India-Australia CECA: Breaking the impasse

• India-Australia CECA is still under negotiations, even though it was supposed to get concluded in 2015.
• Agriculture is a major stumbling block in talks, as India is reluctant to give market access to sectors like dairy, wine, meat and processed agro that Australia desires.
• Australia is a highly competitive producer in agri-products with average returns of the top 25% of Australian farm businesses outperformed Australia’s highly paid superannuation fund managers over the past fifteen years,
• Providing Australian food producers unbridled access to the Indian market would be quite untenable; however, India could provide conditional access with technology transfer to Indian producers.

In the much delayed CECA and now RCEP negotiations, Australian trade negotiator is perpetually demanding market access to Indian dairy, wine, meat and processed agro sectors. India’s apprehensions in opening its markets for these sectors to Australia are a major factor behind the delay in CECA.

Australia is a major agricultural exporter and also imports significant amount of foodstuffs, which indicates that their domestic markets are open to international competition. They have efficient technologies in food processing, which also nurtures opportunity for employment generation. In many cases their production systems at the farm level are unique. For example to export meat, the process starts from stage one i.e. maintaining the sheep and cattle till they are exported.  During this entire process, several steps are involved including medical checkups and certifications from labs.

Australia’s competitive advantages stems from a number of factors, including natural resources, climate, human resources, market proximity, technological settings and policy frameworks. It is difficult to objectively compare these factors internationally, but success in export markets provides strong evidence as to where Australia’s comparative advantages lie.

More than two-thirds of all Australian agricultural production is exported, although for wool, cotton, sugar, beef and grains, exports account for more than 90% of production. Other strong export sectors include dairy, sheep meat and wine, for all of which exports account for more than 50% of production.

The ability to efficiently produce pasture-fed beef, sheep meat and wool is a significant comparative advantage for Australian agriculture, especially given the growth in demand from middle-class Asian consumers. Australia is a world leader in live sheep exports and one of the largest exporters of beef, dairy cattle and goats. The quality of Australian livestock, in combination with world-leading standards of biosecurity, welfare and animal health makes it very competitive in global markets.

Australian farmers are not only skilled producers of food and fibre, but they are also exceptionally good business managers. This is evident from some research the Australian Farm Institute carried out recently. It recognized that Australian farm businesses experience the highest annual revenue volatility of any sector of the Australian economy, and the second-highest revenue volatility of any international agriculture sector.

Running a successful business in such a volatile environment is tough, as discovered by many corporate investors in Australian agriculture. Yet the average returns of the top 25% of Australian farm businesses have easily outperformed the returns achieved by Australia’s highly paid superannuation fund managers over the past fifteen years, confirming their business management skills.

Agricultural scenario in India

India’s intensity of trade in fresh fruits and vegetables is higher towards neighbouring and Middle-East countries as compared to rest of the world. However, India’s low exports in fresh fruits and vegetables are because of the use of sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) measures by the developed countries.

India’s trade in agriculture commodities has undergone significant changes in the post-reform period. Due to suitable climatic conditions, India’s trade has diversified towards horticulture commodities, especially exports of fruits and vegetables, as it is the second largest producer of fruits and vegetables in world. This sector not only promises increase in employment but also assures reduction in poverty as it yields higher income as compared to food grains. Over the years, the sector is moving to commercialization with increase in usage of technology and modern methods of production. The government is introducing policies especially for the horticulture sector.

However, the Indian food industry does not have trained manpower to handle post-harvest quality management practices and food processing activities. There is an urgent need to train labourers engaged in post-harvest practices and shop floor workers engaged in food processing activities (Deodhar, 2001). According to the existing literatures, story still remains static since two decades.

Provide access, with conditions attached

India may opt for agreeing on giving partial market access only when similar technology is implanted and practiced by Indian stakeholders, once training and capacity building is done by Australian counterparts on their cost. Given Australia’s competitiveness, this seems pragmatic to implement with RCEP negotiations running parallelly.

Similar to BoT (Build operate & transfer), which is implemented in India’s construction sector, there could to be an analogous policy instrument while negotiating trade agreements. This basically indicates the assistance, and nurturing the enervated industries of the respective economies via importing technology and training.

Since Australia is a seasoned economy in these sectors it could assist India to achieve similar productivity by exporting technology and skills and developing infrastructure. For example to develop India’s processed dairy, meat, wine and horticulture sectors Australia could assist in implanting technology which will facilitate our manufacturer and exporter to link into global value chains, boost productivity and efficiency of the sector, and skills of workers.

As a reciprocal gesture, India could offer land, economical labor and incentivise trade policies like national treatment of manufactured products. It could take a cue from Brazil, which evolved as a veteran exporter after facing tremendous rejections from EU in early 1980s. They have invested near about two decades to improve their quality. It is an opportune time for India to take the leap, and the trade agreement could be reoriented so that both India and Australia benefit.