facilitate greater transparency in approval and accreditation processes for education
service providers.
6.3.5 Professional Services
Professional services include, among others, fields such as law, accountancy, engineering,
architecture and medical services. Professionals from one country can notionally deliver services
to the other country either cross border (e.g. by mail or the internet); in the other country (either
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by visiting temporarily or establishing a commercial presence); or to customers who visit from
the other country. Further, advancements in information and communications technologies have
resulted in trade in professional services occurring via less traditional modes of delivery – such as
service delivery via telephone lines and the internet. Trends towards an increasing globalisation of
professional services have been seen in all GATS modes.
Expanding trade in professional services is one of the most powerful means of intensifying the
commercial relationship between countries, and one of the more powerful ways of enhancing
productivity. This is partly because some key professions are often facilitators of trade and
investment (such as lawyers and accountants), but it is also because the transfer of best-practice
professional expertise from one country to another can help drive innovation and accelerate the
adoption of new practices and technologies.
Historically, trade in professional services between countries has been limited. This is often due
to the requirement to be registered as a professional in a particular jurisdiction before being
allowed to practise. For instance, for lawyers in either country to be able to practise in the other
they must generally be registered with the Bar Council of India (for practise in India) or with one of
the state legal professional bodies (for practise in Australia). Such professions tend to be largely
self-regulating with government playing a limited role. However, governments perform a policy
function and can contribute to liberalisation of professional services through changes to legislation
or regulation, facilitating choice and promoting the efficient delivery of services. Governments also
decide whether individuals from another country can enter the host country and whether they will
be given a visa which would allow them to work (though for a professional this may be contingent on
being registered and accredited by the appropriate domestic registration and accreditation body).
Increasingly, professional bodies in different countries seek to simplify the assessment of
qualifications from elsewhere through mutual recognition arrangements (MRAs). MRAs can be
very complex, but a simple example is where registration with the relevant professional body in one
country would be recognised for the purposes of automatic registration with the counterpart in the
other country. For example, in 2009 a mutual recognition arrangement was concluded between the
Institute of Chartered Accountants of India (ICAI) and CPA Australia which facilitate recognition of
accounting qualifications.
In Australia’s FTA with the US (AUSFTA), a Working Group on Professional Services (WGPS)
was established to facilitate profession-led initiatives aimed at developing mutually acceptable
standards and criteria for the licensing and certification of professional services suppliers. The
WGPS has supported profession-led initiatives in three initial priority professions – accounting,
engineering and law.
Australia has also addressed the issue of professional services through ambitious Domestic
Regulation provisions, such as were included in the Australia-Chile Free Trade Agreement
(ACl-FTA). The domestic regulation provisions of the ACl-FTA build on and strengthen the GATS
disciplines. The FTA also includes an Annex on Professional Services in which the Parties agree
to support profession-led initiatives that facilitate recognition of qualifications and registration/
accreditation/licensing of professionals of the other party.
India has similarly included domestic regulation provisions in its Comprehensive Economic
Cooperation Agreement with Singapore, which contains articles which mirror the relevant GATS
provisions (Article VI.2-4). In sectors where specific commitments regarding professional services
are undertaken, India and Singapore agreed to provide for adequate procedures to verify the
competence of professionals of the other country.
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Legal services
Legal services help define rights and responsibilities and contribute to certainty in commercial
transactions. They are a key business input in facilitating the growth of all cross-border trade and
investment and usually involve the law of more than one jurisdiction.
The Australian and Indian legal sectors have much in common, including the English language
and their British common law heritage. Further, the Indian legal system has drawn on Australian
laws in fields such as monopolies, restrictive trade practices and consumer protection, and Indian
precedents have been cited in Australian courts. However, there are also differences. Barristers
or advocates, who appear in the courts on behalf of clients, account for around 10 per cent of
Australian legal practitioners, while in contrast, they account for around 90 per cent of legal
practitioners in India.
Australia
The Australian legal profession is regulated by the states and territories through a combination
of legislation and professional bodies. To practise Australian law it is necessary to be registered
with the relevant state body. An applicant’s eligibility is determined on the basis of prescribed
examinations and areas of study, other criteria relating to practical legal training and an
assessment of the applicant as a person of good character. Professional recognition does not
have nationality or citizenship requirements.
The Law Council of Australia is the peak national body representing the legal profession. Although
regulated at the regional level, a national legal services market is emerging, with agreement by
all Australian states and territories to adopt uniform national legislation to create a single legal
services market with nationally consistent regulations covering admission, professional standards,
discipline and the administration of legal practices generally.
Indian and other foreign lawyers may currently practise foreign or international law (as distinct
from Australian law) under a “fly-in fly-out” arrangement for a maximum period of 90 days in any
12 month period without the need to register as a foreign practitioner. An Indian firm or Indian
lawyer may also establish an office in Australia to provide Indian or international legal services.
Direct foreign investment in the legal services sector is permitted.
India
The Bar Council of India (BCI) oversees regulation of the legal services sector in accordance
with the Indian Advocates Act 1961 and Bar Council Rules 1975. With certain limited exceptions,
foreigners are restricted from offering legal services to the Indian market, including in the law of
the foreign lawyer’s home country. Foreign firms are not permitted to establish offices in India.
Direct foreign investment in legal services is not permitted. The BCI recognises the law degrees
of a number of Australian university law schools for the purpose of practising in India, subject to
certain qualifications, but only for Indian nationals. In India there are also limits to the number
of partners permitted in Indian law firms, the Indian Companies Act 1956 effectively limits
partnership size to 20.
Demand for legal services in India has grown as the broader economy has expanded, creating
areas of shortage of supply of legal professionals, especially for lawyers with international and
cross-border commercial legal services expertise.
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Accountancy services
Australia
A range of activities undertaken by accountants and auditors in Australia are subject to specific
regulatory controls of several different federal statutory bodies including the Australian Securities
and Investments Commission, the Australian Taxation Office and APRA. Accountants are only
subject to licensing requirements, in respect of particular areas, namely audits, of companies,
registered schemes, disclosing entities and certain other entities, as well as matters such as
liquidations, investment advice and dealing in investments. Accountants who wish to prepare
income tax returns must also register as a tax agent in order to provide such services. They may
practise as sole practitioners, through trusts, partnership firms or through corporate entities (in
respect of partnerships and corporate practices, at least one equity partner in a firm providing
accounting, auditing and bookkeeping services must be a resident). There are conditions and
restrictions for the use of corporate structures for auditors of companies, registered schemes and
disclosing entities.
Relevant state and territory legislation may also apply to services provided by accountants,
including auditing and financial reporting, investment advice, taxation advice, financial planning,
insolvency and liquidation.
No specific restrictions apply to general participation in the sector by foreign service providers.
All of the major international accountancy firms operate in Australia. However, to satisfy the
licensing requirements for particular roles as described above, a recognised professional
qualification or an accredited qualification is required (ASIC class order CO 02/551). Furthermore,
to be an approved auditor of an APRA regulated entity there are certain additional requirements
which are set out in the Fit and Proper Standard for the relevant industry (for example note
paragraph 19 of http://www.apra.gov.au/ADI/upload/APS-520.pdf).
Although membership of a professional association is not mandatory, the majority of accountants
are members of the Institute of Chartered Accountants in Australia or CPA Australia or the
National Institute of Accountants, and in practice an accountant could not undertake an
audit unless they belonged to one of these recognised bodies. These bodies are professional
associations that undertake self-regulation of their members through the issuance of
professional codes, the enforcement of professional standards and the disciplining of members.
Members must meet certain academic and professional standards. These professional bodies
have their own reciprocal membership arrangements with certain other overseas professional
accounting bodies, and may also take into account overseas qualifications when considering
membership applications. As noted previously in this section of the report, mutual recognition
for accountants in the two countries has been facilitated by a recently concluded MRA between
CPA Australia and ICAI.
India
Since 199l, growth in the accounting services sector in India has outpaced growth in other
services sectors. Accounting service providers in India are self-regulated through a combination
of legal and professional bodies such as the ICAI and the Institute of Cost and Work Accountants
of India (ICWAI) and in accordance with applicable Indian laws, including the legislation which
constitutes the ICWAI. Accounting professionals are only permitted to operate either as a
partnership firm or as a sole proprietorship firm. The number of partners in Indian accounting
firms is limited to 20 as the Partnership Act of India permits no more than 20 professionals in any
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one firm. The number of statutory audits of companies per partner is also restricted to 20. Indian
regulations also proscribe inter-disciplinary professional models, i.e. accounting firms are not
allowed to hire management professionals to perform consulting/management services. As a
consequence of the above restrictions, less than 200 firms (or 0.5 per cent of total accountancy
firms) have more than 10 partners.
The 2009 MRA between ICAI and CPA Australia demonstrates the potential for such arrangements
to ease restrictions. It gives CPA Australia members exemptions against ICAI’s examinations,
regardless of where they went to university.
This outline of accounting practices and regulation in the two countries demonstrates that there
are a number of areas that could be considered in possible future FTA negotiations.
6.3.6 Tourism
Tourism trade is already significant and is growing strongly in both directions, generating benefits
for the Australian and Indian economies. Both countries have taken steps to encourage tourism in
both directions. The Government of India has opened an Indian Tourism office in Australia (Sydney)
in 2007, while the Australian Government opened a Tourism Australia office in Mumbai in 2008,
and the Australian State of Queensland has also opened a tourism office in India. Cooperation is
also assisted by the Joint Working Group on Tourism (led by Australia’s Department of Resources,
Energy and Tourism and India’s Ministry of Tourism with an MOU signed in 2002).
India
India is currently experiencing robust inbound tourism growth from many countries including
Australia. India’s travel services exports to Australia have been rising consistently, increasing
by 12 per cent in 2008–09. They represent India’s largest services export to Australia. Indian
companies are also investing in the Australian tourism sector – the Indian Hotels Company which
is part of the Tata Group has invested in the hotel market in Sydney.
India’s schedule of GATS commitments cover tourism with private participation and foreign
investment permitted in many non-core areas and activities including hospitality (tourism and
catering), although restrictions remain on travel agency, hotel and tourist guide services.
Australia
Similarly, growth in Australian tourism-related exports to India is significant. Visitor numbers have
grown to over 97,000 in 2008. Total inbound economic value (TIEV) has increased from US$342
million to US$600 million over the same period. The Tourism Forecasting Committee estimates
that Indian visitation will reach 440,000 annually by 2017, with TIEV expected to be US$1.5 billion.
The strong growth in India’s outbound travel market to Australia – and other countries – has
been attributed to improved client service initiatives for Indian citizens (expanded access to
online tourist applications to Indian agents and the preferred Australian Specialist Scheme which
delivers improved processing times for agents trained by Tourism Australia and the Department
of Immigration and Citizenship (DIAC)), as well as to India’s strong economic growth and the rising
levels of disposable income for Indian middle-class families.
Under Australia’s schedule of WTO General Agreement on Trade in Services (GATS) commitments,
the cross-border supply of travel agents and tour operator services are limited to supplying crossborder (that is, securing bookings via telephone or the internet) only where they have a commercial
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presence in the other country. Australia provides national treatment, that is, there are no sector
specific requirements which differentiate between domestic and foreign services suppliers.
In Australia, any regulation of the tourism industry is largely the responsibility of the state and
territory governments which have primary carriage for the administration of matters relating to
licensing and operation. Because tourism is defined by the consumption of goods and services, it
encompasses a number of sectors of the economy, and in turn a range of government agencies
may regulate tourism businesses. An example of regulatory requirements that apply at the state
and territory level to both domestic and foreign suppliers of tourism services is travel agents.
Travel agents are licensed in their state or territory of operation and need to maintain a commercial
presence. Relevant legislation is administered by the Fair Trading portfolio in each state and
territory. All state and territory travel agents, with the exception of the Northern Territory (which
has its own insurance scheme), also participate in the Travel Compensation Fund. The Travel
Compensation Fund is Australia’s primary means of providing compensation to eligible travellers
who suffer a loss as a result of the financial collapse of a participating travel agency business.
Companies with a commercial presence in Australia providing services to the inbound tourist
market can sponsor skilled overseas workers to work in Australia for up to four years through the
Subclass 457 Business Long-Stay visa provided they meet the requirements as skilled workers
under the Migration Regulations 1994. Overseas workers must work in the position they were
nominated for and satisfy minimum skill levels. The occupation must be in the list of ‘gazetted’
occupations – the list of occupations and minimum salary levels overseas workers must be paid
are published in a public gazette notice.
Given the fact that both India and Australia give importance to tourism, a possible FTA could
enhance linkages between the two countries.
6.3.7 Air Services
Within the broader framework of air services, some services, namely international air transport
services are covered by bilateral air services agreements – and therefore not included in the GATS
or part of bilateral FTAs. Those air services, between Australia and India, are governed by an Air
Services Agreement signed in 2006 supplemented by a Memorandum of Understanding between
aeronautical authorities signed in 2004.
India
India liberalised the civil aviation sector in 2000, as a result of which FDI was allowed for greenfield
airports, with foreign equity participation permitted up to 100 per cent with automatic approval.
However FDI beyond 74 per cent in existing airports requires prior permission of the government.
The recent ‘open skies’ policy for liberalisation has promotion of tourism as the key agenda,
as shown by the freedom provided to International Tourist Charters to use all airports linking
places of tourist interest. At airports managed by the Airports Authority of India (AAI), new private
investors have been allowed to undertake ground handling. This will increase competition and
result in improved services and reduced costs. At private airports, at least limited competition has
been made mandatory. AAI has well established training colleges at Delhi, Allahabad and Kolkata
imparting training on airport management, CNS (Communication, Navigation and Surveillance)
maintenance, air traffic control, and fire services procedures. AAI colleges would be interested to
provide training to aviation personnel in both countries.
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India’s Directorate-General of Civil Aviation does not currently recognise pilot training
qualifications apart from those from India. In part because domestic private airlines in India
are now allowed to operate internationally, and also because of projected strong growth of the
domestic aviation market, civil aviation in India is set for rapid growth in coming years. A number
of Australian architectural firms are active in the design of airports and expansion of India’s air
transport infrastructure.
Australia
The Australian Government is in the process of developing a comprehensive National Aviation
Policy Statement or Aviation White Paper which is expected to be finalised soon. The Aviation
White Paper will provide greater planning and investment certainty for the industry and provide
clear commitments for users of aviation services and communities affected by aviation activity.
More information on this can be found at the Department of Infrastructure, Transport, Regional
Development and Local Government website: www.infrastructure.gov.au/aviation/nap/.
Aviation safety and security issues are the responsibility of the Australian Government.
However, the economic regulation of intra-state aviation (that is between the Australian states)
is a state responsibility.
Domestically, key Australian legislation includes the following: the Air Navigation Act 1920; the
Air Services Act 1995; the Aviation Transport Security Act 2004; the Civil Aviation Act 1988; the Civil
Aviation (Carriers Liability) Act 1959; the International Air Services Commission Act 1992 and the
Airports Act 1996.
In respect of foreign participation in the airline services industry, foreign persons (including
foreign airlines) can generally expect approval from the Foreign Investment Review Board (FIRB)
to acquire up to 100 per cent of the equity in an existing Australian domestic airline, or to establish
a new domestic airline, unless FIRB deems any such acquisition to be contrary to the national
interest. Australia’s open door policy for foreign investment in the aviation industry has seen the
recent entry into the purely domestic market of airlines such as Tiger Airways, Regional Express
and Sky West, all of which are majority foreign owned. In addition, the Virgin Group commenced
operations in Australia in 2000 with Virgin Blue listed on the Australian Stock Exchange in 2003 –
it is now the second-largest provider of domestic air transport services in Australia.
Under the Air Navigation Act 1920, foreign persons (including foreign airlines) can generally expect
approval to acquire up to 49 per cent of the equity in an Australian international carrier (other
than Qantas) individually or in aggregate provided the proposal is not contrary to the national
interest. In the case of Qantas, under the Qantas Sale Act 1992, total foreign ownership is restricted
to a maximum of 49 per cent in aggregate, with individual holdings limited to 25 per cent and
aggregate ownership by foreign airlines limited to 35 per cent. In addition, a number of national
interest criteria must be satisfied, relating to the nationality of Board members and operational
location of the enterprise.
Foreign investment proposals for acquisitions of interests in Australian airports are subject to
case-by-case examination. In relation to the airports previously owned by the Commonwealth, the
Airports Act 1996 stipulates a 49 per cent foreign ownership limit, a 5 per cent airline ownership
limit and a 15 per cent cross ownership limit between Sydney airport (together with Sydney West)
and Melbourne, Brisbane and Perth airports. Supporting services such as ground handling are
open to foreign participation in most cases.
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6.3.8Movement of Natural Persons, including Visas for
Mode-4
Overview
Movement of natural persons is necessary for enhancing international trade and investment.
Access to professional, specialist and skilled services providers can deliver strong economic
benefits and improve services for all segments of the economy, as well as for consumers. In
addition, facilitating movement of natural persons promotes international trade and supports
the development of ‘business infrastructure’ type services that can act as a strong inducement
to investment. Movement of natural persons can have a positive role in encouraging foreign
investment flows as investors highly value the ability to engage the best possible services
providers in the management and operation of their investments.
Movement of skilled professionals, specialists and other business persons has become an
increasingly prominent component of trade agreements. They also include improvement of the
administration and management of factors impacting on movement of natural persons, including
the simplification of visa-issuing procedures.
Parties to FTAs generally include substantive commitments in this area. This is in line with the
rules relating to FTAs contained in the GATS that require no mode of supply should be excluded
a priori.
Given the sensitivities that can surround the movement of natural persons to supply a service,
movement of natural persons has been approached in a variety of ways in FTAs. Most FTAs
limit their coverage to facilitating movement of skilled professionals and specialists for specific
business related activities.
FTAs can also facilitate greater transparency for business people regarding the application
processes for business visas and the rights and obligations attached to them. They can establish
the right conditions to ensure that parties expeditiously process temporary entry applications.
Australia
Immigration legislation and policy, including Australia’s universal visa system, are administered
by DIAC. Australia has a broad range of visa options available for the temporary entry of India’s
citizens for business purposes.
Australia’s current temporary entry regime is transparent and non-discriminatory, and Australia
has made commitments based on it GATS Mode 4 (supply through the presence of natural
persons) schedule, which apply to all scheduled services sectors. The two key visa options for
business people are:
• The Subclass 456 Short Stay Business visas for those intending to visit Australia on business
for three months or less. This Visa is for business people who wish to:
— explore business opportunities in Australia;
— conduct business negotiations, site visits, equipment inspections;
— sign business contracts; and/or
— attend conferences or meetings in relation to their field of employment.
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• The Subclass 457 Temporary Entry Long Stay visa for those intending to enter and work
in skilled employment in Australia on business for periods up to four years. Under this
visa, arrangements have been streamlined, including off-shore processing and a single
application process, to ensure entry procedures are efficient and transparent for intracorporate transferees and contractual service suppliers. This visa is based on sponsorship
by the employer, who will be responsible for their nominee. India-based companies are
able to sponsor personnel to establish an operation in Australia. Australian companies are
able to sponsor professional and skilled personnel as needed. The subclass 457 Business
Temporary Entry Visa provides permission to enter and work for an initial period of up to
four years. Australian-based businesses may apply for further periods of up to four years
at a time. Under this visa, spouses and dependants are granted similar periods of stay and
work rights as the principal applicant. There is no upper limit to the number of Subclass
457 visas granted.
In April 2009, the Australian Government announced changes to the skilled temporary migration
program aimed at addressing concerns about the efficiency and integrity of the Subclass 457 visa
program. The reforms will ensure that overseas workers are not being exploited and are provided
the same wages and conditions as Australian workers.
In recent years, there has been a significant increase in the number of Indians accessing the
Australian labour market through temporary entry for business purposes. In 2008–09, India was
the second largest source of Subclass 457 visas.
India
In India, immigration legislation and policy, including India’s visa system, are administered by
the Bureau of Immigration in India’s Ministry of Home Affairs. India’s current visa system allows
foreign businesses to secure an Indian visa for their employees for up to 12 months once they have
an established business in India. To advance cooperation on visas and related matters, Australia
and India have established a joint officials-level Working Group on Visa, Passport and Consular
Matters which held its first meeting in 2009.
Temporary movement of people to deliver services is an area of great importance for India given
the growing work-age population and increasing potential to supply services through movement of
skilled persons. India identifies several domestic laws and regulations that apply to free movement
of natural persons to Australia, including in relation to the ability of Indian service providers to
visit Australia for providing different types of services. There exist other issues including the
requirement for recognition of the qualifications and experience of professionals, and other
licensing/registration requirements
Conclusion
In an FTA both sides would need to address the issue of market access for the temporary
movement of natural persons in various sectors in accordance with relevant provisions of the
GATS, particularly in the categories often used by WTO members under GATS “Mode 4” (temporary
movement) provisions, such as Intra Corporate Transferees, Business Visitors, Contractual
Service Suppliers and Independent Professionals. Parties would also need to consider applying
commitments on the temporary movement of business persons to non-services businesses, such
as goods traders and investors.
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Australia and India could specifically consider the following:
• Facilitate enhanced mutual recognition of qualifications by authorities and professional
registration bodies in Australia and India (see also sections 6.3.6 and 8.4 of this report –
Professional Services, Mutual Recognition).
• India would seek relaxation of various services-related visa issues.
• Enhancing transparency on information and policies, and that immigration and visa issuing
authorities should make information on their regulatory and visa regimes more conveniently
available to enterprises and business people. Mechanisms could also be established to
enhance communications between relevant authorities of the two countries.
• Increasing the application of electronic methods, especially through the internet, to manage
business entry.
• Ensuring that procedural arrangements for visa application, processing and granting of
visas and/or temporary entry rights are transparent and administered in a timely and
uniform manner.
• Facilitating the entry and stay for work purposes of skilled temporary service suppliers and
their immediate families – of companies with a commercial presence.
Consideration of mechanisms to ensure that contractual service suppliers and skilled people of an
enterprise of one party of the possible FTA are granted entry to allow them to enter, stay and work
in the other party for a reasonable period of time, and that multiple entries within the period of
stay, including for researchers engaged in short term work.
6.3.9 Agricultural Services
Services are a key component in the structure of agricultural value chains. As outlined in
Chapter 5, both countries are significant agricultural producers and there are complementarities
in bilateral agricultural trade.
India’s agriculture sector has grown less strongly than other parts of the Indian economy.
Logistical impediments, such as limited supply of cold storage and weaknesses in transport
infrastructure, have contributed to high levels of wastage and loss. As a major food producer
and exporter, Australia has developed expertise in a range of agricultural and agri-business
services, some of which are already being provided in India. In particular, Australian agroservices companies have considerable strength in logistics, including storage, transport and
cold chain management. Australian firms also deliver services that focus on improving yields
and productivity of farmers through information technology and animal and plant based
biotechnologies, including in pasture and improved animal and plant genetics. In a range of areas,
therefore, Australian services expertise could help enhance the export capabilities of the Indian
agriculture and food industries.
A possible bilateral FTA could therefore assist the agricultural sectors of both countries by
examining the potential for improved access in agricultural services.
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Box 5: Report on Agricultural Cooperation
In June 2007, Rabo India Finance released a report entitled ‘Strengthening the India-Australia
corridor in select Food and Agribusiness sectors’. The report was based on consultations and
research carried out in India by Rabo India Finance. It noted a number of areas of potentially
mutually advantageous agricultural cooperation. Examples of opportunities noted in the
report include:
• know-how for better agronomic practices for stone fruit production;
• partnering in the setting up of cost efficient cold chain logistics and cold storage
infrastructure;
• technology transfer in the areas of advanced freezing process and equipments, for
example for peas and green peas based snacks;
• opportunities to partner on new processed products and processing technologies for
berries and stone fruits – to be used in fruit fillings and ice creams; and
• partnering to develop wheat based products markets such as biscuits and pasta.
6.3.10 Audio-Visual
Australia and India both have vibrant audiovisual sectors. Bilateral contact and trade, especially in
film production, has increased in recent years.
India
One of the services sectors that has seen fast growth in India is the audiovisual sector. India is one
of the largest film producing countries in the world, producing on an average 800 features film and
900 short films annually in 52 different languages. Given the fact that Indian films and television
news and sports channels have generated great interest by viewers all around the world, their
export potential to Australia is very high.
The Government of India permits FDI up to 49 per cent in Indian companies that uplink from India.
Total foreign investment has been restricted to 49 per cent with an FDI ceiling of 20 per cent on
investments by broadcasting companies and cable companies. There is no cap in motion picture
and video tape production and distribution services and motion picture projection services. In radio
and television services, FDI is allowed subject to FIPB approval, although foreign equity investment
and FDI is only permitted up to a level of 26 per cent in the news and current affairs media, while
foreign investment in FM radio broadcasting is restricted to 20 per cent. In addition, operational
control of editorial content must be in Indian hands. The Indian government has also announced
other minimum capitalization requirements.
Australia
Australia has an open audiovisual market. Australia produced 29 feature films and five feature
co-productions in the 2008–09 financial year, as well as 690 hours of television drama. Australia
is a net importer of audiovisual products. In 2008, foreign films accounted for 89 per cent of all
films screened in Australian cinemas and accounted for over 96 per cent of gross Australian box
office revenue.
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The main legislation relevant to Australia’s audiovisual sector is the Broadcasting Services Act
1992, the Radiocommunications Act 1992, the Australian Communications and Media Authority Act
2005 and the Income Tax Assessment Act 1997. The Migration Regulations 1994 are also relevant to
the sector.
The Department of the Environment, Water, Heritage and the Arts (DEWHA) has portfolio
responsibility for the production and cultural aspects of Australia’s audiovisual policy. Australia
regulates a range of audiovisual services to achieve cultural objectives and to maintain the broad
matrix of support measures for Australian culture. These measures are maintained in the national
interest to sustain Australian creative resources and production. They ensure that Australians have
access to their own images and stories in the cinema and through other media.
DEWHA and its portfolio agencies administer various measures for film and television
production in Australia, including the International Co-production Program, and the Foreign
Actor Certification Scheme for foreign actors entering Australia for employment in film and
television productions.
Policy responsibility for the broadcasting section of Australia’s audiovisual sector rests with
the Department of Broadband, Communications and the Digital Economy (DBCDE). DBCDE
has responsibility for the regulation of Australia’s commercial television and commercial radio
broadcasting industries, including the conversion to digital television and the launch of digital radio,
the regulation of media ownership, and Australia’s local content quotas for television and radio.
DBCDE also has policy responsibility for the Internet section of Australia’s audiovisual sector.
All direct (that is, non-portfolio) proposals by foreign persons to invest in the Australian media
sector irrespective of size are subject to prior approval. Proposals involving portfolio shareholdings
of 5 per cent or more must also be submitted for examination. The Australian Government may
also reject foreign investment proposals which are determined to be contrary to the national
interest under the Foreign Acquisitions and Takeovers Act 1975.
India’s strength in this sector, especially for post-production activities including editing, sound
mixing dubbing, animation and computer graphics has the potential for enhancing bilateral links
in this sector. Other areas of interest to India are animation, video gaming, broadcasting and
telecasting services. Australia has state-of-the-art facilities at Fox Studios Australia (New South
Wales), Warner Roadshow Studios (Queensland) and the Melbourne Central City Studios (Victoria).
Australia’s post/digital/visual effects infrastructure has supported many internationally acclaimed
films from development to delivery in every format.
Both countries offer diverse and interesting scenery for the production and post-production of
films. The locations for film shootings also have the potential for creating tourism flows. Both
sides may pursue negotiations for a film co-production agreement to expand bilateral trade in
film industry services.
6.3.11 Healthcare Services
Australia and India consider that further liberalisation of health services would provide consumers
in both countries with tangible benefits. However, health care is a sensitive sector and thus health
services is one of the least-committed sectors in the WTO. Less than 50 WTO members have
undertaken commitments – with most commitments concerning hospital services.
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India
The Indian healthcare services sector is now getting worldwide attention due to its quality and
its competitive advantage in various areas, with health tourism an emerging area. India is in a
position to tap the top end of the US$3 trillion global healthcare market because of the quality of
its services and the brand equity of Indian healthcare professionals across the globe. The Indian
Government places top priority on the healthcare sector and is focusing on indigenous research
and development and the further creation of human capital.
It is expected that the Indian laws and procedures relating to recognition of intellectual property
and foreign investments will allow global pharmaceuticals and biotechnology companies to set
up partnerships with Indian counterparts. India spends 5.2 per cent of its GDP on healthcare,
comparable with most other developing countries. The healthcare industry is expected to grow
from US$19 million in 2001 to US$60 million by 2012. Australia companies in the health sector
are currently active in the Indian market, including ResMed which supplies sleep apnoea products,
and IBA Health (see box under Section 7.2 Impact of Investment Liberalisation”)
In India the Ayurvedic/Herbal healthcare industry is growing and is now being globally
recognised. Investments for providing specialised health facilities and services is another
potential area for growth. The availability of world class health facilities – invasive and noninvasive – in India at competitive prices as compared to other parts of the world may be
considered for further co-operation and collaboration by tie up between hospitals and health
insurance providers of both sides.
Australia
In Australia, restrictions on who is able to own health professional practices, and how many they
are permitted to own is governed by state and territory legislation. For example, only qualified
pharmacists are permitted to own a pharmacy, and the location and number of pharmacies that a
pharmacist is permitted to own varies amongst the states and territories. Each of the states and
territories has boards which set standards for pharmacists. There are also national guidelines for
standards, but each state and territory in practice determines its own requirements.
Individual states and territories are also responsible for the regulation of health professions. The
recognition of overseas health qualifications and assessment of suitability to practise as a health
professional in Australia are the responsibility of a number of different bodies, depending on the
particular health profession and whether specialist training or qualifications are involved. In some
cases, different bodies regulate different aspects of a profession. For example, the Australian
Medical Council administers national examinations of overseas-trained doctors seeking to practise
medicine in Australia, and undertakes an initial assessment, while overseas trained specialists
must have specialist qualifications and experience assessed by a relevant national specialist
medical college.
In Australia, all nurses and midwives are required to meet Australian nursing and midwifery
competency standards. Nurses and midwives from other countries, such as India, may need to
complete a competency program approved by the relevant state or territory regulatory authority
to meet those standards. The competency standards of a small number of countries, although
not India, are recognised by the Australian Nursing and Midwifery Council and state and territory
nursing and midwifery authorities.
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Foreign service providers may establish and operate private hospitals, aged care and nursing
home facilities as well as medical clinics in Australia, providing that the owners meet all relevant
legislative requirements at Commonwealth and state/territory level and subject to foreign
investment approvals processes which apply to all sectors. Individual states and territories are
responsible for licensing and/or registration of hospitals, and clinics. They may also impose
requirements on aged care facilities, including in relation to building standards, staffing and food
and drug handling. The Commonwealth Department of Health and Ageing has responsibility for
‘declaring’ private hospitals and day hospital facilities for health insurance purposes following
licensing by states/territories. More information on licensing requirements and procedures may be
obtained through the websites of the state/territory health departments.
While the previous paragraphs set out current regulation of health practitioners in Australia,
changes are scheduled to be made. The Council of Australian Governments (COAG – comprising
Australia’s Commonwealth and State and Territory governments) recently took major steps
towards improving Australia’s health system by signing an Intergovernmental Agreements on
the health workforce. The new system, which is planned to be implemented from July 2010,
will for the first time create a single national registration and accreditation system for health
professions: chiropractors; dental (including dental hygienists, dental prosthetists and dental
therapists); medical practitioners; nurses and midwives; optometrists; osteopaths; pharmacists;
physiotherapists; podiatrists; psychologists and medical radiation practitioners.
There is potential for cooperation between Australia and India in joint training programmes
for human resource development and sharing of information and experience in respect of
health industry best practice. To facilitate movement of healthcare students both countries may
investigate the feasibility of facilitating mutual recognition arrangements for the recognition of
degrees in the field of doctors, nurses and trained health technicians. The FTA would also provide
opportunities for cooperation in healthcare services.
6.3.12 Architecture, Construction and Engineering Services
India and Australia have developed a capacity to deliver cutting-edge architectural, construction
and engineering services. Australian architects and engineers, and companies providing
construction services have developed extensive expertise in many countries and have much to
offer India because of the great need for quality infrastructure as a result of the growth of the
Indian economy. Both countries are in a position to benefit from liberalisation from an FTA in
architecture, construction and engineering services.
Architecture
India
India has a large well-trained human resource base for providing architectural services. The lowcost high-skill services that can be provided by India have the potential to add value to architecture
services provided by Australian firms in all modes of supply.
In India, the Council of Architecture regulates the architectural profession and is governed by the
Architects Act, 1972. Under the Act, foreign architects are allowed to practice in India if they are
resident in India and are registered with the Council for Architecture.
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Australia
The high quality of Australian architects has allowed them to play a leading role in many
construction projects around the world. A number of Australian architectural firms are active
in the Indian market, including in the design of airports and expansion of its air transport
infrastructure.
Architecture is a regulated profession in Australia. In order for a foreign architect to provide
architectural services in Australia (in addition to any visa or immigration requirements),
registration as an architect is required. Each state and territory in Australia has separate but
similar legislation covering the registration of architects. The legislation is administered by an
Architects Registration Board in each state and territory. For registration, they require:
• a recognised academic qualification in architecture or a pass in Australia’s National
Program of Assessment or a pass in the relevant Registration Board Prescribed
examinations where offered; and
• two years of work experience, of which at least one year must be in Australia (possibly
working under the direction of a registered architect), followed by successful completion of
the Architects Accreditation Council of Australia Architectural Practice examination.
Once registered, architects must adhere to standards of professional conduct enforced by the
Australian Institute of Architects.
In addition, anyone (foreign or local) providing architectural services must comply with the relevant
regulatory standards required for building construction applicable in each state and territory.
Engineering
India
In the case of engineering and integrated engineering services India has technically qualified and
trained manpower with the potential to operate in the international market.
Engineering services is a growth market in India. Spending on engineering services of approximately
US$750 billion in 2004 is projected to increase to US$1.1 trillion by 2020. The market is highly
fragmented by industry, with automotive engineering accounting for 19 per cent of the total,
aerospace at 8 per cent and utilities at 3 per cent in 2004. High-tech/ telecommunications sector
is the current dominant and fastest growing sector, with 30 per cent of the market.
A number of Australian construction and engineering firms have been active in infrastructure
projects in India, including through joint ventures with Indian firms.
Australia
For foreign engineers seeking to work in Australia, there is no single regulatory regime in Australia
governing the engineering profession and no national legislative restrictions on the use of the
title ‘professional engineer’. However, Queensland has different requirements from the other
Australian states. A foreign engineer in any engineering discipline would need to be registered
in Queensland by its Board of Professional Engineers. In other Australian states and territories
registration is not required as a rule, although some specific industries, such as the building and
construction industry (see below), have registration requirements.
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In all states and territories of Australia (except Queensland), the principal instruments governing
the practice of engineering include:
• self-regulation by Engineers Australia, the principal professional body for engineers in
Australia which accredits engineering qualifications and sets national standards that are
supported by the profession; and
• self and co-regulation by the National Engineering Registration Board which establishes
and maintains national, voluntary, non-statutory registers such as the National Professional
Engineers Register.
For the purposes of general skilled migration to Australia, assessment of engineering credentials
is carried out by Engineers Australia.
Construction and related engineering services
Australia
The Australian building and construction industry is required to comply with regulations at the
federal, state and local government levels. The key regulations for building and construction that
apply nationally include the Building Code of Australia (BCA), the relevant standards referenced
by the BCA and State building regulations, which are administrative in nature. The BCA is a set
of performance guidelines for the design and construction of new buildings and for new building
work in existing buildings such as additions and alterations. There is no Commonwealth legislation
relating to the registration or licensing of building practitioners in Australia. Building practitioners,
including relevant engineers, are required to be registered at the state and territory level with
the appropriate state/territory board. The requirements for registration are not limited to formal
training and qualifications; they also include practical experience and financial capacity.
India
Growth in the Indian economy has created a huge need for quality infrastructure. The Government
is focusing on public infrastructure and at the same time offering opportunities for private
participation in the creation of infrastructure to support and sustain the rapid economic growth.
The Indian Government recently permitted 100 per cent FDI in construction and development
projects, especially in construction of townships, housing, commercial premises, hotels, resorts,
hospitals, educational institutions, recreational facilities, and city and regional level infrastructure.
Both sides are in a position to benefit. This creates opportunities for enhanced trade in the
construction services sector.
In India, FDI is selectively permitted in the real estate sector. There is no cap on some sub-sectors
of the construction sector and FDI is allowed through the automatic route. Thus, opportunities for
Australian infrastructure companies exist in India in the construction sector.
Engineering and consultancy companies of Australia have developed extensive expertise in sectors
such as oil and gas, construction and telecommunications and specifically in areas such as
planning, feasibility studies, cost benefit analysis, surveys, design and project management. The
potential for enhancing trade in these services can therefore be explored by Australian companies.
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6.4 Conclusion
Both countries can make gains through further services liberalisation and with this in mind could
undertake to make substantive, high-quality commitments. To maximise the potential gains India
and Australia should aim for:
• liberalisation which delivers meaningful commercial outcomes in services;
• substantial sectoral coverage measured in terms of number of sectors, volume of trade and
modes of supply;
• basing rules and disciplines on trade in services on GATS provisions and improving them
further wherever possible including, potentially, domestic regulations;
• giving priority to areas with greater potential and complementarities between both
the counties, such as computer-related services, financial services, tourism services ,
professional services and educational services;
• maximising trade through Movement of Natural Persons;
• committing to work towards a mutual recognition of professional qualifications by
authorities and professional registration bodies in Australia and India; and
• maximise trade in services to the benefit of the economies of the parties.
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7. Investment Liberalisation
83
7.1 Current Measures applying to Investment
Foreign investment is a key source of capital and expertise, contributing to higher productivity
and economic growth. This study demonstrates that Australia-India investment flows are modest.
An FTA between Australia and India could address barriers to investment flows between the
two countries by reducing impediments to investment, enhancing transparency and providing
appropriate protection for investors.
Bilateral Investment and Taxation Framework
India has undertaken negotiations with a number of countries to enter into Bilateral Investment
Promotion and Protection Agreements (BIPPAs) to promote and protect investment on a reciprocal
basis. The Government of India has so far signed BIPPAs with 72 countries and 26 are under
negotiation. The Australian Government has concluded a total of 22 BIPPAs.
BIPPAs generally provide for: national treatment for foreign investors; MFN treatment for
foreign investors; free repatriation/transfer of returns on investment; recourse to domestic
dispute resolution and international arbitration for investor-state and state-to-state disputes;
and nationalisation/expropriation only in the public interest on a non-discriminatory basis and
with compensation.
India and Australia entered into a BIPPA on 4 May 2000. It provides both national treatment and
MFN treatment for investments. It also provides security for investments against expropriation,
safeguards for transfers and a mechanism for settlement of disputes between an investor and
the government.
India and Australia signed a Double Taxation Avoidance Agreement in 1991. Besides providing
for avoidance of double taxation, it provides for non-discrimination in relation to taxation, the
settlement of disputes and the exchange of relevant information. The two countries are currently
reviewing this Agreement.
7.1.1 Australian Investment Regime
The Australian Government actively supports foreign investment and Australia has an open foreign
investment regime. Foreign investment plays a significant role in the national economy across
almost all aspects of activity. The stock of FDI in Australia has increased significantly in recent
years, rising from US$112 billion at the end of 2001 to US$271 billion at the end of 2008, FDI
(ie. FDI flows) made up about 3.7 per cent of GDP in financial year 2008–09.
Processes required for establishing a business in Australia are not onerous. According to the
World Bank, regulatory procedures associated with starting a business in Australia take just two
days (compared to the OECD average of 13 days in 2008).
Australia’s foreign investment policy operates on the presumption that foreign investment
proposals are generally in the national interest and should go ahead. However, to ensure foreign
investment in this sector is consistent with the national interest, the Treasurer has the power
under Australia’s foreign investment screening arrangements, to review, on a case-by-case basis,
foreign investment proposals and investment proposals from foreign governments. In such cases,
the Treasurer has the power to reject an investment or to allow it to proceed (with or without
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conditions). The types of foreign investment proposals which are subject to the Foreign Acquisitions
and Takeovers Act 1975 and Australia’s foreign investment policy or both and hence should be
notified to the Government for approval include:
• acquisitions of a substantial interest in an Australian business or corporation which is valued
above A$100 million (US$70 million);
• takeovers of offshore companies whose Australian subsidiaries or gross assets exceed
A$200 million (US$140 million) and represent less than 50 per cent of global assets;
• proposals to establish new businesses involving a total investment of A$10 million
(US$7 million) or more;
• acquisitions of interests in Australian real estate; and
• direct investments by foreign governments and their agencies irrespective of size.
Foreign investment in certain sectors, including urban land, banking, the media, shipping, civil
aviation, airports, international air services, and telecommunications are subject to special
provisions (for example, in the telecommunications sector there are special limits on ownership
of Telstra, Australia’s largest telecommunications company).
The overwhelming majority of foreign investment proposals which are considered are approved.
In 2008–09, for example, 8,548 proposals were considered under Australia’s foreign investment
policy. Only 14 applications were rejected – less than 0.2 per cent of the total – all involving the
acquisition of residential real estate.
According to the World Bank, regulatory procedures associated with starting a business in
Australia take just two days (compared to the OECD average of 15 days).
Australia has continued to liberalise its investment regime. The general screening threshold for
foreign investment in Australian businesses was raised from A$50 million (US$35 million) to
A$100 million (US$70 million), and the threshold for offshore takeovers of Australian businesses
was increased from A$50 million (US$35 million) to $200 million (US$140 million) in 2006.
Under Australia’s FTA with the US, the threshold above which US investors must seek approval
for acquisitions of significant interests in Australian businesses and prescribed corporations in
non-sensitive sectors, as well as developed commercial real estate, was raised from A$50 million
(US$35 million) to A$800 million (US$560 million). Furthermore new greenfield investments by US
investors in non-sensitive sectors do not need to be notified to the FIRB. In other FTAs Australia
has bound its existing threshold, effectively guaranteeing that while our treatment of foreign
investors from the partner countries may become more liberal, it cannot be made more restrictive.
7.1.2 Indian Investment Regime
As part of India’s economic reform programme, the foreign investment policy of the Government
of India has been progressively liberalised. The basic rationale for opening up the regime for
overseas investment in India is the need to provide Indian industry with access to new markets
and technologies with a view to increasing competitiveness globally and helping boost the
country’s exports.
FDI policy in India is the responsibility of the Department of Industrial Policy and Promotion (DIPP)
in the Ministry of Commerce and Industry. There are two routes for FDI approval in India:
85
• through an ‘automatic route’ which requires only a notification to the regional office of the
Reserve Bank of India (RBI) within 30 days of receipt of the investment and within 30 days of
issuing shares to foreign investors; or
• through prior approval, which requires proposals to be considered (in most cases) by the
Foreign Investment Promotion Board (FIPB) based in the Department of Economic Affairs
(DEA).
Approval by the FIPB is subject to clearance being obtained where required by applicable national
and state laws and regulations. Once that approval has been granted, the investor must obtain
clearance from other relevant central or state government agencies.
The Foreign Investment Implementation Authority (FIIA), which is based in the DIPP, provides
assistance to foreign investors encountering approval or operational difficulties. The FIIA is assisted
by a Fast Track Authority in each sector, and includes representatives across the Government,
including state governments, and agencies involved in the particular project being considered.
Reforms undertaken by India which further facilitate investment include ceasing to apply
excessively stringent regulatory processes to industry; simplification of investment procedures;
liberalisation of exchange controls; rationalisation of taxes and public sector divestment. As
a result of the various rationalisation measures, India’s FDI Policy has become progressively
more liberal, transparent and investor-friendly. The Government has put in place a liberal and
transparent FDI policy for industrial, services and infrastructure sectors under which up to 100 per
cent investment is permitted in most sectors automatically.
Investment in an Indian company under India’s Portfolio Investment Scheme is not covered by
the FDI policy and requires prior approval from the Securities and Exchange Board of India, while
foreign investors setting up branches, liaison or project offices would need to comply with the
provisions of India’s Foreign Exchange Management Act.
Some features of the current policy are summarised below.
Industrial sector
Progressive liberalisation of India’s industrial policy has removed the requirement for industrial
licences in almost all sectors except for a few that are retained for public health safety and security
considerations.
This means that in the manufacturing sector, FDI is permitted up to 100 per cent automatically for
all manufacturing activities, except for:
• manufacture of cigars and cigarettes of tobacco products where FDI up to 100 per cent is
permitted with prior Government approval;
• manufacture of defence items where FDI up to 26 per cent is permitted with prior
Government approval;
• for domestic companies engaged in the manufacture of items reserved for micro & small
enterprises (that is companies with investment in plant and machinery up to 5 crores Indian
rupees, about US$ 1 million), FDI is only permitted up to a level of 24 per cent; and
• circumstances in which the proposed location attracts locational restrictions (ie: it is within
25 kilometres of the standard urban area limit of 23 towns with a population of one million in
the 1991 census.
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In the mining sector (covering the exploration and mining of coal and lignite, diamonds, precious
stones, gold, silver and minerals):
• FDI up to 100 per cent is permitted in coal and lignite mining for captive consumption by
power projects, iron and steel, cement production and some other mining sectors;
• FDI up to 100 per cent is permitted automatically for exploration and mining of diamonds,
precious stones, gold, silver and minerals; and
• FDI up to 100 per cent is allowed for mining of titanium bearing minerals and ores, though it
requires prior approval by the Government and is subject to some additional conditions.
In the electricity sector: FDI up to 100 per cent is permitted automatically for generation,
transmission and distribution of electricity and also for power trading.
In the infrastructure sector:
• FDI up to 100 per cent is permitted automatically for roads and highways, ports and
greenfield airport projects; and
• FDI up to 100 per cent is allowed automatically for the setting up of industrial parks and
also for investment in industrial parks that have already been established, subject to certain
conditions.
In the financial infrastructure sector:
• Credit Information Companies: up to 49 per cent foreign equity is allowed, although prior
approval of the Government is required as well as regulatory clearance from the Reserve
Bank of India (RBI); and
• Commodity Exchanges: FDI up to 49 per cent with prior government approval is allowed
subject to some conditions.
In the services sector:
• In the telecommunications sector, foreign investment is limited to 74 per cent for fixed line,
cellular national and international long distance calls service (investment in excess of 49 per
cent needs to be approved by the FIPB), and the majority of directors on the Board must be
resident Indian citizens;
• Foreign equity restrictions in audiovisual services range between 20 per cent FDI(in FM radio
broadcasting) to 100 per cent FDI (in up linking of non-news and current affairs’ TV channels);
• FDI in the insurance sector is limited to 26 per cent (of a firm’s paid up capital);
• FDI in the private banking sector is limited to 74 per cent of the capital of the private bank,
and there is a requirement for the RBI to approve ownership of 5 per cent or more of an
Indian private bank (for more detail see section 6.3.1 – Financial Services); and
• In a large number of sectors, FDI up to 100 per cent is allowed automatically subject to
sectoral regulations and licensing requirements, where applicable. Services and related
sectors where FDI up to 100 per cent is allowed subject to certain conditions include:
— development of airports, although FDI beyond 74 per cent in existing airports requires
Government approval;
— maintenance and repair organisations, flying training institutes and technical training
institutions;
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— helicopter services seaplane services, although approval from the Directorate General of
Civil Aviation is required;
— publishing of scientific magazines/speciality journals/periodicals is allowed with prior
Government approval;
— trading of items sourced from the ‘small scale sector’ and test marketing of products is
allowed with prior Government approval;
— courier services allowed with prior Government approval;
— internet service providers without gateway, infrastructure providers of dark fibre,
electronic mail and voice mail: FDI up to 100 per cent is allowed subject to divestment of
26 per cent equity after 5 years if the investing companies list in other countries;
— non-banking finance companies FDI up to 100 per cent is allowed in 18 types of NBFCs
automatically subject to minimum capitalization norms; and
— construction development projects (housing and real estate) FDI up to 100 per cent
is allowed automatically subject to minimum capitalisation norms, minimum area
requirements and lock-in periods for the original investment.
In the agricultural sector, including horticulture and floriculture:
• FDI is generally not allowed in agriculture and plantation activities. Exceptions include the
tea sector, where FDI up to 100 per cent is allowed with prior Government approval, subject
to the condition that 26 per cent of equity would be divested in favour of an Indian partner or
the Indian public within a period of 5 years, and subject to prior approval of the relevant state
government for change in land use; and
• In addition, up to 100 per cent foreign equity is permitted automatically in: floriculture,
horticulture, development of seeds, animal husbandry, pisciculture, aquaculture and
cultivation of vegetables and mushrooms under controlled conditions as well as services
related to agriculture and allied sectors.
Foreign technology transfer policy
FDI brings along with it access to capital, modern technologies and best practices. The
Government of India’s policy on foreign technology transfer is regulated on the basis of the
quantum of payments allowed for technology transfers.
At present, foreign technology collaborations involving payment of lump-sum amounts of up to
US$2 million and/or royalty at the rate of 5 per cent on domestic sales and 8 per cent on exports
are allowed automatically. In addition, the current policy also allows payment of royalties of up
to 2 per cent on exports and 1 per cent on domestic sales automatically for the use of trademark
and brand names of a foreign counterpart without technology transfer. Cases involving payment of
lump-sum amounts or royalties beyond the limits prescribed under the automatic approval route
are considered on a case by case basis by the Government.
Modes of establishing presence in India
A foreign company can operate in India as an incorporated entity (company with FDI) or as an unincorporated entity (branch/liaison office/project office) depending on the nature of its activities.
Branches and liaison offices can perform only specified functions. To undertake other activities a
company has to be incorporated under the Indian Companies Act, 1956.
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Acquisition and transfer of immovable property in India for carrying on a
permitted activity
A foreign investor who establishes a company or a branch, other than a liaison office, can acquire
immovable property in India which is necessary for or incidental to carrying on his business activity
in India. The acquisition is subject to compliance with all applicable laws and must be reported to
the RBI within ninety days from the date of acquisition
Prohibition on investment
FDI is prohibited in:
• general retail trade: (although single brand product retailing investment is permitted up to a
level of 51 per cent);
• atomic energy: FDI is not permitted in atomic energy (though FDI investment in relation to
proposals from certain countries is allowed with prior Government approval);
• lottery businesses: no foreign investment or technical collaboration is permitted in these
activities; and
• betting and gambling: no foreign investment or technical collaboration is permitted in these
activities.
India’s outward investment policy
Indian Government policy on overseas investment by Indian corporations has been progressively
liberalised with the objective of boosting India’s exports efforts and providing Indian industries with
access to new markets and technologies, to increase their competitiveness,. Indian corporations
can invest overseas through the following routes:
• Automatic Route: Indian corporations/registered partnership firms can invest in entities
abroad with up to 400 per cent of their net worth in a year, without prior approval of the RBI
or the Government of India. Such investments would only be reported retrospectively to the
RBI; and
• Normal Route: Proposals which are not covered under the automatic route are considered
by the Special Committee on Overseas Investments in the RBI.
7.2 Impact of Investment Liberalisation
As has been the case for other countries the impact of liberalisation of investment in recent
years in India has been consistently positive. Opening up an economy to greater FDI brings new
capital, technical expertise and supply and marketing networks. This normally leads to greater
employment, as well as greater choice for consumers. It also results in enhanced competition,
leading to pressure to improve quality (for both goods and service delivery) and downward pressure
on price. While these pressures can challenge incumbents, they stand to benefit directly from joint
ventures with foreign partners, or indirectly as competition forces them to improve their efficiency
and quality. The ‘pie’ often grows as higher quality leads to greater market uptake, or new
products/services create entirely new markets.
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FDI normally brings with it global best practice which leads to globally competitive domestic
production which can compete effectively for export market share. Employment then expands
beyond what is required to supply the domestic market only.
These trends are quite evident in India. As a result of India’s increasingly liberal FDI policies, FDI
inflows to India have risen sharply since the early 1990s and made a major contribution to growth
and economic development in India, reaching around US$27 billion in 2008–09. (See Chart 7.1).
CHART 7.1 | INDIA FDI EQUITY INFLOWS
30
25
US$
20
15
10
5
0
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
Source: Government of India
In its analysis of global FDI trends, the World Investment Report (UNCTAD, 2007) noted that India
was the second most attractive location for FDI for 2007-09. India has also improved its position by
two places in the World Economic Forum’s Global Competitive Index (GCI) rankings for 2006–07,
coming 43rd.
Top sectors attracting FDI inflows to India (from April 2000 to April 2009) are the services sector
(22.96 per cent),computer hardware and software sector (10.46 per cent), telecommunications
sector (8.21 per cent) and housing and real estate(6.72 per cent) as shown in Table 7.2.
TABLE 7.2 | INDIA: SECTORS ATTRACTING HIGHEST FDI INFLOWS (US$ MILLION)
RANK
1
SECTOR
CUMULATIVE INFLOWS
(2000 TO 2009)
PERCENTAGE OF
TOTAL INFLOWS
19828.95
22.96
Services sector
2
Computer software and hardware
9019.59
10.46
3
Telecommunications
6956.34
8.21
4
Housing and real estate
5872.98
6.72
Source: India FDI Fact-sheet, DIPP, Government of India, April 2009
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Australian direct investment in India is increasing but remains low relative to other destinations.
For instance, the stock of Australian outward direct investment in India was US$371 million at the
end of 2008. This compares with the stock of outward direct investment in China (US$2.7 billion),
Indonesia (US$1.5 billion) and in the Republic of Korea (US$500 million). The greater certainty and
new opportunities for investment which an FTA could potentially generate would have a positive
impact for both India and Australia.
The profile of Australian investors overseas is diverse. In mining, for instance, certain Australian
firms are among the biggest in the world and their reputation as world leaders is widely
established. In many other areas, Australian firms are equally well known within their specific
fields. All Australian investors overseas, however, share the same competitive domestic
environment which shapes their approach to quality, customer-focus and product/service
improvement. In an open economy, such as Australia’s, companies must stay at the forefront of
international best practice to remain viable.
Whether big or small, Australian companies take their globally competitive approaches with
them when they invest abroad. Frequently they partner with local leading businesses which
facilitate the wider distribution of the Australian company’s expertise and highly productive
managerial and business practices throughout the other country’s economy. This pattern has
been seen in Australian investment throughout the Asian region in sectors such as mining,
agri-business, logistics (including agricultural transport and storage), telecommunications,
financial services, legal services, infrastructure, construction and environmental management,
among a host of others. Often Australian firms have brought a competitive export capability to
their joint venture overseas.
Box 6: Australia’s IBA Health Group Limited – Global Player in India
IBA Health Group Limited is the largest health information technology company listed on the
Australian Securities Exchange. Its core business involves developing advanced information
systems for healthcare entities around the world. Over 13,000 provider organisations in 35
countries across five continents use its software solutions to manage patient information.
IBA Health’s business is driven by the collective talent, experience and commitment of over
3800 skilled staff around the globe, of which around 2000 are based in India.
The acquisition by IBA Health of Bangalore-based MEDICOM Solutions in 2005 provided an
entry into the fast-growing Indian market – which is supported by a strong research and
development capability. In 2007, with the acquisition of iSOFT, the company added another
major development centre in Chennai.
IBA Health is developing the Chennai and Bangalore offices into global centres of excellence
to cater to the growing international business of providing ‘end-to-end’ healthcare software
solutions and associated services. Staff strength in these two businesses constitutes around
50 per cent of the company’s global staff strength.
IBA Health decided to enter the Indian market for a range of reasons, including the
availability of a large pool of highly-skilled English speaking IT professionals and significant
cost benefits – with the assurance of guaranteed quality.
The rapid growth of the Indian economy combined with the liberalisation of foreign investment
over recent years is helping produce unprecedented economic growth in all areas of the economy
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including healthcare. Growth in the healthcare sector has also been boosted by a paradigm shift
towards higher quality and affordable healthcare driven by the demands of India’s expanding
middle class.
In the course of this study it was found that Australian firms were keen to boost their investment in
the Indian economy.
Several existing concerns relating to the investment policy regime are being addressed actively
by the Indian Government and some improvements are being made. In particular, the quality of
the business environment in India has improved noticeably in recent years. Goods, labour and
financial markets are making gains in efficiency and there have been substantial improvements in
the quality of public institutions and in such areas as property rights, the operation of the judicial
system and other indicators, which contribute to building a more attractive investment climate.
An FTA would nevertheless provide the opportunity to address remaining issues which impede
stronger growth in the investment relationship.
Australia’s experience with investment liberalisation extends over recent decades and the
economy is now substantially open. The recent increase in Indian investment in Australia (albeit off
a low base), ranging from software services to mining provides evidence of the potential for further
such integration between the two economies.
Box 7: Gujarat NRE Minerals Limited – Major Player in Australian Resources
Gujarat NRE Minerals Limited owns and operates two coalmines near Wollongong in the
NSW region of Australia. High-grade coking coal is shipped from these mines to India. In
India the company’s parent Gujarat NRE Coke Limited is the largest listed independent (noncaptive) manufacturer of low ash metallurgical coke.
The company made its maiden issue to the Australian public in July 2007, when it raised
around US$13 million from the issue, making this a true ‘joint venture’ between Australian
and Indian investors. It has since acquired another ASX-listed entity, Gujarat NRE Resources
NL, to ensure the company enjoys the benefits of larger scale and synergies.
Gujarat NRE Minerals is making substantial investments in the opening of new mine
entrances and installing state-of-the-art mining equipment in both its Australian mines to
increase efficiencies and production.
By the year 2012-13 once the current round of infrastructure enhancements are complete,
the company hopes to mine and ship to India around 7 million metric tonnes of coal from its
Australian mines. This outcome would benefit the Australian economy. It flows directly from
the success of investment by an Indian company in the Australian resources sector. Both
countries are beneficiaries, with India also gaining greater access to the steel needed to
meet its infrastructure needs.
Australia’s economy has gained from investment from India in areas based on India’s comparative
strengths such as IT, and areas of strong current mutual trade interest, such as the resources sector.
Indian investment in Australia in areas such as IT allows Australia to benefit from Indian expertise
and experience which drives higher standards. Indian investment also contributes to the Australian
economy (see box on Gujarat NRE above). As is the case with Australia’s investment in India, Indian
investment in Australia could be boosted further as links between the two economies strengthen.
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8. Other Matters for Consideration
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8.1 Intellectual Property
Both Australia and India recognise that the effective protection and enforcement of intellectual
property (IP) rights is a key element in fostering creativity, innovation and technological reform,
which facilitates trade and investment and promotes sound economic development. Both
countries are parties to the WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS). In addition to the TRIPS Agreement, Australia and India are common signatories
to a number of other international conventions on IP protection and registration. IP cooperation
between Australia and India is already strong. IP Australia and India’s Department of Industrial
Policy and Promotion signed a Memorandum of Understanding in May 2008 and have prepared
an Action Plan to increase IP cooperation which will soon be signed. Australia was also able to
play a significant role in the 2002 WIPO Expert Mission for Modernisation of the Indian Trade
Marks Registry.
India
Industry in India is becoming increasingly conscious of the value of intellectual property rights.
In India, the Department of Industrial Policy and Promotion (DIPP) is concerned with legislation
relating to Patents, Trade Marks, Designs and Geographical Indications. These are administered
through the Office of the Controller General of Patents, Designs and Trade Marks (CGPDTM),
subordinate office, in accordance with:
• The Patents Act, 1970 (through the Patents offices);
• The Designs Act, 2000 (through the Patents offices);
• The Trade Marks Act, 1999 (through the Trade Marks Registry ); and
• The Geographical Indications of Goods (Registration & Protection) Act, 1999 (through the
Geographical Indications Registry).
An Intellectual Property Appellate Board (IPAB) has been set up to hear appeals against the
decisions of Registrar of Trademarks, Geographical Indications and the Controller of Patents.
Other IP Legislation includes:
• Copyright is protected through Copyright Act, 1957 administered by the Department of
Higher Education;
• Layout of transistors and other circuitry elements is protected through the Semi-conductor
Integrated Circuits Layout-Design Act, 2000 – administered by the Department of Information
Technology;
• New varieties of plants are protected through the Protection of Plant Varieties and Farmers’
Rights Act, 2001 – administered by the Department of Agriculture and Cooperation.
India’s IP administration has been improved and modernised in a number of ways. The Indian
Patents Act was amended in 2005 in order to make it compatible with India’s international
obligations. E-filing facility for patent and trademark applications was introduced in July 2007.
Enforcement of Intellectual Property has been improved – civil and criminal provisions exist in
various laws for dealing with counterfeiting and piracy. DIPP has also set up an inter-ministerial
Committee to coordinate IP enforcement issues.
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Improved Indian policies, laws and resourcing for IP have had a significant impact in India. For
example, the filing of patent applications increased from 4824 in 1999–2000 to 28,882 applications
in 2006–07. The number of applications examined has gone up to 14,119 in 2006–07 from 2824 in
the year 1999–2000.
India’s strategy in the area of Intellectual Property has been:
• to meet international obligations;
• to safeguard public interest;
• to modernize her Intellectual Property Rights administration; and
• to create awareness about Intellectual Property Rights.
Indian IPR laws contain appropriate provisions to prevent domestically the grant or registration of
copyrights, patents and trade-marks on Yoga related postures and accessories, Indian traditional
medical practices and medicinal preparations, and other traditional knowledge. India considers
that much remains to be achieved globally in this area. India therefore attaches importance
to international discussions on the relationship between the WTO’s TRIPS Agreement and the
Convention on Biological Diversity (CBD).
India has also established a Traditional Knowledge Digital Library (TKDL) consisting of about
150,000 formulations in the field of traditional medicines, with a view to prevent patenting of such
knowledge. This library is also being extended to yoga. India is keen to provide access to TKDL
to other countries/ agencies, after signing a disclosure agreement. EPO, USPTO, UKPTO have
expressed interest in access to TKDL.
India has in place a domestic regime to protect geographical indications for goods, including
handicrafts, and so also attaches importance to international discussions on ways to increase the
protection given to geographical indications, for such products, including on registration of GIs and
extension of enhanced GI protection.
Given the importance of the subject, and in order to enhance cooperation in the field of Intellectual
Property Rights, an FTA between India and Australia may address issues of capacity building,
human resources development, public awareness, and outreach activities.
Australia
Australia has laws covering patents, trade marks, designs, plant breeder’s rights, copyright and
circuit layouts, and geographical indications (GIs). In Australia, two Commonwealth Government
departments carry primary policy and administrative responsibility for intellectual property: IP
Australia for industrial property and the Attorney-General’s Department for copyright and related
rights and circuit layouts.
Australia provides a well-developed system for enforcing IP rights through both administrative and
judicial (criminal and civil) processes. Administrative authorities such as the Commissioner for
Patents, Registrar of Plant Breeder’s Rights, Registrar of Trade Marks and Registrar of Designs
can make decisions on the granting of patents, plant breeder’s rights, trade marks and designs.
The Registrar of Trade Marks also has responsibility for certification of trade marks, which include
GIs, while the Australian Wine and Brandy Corporation has responsibility for enforcement of wine
GIs. The Copyright Tribunal is a specialist administrative body dealing with disputes regarding
statutory licences. Collective management of copyright (management by groups representing
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individual copyright owners) is also an integral aspect of the copyright system in Australia. In
addition, the Australian Customs Service, the Australian Federal Police and the Commonwealth
Director of Public Prosecutions have important enforcement roles. Other protections are available
at common law, and through state and territory and Commonwealth laws. There are criminal
offences in Australia’s Copyright Act, Trade Marks Act, and Plant Breeder’s Rights Act in addition
to private civil remedies.
All Australian FTAs, except the Australia New Zealand Closer Economic Relations agreement,
which is an older agreement, include a separate IP Chapter.
8.2 Competition Policy
Australia’s framework
Australia has established a strong competition policy framework. In 1995, as part of the
microeconomic reforms undertaken by Australian Governments (federal, state and territory), a
comprehensive national competition framework was established, overseen by an independent
national regulator, the Australian Competition and Consumer Commission. The principles
underpinning the national competition framework are enshrined in Australia’s intergovernmental
Competition Principles Agreement and related agreements, and they are expressed in legislation
in the Trade Practices Act.
Competition reforms in Australia have delivered significant economic benefits. In its 2006
economic survey of Australia, the OECD said that reforms in Australia, particularly competition
reform, were instrumental in the steady improvement in Australian living standards since the
beginning of the 1990s. Australia’s Productivity Commission research shows that lower domestic
production costs arising from competition policy reforms have also enhanced Australia’s export
competitiveness.
Australia has included competition policy chapters in its FTAs with Singapore, Thailand, the US and
Chile. Australia’s approach to competition policy in its FTAs varies, depending on the negotiating
partner – from clauses encouraging Parties to adopt, maintain and apply competition law, to
legally binding language regarding the legal frameworks available in Australia and the other
country. The agreements also recognise the importance of cooperation between the Parties and
their competition agencies on the enforcement and avoidance of conflict in the application of their
competition laws.
India’s framework
The Competition Commission is now fully constituted in accordance with the provisions of the
Competition Act. The Indian Competition Law (The Competition Act, 2002) provides for setting up
a Competition Commission of India for the purposes of the Act. The Competition Commission of
India has been fully constituted in accordance with the provisions of the Act.
The Competition Act inter-alia provides that the Competition Commission of India set up under the
Act may, for the purpose of discharging its duties or performing its functions under this Act, enter
into any memorandum or arrangement with the prior approval of the Central Government, with
any agency of any foreign country.
96
India’s CECA/FTA with Sri Lanka and Singapore has not included a Chapter on Competition Policy.
India’s CEPA with Korea includes a Chapter on Competition Policy wherein it was agreed to enter
into consultation and cooperation.
It is recommended that consultations between India and Australia may be undertaken as
appropriate on various matters relating to competition policy, including capacity building, exchange
of information and notification procedures.
8.3 Government Procurement
Australian Government procurement framework
Since the mid 1990s, the Australian Government has implemented a number of broad ranging
and integrated reforms to its resource management and governance arrangements which have
resulted in significant improvements to the efficiency and responsiveness of the procurement
practices of Australian Government departments and agencies.
Value for money is the core principle governing procurement by the Australian Government,
and is usually assessed on price and non-price criteria to ensure that the Government gets the
best performance outcome relative to price. Consistent with this core principle, the Australian
Government procurement framework generally does not discriminate between domestic and
foreign suppliers. Exceptions to this non-discrimination include policies to ensure small and
medium enterprises are not discriminated against in procurement processes and, in limited
circumstances, policies to assist indigenous Australians.
The Australian Government does not control or regulate procurement by state and territory
governments or local governments. Each state and territory government manages its own
arrangements and is responsible for ensuring compliance with any international agreements to
which it has agreed to be bound.
Given its significance, in terms of the proportion of total trade it accounts for, Australia seeks
coverage of government procurement in its FTAs. Australia has entered into five international
agreements with substantive provisions on government procurement. The Australia-New
Zealand Government Procurement Agreement established a single government procurement
market covering all central and state level governments. The Singapore-Australia FTA provides
for non-discriminatory access to the government procurement market of each country at the
central government level. The government procurement chapter of the Australia-United States
FTA and the Australia-Chile FTA provide for access to government procurement at the central and
state government levels. The Thailand-Australia FTA provides for future negotiations to include a
substantive government procurement chapter.
Indian Government procurement framework
India is willing to engage in dialogue on various aspects of government procurement. However,
India has not included government procurement as a negotiating subject in its bilateral FTA
negotiations to date.
97
8.4 Mutual Recognition
A mutual recognition agreement is an international agreement by which two or more countries
agree to recognise one another’s procedures for assessing the conformity of goods with technical
regulations and standards. The World Trade Organization (WTO) Agreement on Technical Barriers
to Trade provides for countries to develop and apply three important trade facilitation devices:
harmonization, equivalence, and mutual recognition of conformity assessment procedures.
In the treatment of goods in a possible future FTA, trade linkages between the two countries could
be intensified not only through tariff liberalisation, but also by facilitating goods trade through
measures in relation to technical regulations, standards and conformity assessment procedures.
Additionally, for services trade, an important tool to facilitate the movement of professional service
providers in a possible future FTA would be to encourage mutual recognition of professional
qualifications by professional bodies in both countries.
In this regard, the following areas could be considered in negotiations for an FTA between the
two countries.
Trade in goods
To facilitate trade in goods both sides could explore opportunities in the area of technical
regulations, standards and recognition of conformity assessment.
Existing voluntary sector arrangements between conformity assessment and accreditation bodies
could provide a basis for exploring opportunities for recognition of conformity assessment at a
regulatory level in the two countries.
In possible future FTA negotiations, both sides could consider mechanisms to facilitate:
(i) agreement on the recognition of conformity assessment procedures on products of their
export interest;
(ii) approval procedures, inspection requirements, testing and certification; and
(iii) acceptance of conformity assessment including inter alia recognition of each others’ testing
laboratories or certification bodies.
Other issues that could be discussed are cooperation for the development of capacity of
institutions and comprehensive confidence-building process to demonstrate equivalence of
regulatory standards, inspection competence and effective enforcement in both countries in
identified priority areas.
Trade in services
Given the existing synergies between the two economies, India and Australia should work towards
encouraging the mutual recognition by relevant professional bodies of professional qualifications
with the aim of facilitating easier movement by them between the two countries. Governments
could also support easier certification norms and accreditation of professional service providers in
fields such as health care, engineering, and architecture.
98
In a possible future FTA, the two Governments should therefore facilitate increased dialogue
between the regulatory/professional bodies, with the aim of facilitating mutual recognition of
qualifications between them.
8.5 Consultation
A potential bilateral FTA could include a chapter on consultations and dispute settlement which
would establish fair, transparent, timely, and effective procedures to settle disputes arising under
the Agreement. A robust dispute settlement mechanism could borrow from the WTO dispute
settlement architecture and may incorporate other ‘best practice’ elements.
An institutional structure that reflects the strong relationship between Australia and India would
also be a key feature of a bilateral FTA. For example, consideration could be given to a joint
committee which reports – with some measure of flexibility – to the regular Joint Ministerial
Commission meeting of Trade Ministers. An appropriate institutional structure would recognise
that an FTA was a platform for ongoing and increasing bilateral interaction in the economic field.
99
100
9. Economic Modelling
101
Economic Modelling
Economic modelling was employed to gain some insights into how an Australia-Indian FTA might
impact on bilateral trade and investment flows, economic welfare and specific sectors in both
countries.
Centre for International Economics
The independent Centre for International Economics (CIE) in Australia undertook the modelling
using the CIEG-Cubed global economic model. In interpreting the modelling results, it is important
to recognise that economic models simplify reality, depend on the quality of data inputs, and rely
on numerous assumptions regarding economic parameters, behaviour and relationships. All
results should therefore be regarded as illustrative estimates. Modelling can be useful, however,
in inferring the outcome of trade liberalisation (positive or negative impact on output) and the
magnitude of such impacts (large or small). The Executive Summary of the economic modelling
is at Annex B13.
Without prejudice to any subsequent negotiations, the modelling was premised on the hypothetical
scenario where all barriers to bilateral trade and investment between Australia and India were
removed immediately on commencement of an agreement.
Countries achieve allocative efficiency gains through trade and investment liberalisation. As seen
in Chart 9.1, CIE’s modelling indicates an FTA between Australia and India could result in a net
positive impact on the GDP of both countries. Ten years after the hypothetical FTA came into force,
Australia’s GDP could be 0.23 per cent higher in net terms than without an FTA. India’s GDP could
be 0.15 per cent higher. While Australia was estimated to gain more in relative terms from an FTA,
India would benefit slightly more in absolute terms. The somewhat higher impact on Australian
GDP is due to two main factors – India’s higher tariff levels prior to an FTA, and the greater
importance India currently represents as a destination for Australian exports than Australia is for
Indian exports. Over a period of 20 years, an FTA could lead to Indian GDP gaining in net terms an
additional US$34.4 billion in (2009 prices) net present value (NPV) terms, compared to US$32.4
billion in Australia.
Modelling was undertaken to estimate the impact on 57 specific sectors in each economy to
determine the net change in output for each sector. A net increase in output under an FTA could
be expected for 39 Indian sectors, with a corresponding figure of 40 for Australia. Dynamic
productivity gains arising from greater import competition, learning by doing in export markets
and greater foreign investment are key factors in the high proportion of sectors benefiting in net
terms from an FTA.
The modelling estimates that an Australia-Indian FTA could result in a modest positive impact on
total global economic output.
13 Modeling was calculated in 2008.
102
CHART 9.1 | ESTIMATED IMPACT OF THE FTA ON REAL GDP
1.0
Australia
India
% deviation from baseline
0.8
0.6
0.4
0.2
0.0
-0.2
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
Data source: CIEG-Cubed modelling simulation.
Research and Information System for Developing Countries (RIS)
In addition to the modelling carried out by the CIE, which envisaged a modest welfare gain for both
economies, India’s RIS carried out economic modelling on the benefits of a bilateral FTA, which
has concluded that the gains could be much greater. A more liberal and optimistic CGE Modelling
exercise was employed (Details are given in Annex C).
Modelling of welfare and trade gains from the proposed India-Australia FTA was undertaken by
RIS in an alternative scenario which included full tariff liberalisation on manufactured products
and with import-augmenting technical change denoting trade facilitation effects. This was done on
the latest (2009) GTAP 7 database. These assumptions together explain the optimistic estimates
presented in Table 9.1.
TABLE 9.1 | W
ELFARE AND TRADE GAINS UNDER FULL TARIFF LIBERALISATION AND
TRADE FACILITATION SCENARIO (GTAP DATABASE (VERSION 7:2009)
I. WELFARE GAINS
US $ MILLION
% OF GDP
Australia
10650.05
1.17
India
12533.04
1.14
II. BILATERAL EXPORTS
% INCREASE
Australia
13.38
India
14.54
The proposed FTA could, based on the more optimistic modelling assumptions noted earlier,
yield welfare and trade gains for both the countries that could be as high as 1.14 per cent of GDP
(welfare gain) and 14.54 percent (bilateral export gain) for India and 1.17 per cent of GDP (welfare
gain) and 13.38 per cent (bilateral export gain) for Australia. These gains could accrue with full FTA
103
implementation as they have been estimated under a ‘static scenario’. Other things remaining the
same, these gains could be translated into per annum benefits with full implementation of tariff
liberalisation and trade facilitation.
Conclusion
The modelling commissioned during the feasibility study indicates an FTA between Australia and
India could result in a significant net positive impact on the GDP of both countries.
104
10. Conclusions and Recommendation
105
10.1 Introduction
The JSG has presented a comprehensive review of bilateral economic linkages between Australia
and India, covering trade in goods and services, investment flows, and other areas of economic
cooperation. This report analyses the feasibility of a comprehensive FTA which will include
agreements on goods, services, investment and other trade and investment facilitation cooperation
measures between Australia and India.
• A Free Trade Agreement (FTA), for the purposes of this Study, has a wide coverage including
goods, services and investment. In India, FTAs are commonly understood as goodsonly agreements whereas a Comprehensive Economic Cooperation Agreement (CECA)
includes goods, services, investment and other areas of cooperation. In Australia, FTAs are
understood as comprehensive agreements.
The total amount of trade (in goods and services) between Australia and India has been rising
rapidly in recent years, reaching almost A$19 billion (about US$16 billion) in 2008. Bearing in mind
the two countries’ economic size, there is further potential for growth in bilateral trade flows owing
to the complementarities of the two economies.
Major findings of the JSG are summarised below:
Trade in Goods: Analysis of the bilateral trade in goods suggests substantial increases are
possible through a comprehensive FTA, including coverage of resources (mining), agricultural and
manufactured goods trade. The JSG also noted that the trade links between the two countries
could be intensified not only through tariff liberalisation, but also by adopting other measures.
Some observations of the JSG are:
• an FTA will mutually benefit both countries by removing tariff and non-tariff barriers;
• agreement on rules of origin would enhance bilateral preferential trade;
• consultation and co-operation in sanitary and phytosanitary matters, technical barriers to
trade and other similar measures could be enhanced;
• a mechanism for enhanced customs cooperation could be considered; and
• trade remedies cooperation could be enhanced.
Trade in Services: The services sector is an important part of both Australian and Indian
global exports. It contributes to about 37 per cent of India’s exports and about 21 per cent of
Australia’s exports.
The JSG found that there is further potential in services trade between India and Australia
including in the sectors of financial services, software, telecommunications, IT and ITeS/computer
related services, education, professional services (including accounting and legal services),
tourism, air services, agricultural services, audiovisual services, healthcare, architecture and
engineering, and movement of natural persons including visas for Mode-4. The JSG also discussed
Mining & Energy, Environmental and Sporting & Recreational Services and agreed that, if FTA
negotiations were to commence, no services sector would be excluded a priori from consideration
in the negotiations.
Investment: The JSG noted that Australia-India investment flows are modest relative to bilateral
trade and there is considerable scope for enhanced investment links between Australia and
India. There are considerable investment opportunities in India and Australia in sectors such as
106
mining and resources, agricultural processing, infrastructure, banking and telecommunications.
In order to encourage investment inflows both countries have liberalized their investment regimes.
Some observations of the JSG in relation to investment are:
• an FTA would facilitate bilateral investment in many sectors;
• interaction between governments (including state governments), industry and business on
an institutional basis would be boosted; and
• exchange of information on investment laws and regulations would be further facilitated.
Cross-cutting issues: A range of cross-cutting issues, such as intellectual property, competition
policy, government procurement and technical barriers to trade, were also considered in the study.
10.2 Conclusions on the Feasibility of an FTA
Negotiation of a comprehensive WTO-consistent and WTO-plus FTA covering goods, services, and
investment between Australia and India is feasible. Cooperation, capacity building and exchange
of information on other issues such as the protection of intellectual property rights (covering all
issues including TRIPS & CBD, and GIs inclusive of non-food GIs), SPS & TBT matters, competition
policy and government procurement could also be considered during FTA discussions..
India and Australia produce highly competitive and largely complementary goods for export to
international markets. While economic activity in each country has led to substantial growth in
bilateral goods trade, tariffs and non-tariff barriers continue to raise the cost of imports, imposing
implicit taxes on businesses and consumers alike.
A comprehensive FTA between Australia and India would cover substantially all goods trade
allowing the two countries to take maximum advantage of the considerable complementarity
between the two economies. Such liberalisation would provide impetus to economic activity and
economic welfare in each economy.
An FTA would also cover a substantial range of services sectors, including sectors of export
interest to both the countries, covering all the four modes in a GATS-consistent and GATS-plus
framework, and including enhanced cooperation to assist the recognition of professional services.
Liberalising investment regimes would result in valuable economic benefits for both countries.
Economic modelling indicates that GDP in each country should increase as a result of an FTA and
could result in a modest positive impact on total global economic output.
However, the indicative nature of any economic modelling needs to be borne in mind (due to the
inherent assumptions that underlie any economic modelling exercise).
10.3 Recommendation
On the basis of this Report and its conclusions, the Joint Study Group finds a bilateral FTA feasible
and recommends that the Indian and Australian Governments may consider negotiation of a
comprehensive bilateral FTA that includes trade in goods, trade in services, investment and other
trade and investment facilitation and cooperation measures as a single undertaking.
107
Annex A: Terms of Reference
Australia and India agreed in April 2008 to undertake a feasability study for a possible bilateral free
Trade Agreement (FTA) with the following terms of reference:
i.
to identify the strategic and economic benefits that India and Australia can derive from the
establishment of an FTA;
ii.
to develop a comprehensive policy framework for enhancing the bilateral economic
relationship, including by assessing the feasibility of achieving desired outcomes through
a comprehensive FTA covering trade in goods, services, and investment; as well as other
issues such as the protection of intellectual property rights (covering all issues including
TRIPS & CBD, and GIs inclusive of non-food GIs), SPS & TBT matters, competition policy and
government procurement;
iii. to review the existing institutional framework, infrastructure and mechanisms in bilateral
trade, investment and economic relations to enhance closer cooperation and recommend
measures to facilitate and optimise such cooperation;
iv. to expedite the expansion of trade in goods through liberalisation of tariffs, consistent with
WTO principles, and removal of other impediments to trade;
v.
to expedite the expansion of trade in services, by liberalising trade in services, consistent with
WTO principles, with substantial sectoral coverage including visas related to Mode-4, and
MRA issues;
vi. to evolve an appropriate framework and modalities for investment cooperation with a view to
creating a favourable climate for encouraging cross border investment flows;
vii. the JSG will be required to produce a Joint Report, with recommendations, for consideration
by the Governments of India and Australia in the first half of 2009 or earlier.
108
Annex B: Centre for International Economics
Summary of the Economic Modelling for the Australia-India FTA Feasibility Study
The Australian and Indian Governments have announced that a joint feasibility study will be
undertaken into the merits of a bilateral free trade agreement. As part of the feasibility study,
economic modelling is to be undertaken to quantify the possible economic impacts of a trade and
investment agreement between Australia and India.
This report provides an independent assessment of the possible economic impacts.
Barriers to merchandise trade
• The average applied Australian tariff in 2008 is a low 3.2, with nearly 52 per cent of tariff
lines being duty free. The highest tariff during 2008 is 17.5 per cent (levied on some apparel
and textile products). Australia has bound nearly 97 per cent of its tariff lines in the WTO,
with the average bound tariff rate being 10 per cent.
• The average applied tariff in India during 2008 is a relatively higher 17.6 per cent, with nearly
3.7 per cent of tariff lines being duty free. The average tariff masks some substantial variation
in tariff rates. For example, during 2008 over 400 tariff lines had a tariff equal to or in excess
of 100 per cent. India has bound over 75 per cent of its tariffs in the WTO, with the average
bound tariff rate being 48.6 per cent.
• India applies its MFN tariff rate to Australian imports, while Australia applies its developing
country tariff rate to Indian imports. Hence Australia already affords India some tariff
concessions relative to imports from an MFN country.
Barriers to services trade
• Barriers to services trade are nationalistic treatments that hinder or prevent market entry
and price competition between ‘foreign’ and domestic service providers.
• Service barriers can comprise things such as restrictions on FDI, restrictions on the recognition
of professional qualifications, residency/local presence obligations and limitations on the
scope of activities that can be undertaken by foreigners.
• It is considered that there is little in the way of barriers to consumption abroad (such as
barriers to Australians taking holidays in India, or to Indian students studying in Australia).
Barriers to services delivered via commercial presence (Mode 3 delivery under the WTO’s
General Agreement on Trade in Services) are typically barriers to foreign direct investment, and as such were dealt with when estimating the impact of investment liberalisation (see below).
• This leaves barriers to services delivered via cross border supply and movement of persons
(such as professionals travelling temporarily to the economy into which they are delivering
their services). While service barriers will be of a ‘behind the border’ and regulatory nature,
the effect thereof will be similar to a tariff applied to merchandise imports — the service
barriers will act to increase the cost of those service imports and reduce competition in the
local market.
109
• Drawing on published research, the tariff equivalents of barriers to services typically
delivered via cross border trade and movement of persons — water transport,
communications and professional services — were found to range between 0–10 per cent.
Barriers to investment
• Estimates of barriers to foreign direct investment (FDI) in the service sectors are available
for 29 OECD countries and 46 other (largely developing) countries. On a scale of 0 (no
restrictions) to 1 (totally restricted), Australia’s investment environment is accredited with
a ‘score’ of 0.32, while India is scored at 0.50. These ratings were used for the purpose of
modelling the impact of investment liberalisation. They do not, however, capture informal
barriers to investment, which can be significant.
• While FDI is important to Australia and of growing importance to India, bilateral FDI between
Australia and India is currently modest. India is the destination for a small share (0.03
per cent) of Australia’s outward FDI stock, with the value of Australia’s FDI stock in India
being valued at A$106 million in 2006. Australia is the destination for 0.80 per cent of India’s
outward FDI stock, with the value of India’s FDI stock in Australia estimated to be around
A$133 million in 2006.
• Comprehensive liberalisation of bilateral FDI is estimated to see India’s stock of investment
in Australia increasing by A$291 million, while Australian investment in India is estimated to
increase by some A$228 million.
• Despite large barriers to FDI being removed, the estimated changes in the FDI stocks
are quite small, reflecting the small underlying bilateral FDI base. Continued economic
development in India and greater future integration of the two economies could see
investment liberalisation having a much larger impact on bilateral FDI flows than that
estimated here.
Macroeconomic impacts of bilateral trade and investment liberalisation
• Given the uncertainty with respect to the pace and scope of (any) liberalisation, it has
been assumed for the purpose of modelling that the bilateral trade and investment
liberalisation will be comprehensive in scope with all barriers being removed immediately
on commencement of the agreement, assumed to occur on 1 January 2010.
• As can be seen from chart , an Australia–India Free Trade Agreement is estimated to have a
beneficial impact on the GDP of both economies. By 2020, 10 years after the FTA has come
into force, Australia’s GDP is estimated to be 0.23 per cent higher than otherwise, and 0.15
per cent higher in the case of India.
• The fact that Australia benefits relatively more from the FTA reflects the trading relationship
and magnitude of trade barriers — India has higher trade barriers than Australia, and India
is currently a more important trading partner to Australia than Australia is to India. Removal
of high trade barriers in a market that is the destination for 5.3 per cent of Australia’s
exports provides Australia with relatively greater gains than does removal of already low
Australian barriers in a market that is the destination for 0.5 per cent of India’s exports.
• While Australia is estimated to benefit relatively more than India from the FTA, India benefits
more in absolute terms. Over the period 2010–30, Australia is estimated to gain A$43 billion
in real GDP in (2008) net present value terms, versus India’s real GDP gain of A$46 billion.
110
ESTIMATED IMPACT OF THE FTA ON REAL GDP
1.0
Australia
India
% deviation from baseline
0.8
0.6
0.4
0.2
0.0
-0.2
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
Data source: CIEG-Cubed modelling simulation.
Sectoral impacts of the bilateral trade and investment liberalisation
•
70 per cent of Australian sectors and 68 per cent of Indian sectors are expected to experience
an increase in output under the FTA.
Dynamic productivity gains, arising from greater import competition, learning by doing in export
markets and greater foreign investment, are a key factor in seeing such a high proportion of
sectors benefiting under the FTA. Indeed, Australian sectors are estimated to have experienced
a productivity gain of 0.13 per cent by 2020 on average, versus 0.17 per cent in the case of the
average Indian sector.
111
Annex C: Research and Information System
for Developing Countries
Summary of the Economic Modelling for the Australia-India FTA Feasibility Study
Modelling of welfare and trade gains from the proposed India-Australia FTA was undertaken by
RIS in an alternative scenario of CGE. The rationale for so doing needs to be explained briefly in
non-technical terms.
Reduction or elimination of tariff barriers between India and Australia is important under the
proposed FTA in order to step up bilateral trade flows. Considering that trade flows are a function
not only of tariff reduction or elimination, but also of trade facilitation measures that may include
simplification of customs clearance procedures, mutual recognition agreements for standards,
technical cooperation and improvement in trade facilitation infrastructure, it was imperative
to factor in both tariff liberalisation and trade facilitation while making any assessment of the
possible trade and welfare gains.
With respect to tariff liberalization, the agricultural trade liberalization was excluded due to
obvious reasons. Similarly, due to inherent difficulties in the GTAP database on services, this
sector was also excluded. Therefore, the study attempted to examining scenarios of full trade
liberalization in the manufacturing sector.
Trade facilitation measures were formulated in our simulation as an “import-augmenting technical
change” to estimate the impacts. In the model, a positive “import-augmenting technical change”
or an improvement in efficiency of importing products lowers the market price (domestic price) of
imported products. Specifically, we investigate the effects of 10 percent exogenous change in this
efficiency improvement. It should be noted that zero percent change in that efficiency improvement
is applied to Australia on the assumption that its trade facilitating infrastructure is not only
well-developed but it can also be considered as a benchmark vis-à-vis India. Trade facilitation is
modelled as a shock to “ams”: import augmenting technical change, which lowers the effective
price of imported products.
Thus, this exercise included full tariff liberalisation on manufactured products along with importaugmenting technical change denoting trade facilitation effects. This was done on the latest (2009)
GTAP 7 database. In terms of country-aggregation, it was kept straight forward with three regions
viz. India, Australia and Rest of the World. This was done due to the complexities that seep into the
modelling due to any further disaggregation. In terms of sectoral aggregation, 57 sectors were
mapped in terms of 10 sectors with five sectors capturing the manufacturing sector as a whole.
The solution method was adopted as 1-Step Johansen and the parameters were taken as default.
112
Annex D: Currency Conversion Table
YEAR
EXCHANGE RATE: USD RATE
(PERIOD AVERAGE):
AUSTRALIA: ANNUAL
A$1= USD
EXCHANGE RATE: USD RATE
(PERIOD AVERAGE):
INDIA: ANNUAL
N.C./USD
YEAR
1990
0.7806
1990
17.504
1991
0.7790
1991
22.742
1992
0.7344
1992
25.918
1993
0.6800
1993
30.493
1994
0.7311
1994
31.374
1995
0.7413
1995
32.427
1996
0.7826
1996
35.433
1997
0.7422
1997
36.313
1998
0.6282
1998
41.259
1999
0.6452
1999
43.055
2000
0.5798
2000
44.942
2001
0.5172
2001
47.186
2002
0.5433
2002
48.610
2003
0.6485
2003
46.583
2004
0.7354
2004
45.317
2005
0.7637
2005
44.100
2006
0.7530
2006
45.307
2007
0.8368
2007
41.349
2008
0.8388
2008
43.505
2009
0.7913
2009
48.405
Source: IMF, International Financial Statistics, on-line database from DX-Econdata
113
Annex E: Glossary of Acronyms and
Abbreviations
114
AAI
Airports Authority of India
AICTE
All India Council for Technical Education
ASEAN
Association of South East Asian Nations
ASIC
Australian Securities and Investments Commission
ASX
Australian Securities Exchange
AQIS
Quarantine and Inspection Service
BCA
Building Code of Australia
BIPPA
Bilateral Investment Promotion and Protection Agreements
BIS
Bureau of Indian Standards
BPO
Business Process Outsourcing CIE – Centre for International Economics
CTC
Change in Tariff Classification
CECA
Comprehensive Economic Cooperation Agreement
DAFF
Department of Agriculture, Fisheries and Forestry
DBCDE
Department of Broadband, Communications and the Digital Economy
DFAT
Department of Foreign Affairs and Trade
DIAC
Department of Immigration and Citizenship
EIC
Export Inspection Council
FATA
Foreign Acquisition and Takeovers Act
FDI
Foreign Direct Investment
FTA
Free Trade Agreement
GDP
Gross Domestic Product
ICAI
Institute of Chartered Accountants of India
ICT
Information Communication Technologies
ICWAI
Institute of Cost and Work Accountants of India
IMF
International Monetary Fund
IP
Intellectual Property
IT
Information Technology
JSG
Joint Study Group
MFN
Most Favoured Nation
MOU
Memorandum of Understanding
MRA
Mutual Recognition Arrangement
OECD
Organisation for Economic Cooperation and Development
ROO
Rules of Origin
RIS
Research and Information System for Developing Countries
SPS
Sanitary and Phytosanitary
SBI
State Bank of India
TBT
Technical Barriers to Trade
TCF
Textiles, Clothing and Footwear
TRIPs
Trade Related Intellectual Property Rights
115

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