The Hindu Business Line : ‘India, Australia trade cooperation will enhance Asian integration’

New Delhi, April 2 The emergence of a mutually-beneficial trade pattern in Australia’s relationship with East Asia over the years is now being replicated between Australia and India, as well. And, together both the countries could bolster Asian integration in a more meaningful and mutually advantageous manner.

In an interview with Business Line , Prof Peter Drysdale of the Crawford School of Economics and Government at the Australian National University (ANU), an authority on the East-Asian and Pacific economies, contends that such a trade relationship remains strategically crucial to East Asia. Australia now supplies around half of Northeast Asia’s key imported industrial raw materials and more than 22 per cent of Japan’s energy supplies (not including uranium) — Australia is a more important energy source for Japan than Saudi Arabia.

“So the opportunity for establishing similar kind of relationship with India is growing, but, of course, it is on the expectations about the continuation of reform process in India. The most important thing is access to three or four most competitive mining companies of Australia and they are going to participate in India provided constraints on investment in terms of ownership and so on are addressed. It is important to deal with this — policy changes at the Federal (Union) level and at the State level.”

Commodity exports

Stating that bilateral trade and economic relationship is growing rapidly, Prof Drysdale said that Australia’s commodity exports to India rose by 37 per cent. India is already Australia’s second largest market for metallurgical coal and is a huge potential market for energy, including uranium.

Australia is also the second largest destination for Indian students, after the US, with 60,000 students studying in Australia each year. He added, “We want to upgrade participation as the partnership between India and Australia benefits from training in both sides”. Prof. Drysdale said, “It is not only opportunity for delivering commodities but also opportunities for services including tourism. With growing number of Indian visitors, migration is a new and a major component.”

Prof Drysdale said the emergence of the Indian economy and the opportunity for integration of the South and East Asian economies, including Australia, is important. “East Asia needs a coalition to deal with the problems not only with itself but with the rest of the world. For Asia, the proximity to the region and the complementarity of their economic and trade structures would intensify intra-regional trade and investment ties as Asia experiences deeper integration with global markets”.

“An Asian regionalism that fosters a regional economy that is internally integrated, closely connected with North America, Europe and other global markets and assumes a responsibility and influence in global economic arrangements more commensurate with its new economic weight” would bolster Asian and global welfare. This would also help alleviate the attendant risks in global trade and economic change, he added.

Mutual interest

Prof Drysdale also hailed the fact that the Finance Ministry here and the Treasury in Australia are mutually interested in finance and regional cooperation and this could be expanded across many areas. “A lot of people are worried about short-term developments in the US and their impact on Asia’s and India’s growth. The drive and success of East Asia and India’s growth is very important to the global economy, which will be the continuing driver for the international economy”.

On Inflation

On inflation, he said, it is a purely national challenge but the inflation here is higher than the average in such countries and it is growing rapidly.

But it is also a “chance to make progress on reform because people realise that it is not just a short-term problem but how to solve it on a broader level. But as a short-term measure, if the Indian government is prepared to see the connection between liberalisation of markets allowing the inflow of high-constraining imports into India — whether it is food products or manufactured products by adjusting customs duty and other restrictions on trade, that structural policy approach would hopefully alleviate the pressure on prices and in the long-term would leave a more efficient economy.

But they will never be good in the longer term to sustain growth. It is a sort of trade-off between getting the structural policy right and what happens on the macro front”.

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