Australia nudges India trade beyond coal
Wall St Journal - 16 Oct 2012
Australia nudges India trade beyond coal
By Tom Wright
Australian Prime Minister Julia Gillard attended a business forum in New Delhi today, part of her government’s attempts to capitalize on booming trade with India.
Two-way goods and services trade with India has jumped to about $20 billion from $3.3 billion in 2000, according to Australian figures. India is now Australia’s fourth-largest goods export market.
Most of the jump has come from Australia’s export of coal, copper and gold. Ms. Gillard’s aim is to turn the focus away from commodities to allow Australia’s services sector to build a firmer toe-hold in the Indian market.
Ms. Gillard, who is on a three-day trip to India ending Wednesday, told The Australian newspaper today she sees room for growth in water technology, health, legal and financial services.
Australia’s business delegation includes commodity heavyweights like Sam Walsh, chief executive of Rio Tinto iron ore division, but also Mike Smith, chief executive of Australia & New Zealand Banking Group and Lindsay Fox, chairman of logistics company Linfox.
Indian Trade Minister Anand Sharma will likely be looking for ways to reduce India’s trade deficit with Australia. According to Indian statistics, which exclude services, India exported goods worth only $2.5 billion to India last year, versus $15 billion in imports. (Two-way trade in services is over $3 billion.)
That won’t be easy with India’s desire for commodities – especially coal to fuel power plants – on the rise. During Ms. Gillard’s visit, India and Australia are expected to announce the start of talks to allow Australia to export uranium to India’s nuclear power plants.
India’s goods exports to Australia include gems and jewelry, chemicals, leather and agricultural products. India also will likely be hoping to boost the amount of IT outsourcing it does for Australian clients.
Any breakthrough in trade will take time. Both countries last year launched talks toward a bilateral free-trade agreement in goods and services. Australia says it faces large non-tariff barriers and regulatory uncertainty to trade and investment in India.
India’s efforts to reach agreements with other countries have been spotty. It concluded a free-trade agreement with the Association of Southeast Asian Nations in 2009 but both sides have yet to conclude a services agreement.
Meanwhile, investment between India and Australia remains low but is increasing. A number of Indian companies have begin to invest in Australian mining operations, including India’s GVK Group purchase last year of a majority stake in Australia’s Hancock coal project for $1.26 billion.
