Australia pushes trade with India as dispute with China exposes dependency

Australia pushes trade with India as dispute with China exposes dependency

Australian service exports have seen a calm tectonic shift over the past 18 months.

Australia’s escalating tensions with Beijing have shown it relies on Chinese trade and fueled efforts to strengthen ties with Asia’s other giant economy, India.

New enrollments for international students from India rose 32% year over year in 2019 and is the fastest growing major market for Australian services. India has overtaken China as the largest source of net migration to Australia, and its diaspora is the third largest Down Under after China and Britain.


India’s growing population, set to overtake China by 2027, suggests Australia still has the ability to diversify a trading portfolio that currently makes it the most heavily China-dependent economy in the developed world. The need to turn things upside down has accelerated as relations plummeted to their lowest level in 30 years after Canberra’s call for an international investigation into the origins of Covid-19 was taken as a political attack by Beijing and China Barley, beef and wine from barriers imposed under.

This makes Australia look to its democratic, cricket-loving ally to fill the void. Prime Minister Scott Morrison held a virtual summit with his Indian counterpart Narendra Modi in June. The two signed a defense agreement and improved relations into a comprehensive strategic partnership. The trade ministers of Japan, India and Australia recently agreed to work towards supply chain resilience in the Indo-Pacific region.

“We can sell India’s education, healthcare, and science and technology potential,” said Ian Hall, professor of international relations at Griffith University in Queensland. “It is much more the consumer market of the growing Indian middle class than goods.”

Trading with India, however, has its own challenges. Your government is tied to economic nationalism, as demonstrated last year when it withdrew from the regional comprehensive economic partnership to free trade.

Delhi wants to send many people to Australia on work visas and not cut tariffs, according to former Australian Trade Minister Craig Emerson, who initiated the free trade negotiations between Australia and India in 2011, which resulted in reciprocal trade only a tenth of the shipments between China and Australia.


“India is very concerned about its trade deficit,” said Lai-Ha Chan, a political scientist at Sydney Technical University, who notes that after signing free trade agreements with South Korea and Japan, India’s trade deficit with these nations has skyrocketed. “It would be very concerned about Australian farm products like dairy products that would harm Indian farmers.”

Australia’s most valuable export – iron ore – has not yet been caught in China’s crosshairs, possibly due to the lack of alternative suppliers. Beijing appears to be giving itself more flexibility, however, with Emerson noting that China is buying ore carriers that improve the economics of long-distance shipping from Brazil, and buying Guinea mines.

“It is entirely possible that once China has all three mineral provinces in a row – Guinea, Brazil and Australia – it will play against each other for a better price,” he said. “If you are China, would you say where is our vulnerability? Iron ore. So let’s diversify, let’s fix this.” You may never need to activate it, but it’s there, it’s available. “


What Bloomberg’s Economists Are Saying

Australian service exports have seen a calm tectonic shift over the past 18 months. In the education field, the number of Indian student visa holders has dwarfed Chinese students due to the increase in Indian enrollments. While China’s dominance in Australian goods exports reflects demand for raw materials, China’s importance in the labor-intensive service sector has been challenged by a doubling of service exports to India in the past two years.

(Except for the headline, this story was not edited by GossipMantri staff and published from a syndicated feed.)


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