Indo-Australian trade ties haven’t really benefitted from the cricketing connect, with Australia not featuring even in the list of top 20 trading partners of India. To understand what is affecting the bilateral trade and what actually can be done to improve the situation, The Dollar Business sat down with Nicola Watkinson.

Neha Dewan | @TheDollarBiz

TDB: Bilateral trade between India and Australia is about $12.45 billion, with India having a trade deficit of close to $8 billion. Do you think India needs to be concerned about this trend?

Nicola Watkinson (NW): A large chunk of our exports to India are energy related products. Given the strong focus that India has on energy security, this should not be a cause of concern and I am sure the Indian government has recognised Australia as a stable, long-term and reliable partner. Also, a large number of Indian companies are integrating their operations in Australia. So, a lot of energy related products that are coming from Australia, are actually coming from Indian companies. We have enormous investments from companies such as GVK and the Adani Group in our coal sector. I see this as a very positive development in our relationship. Another area which can be developed over time is Liquefied Natural Gas (LNG) as India looks at alternative fuels. Gas is probably one of the areas where we will be able to extend our relationship further.

TDB: India’s bilateral trade deficit that we are referring to – is it here to stay?

NW: I think the main focus should be on the overall growth of trade between the two economies. I see strong opportunities for Indian companies who are looking to tap the Australian market. We have already seen very strong growth in the IT sector. Australia has been one of the top three global markets for Indian IT companies and they have been one of the largest sources of employment in Australia. They are certainly picking up large contracts in Australia, bringing the work back here. I believe this is an important export, which we shouldn’t ignore. Wellness products, particularly Ayurvedic products, are also seeing rising demand from Australian consumers

TDB: Australia is a huge consumer market. So, besides services, which are the other sectors or industries that Indian exporters should focus on?

NW: Australia is one of the most open economies in the world. It is ranked 11th in the world for ease of doing business. If you have a product in India that you are looking to export to a developed economy, which provides easy access and offers higher margins, then Australia should certainly be on top of your mind. Also, in one of my recent interactions with the Federation of Indian Export Organisations (FIEO), I learnt that they were looking to send a delegation to a large trade show in Australia, which is scheduled to happen in November this year. Moreover, import duties are very attractive for international companies looking at the Australian market. Hence, there is no reason why Indian exporters shouldn’t go to Australia. We have a philosophy that industries grow better when they are less protected. Our companies are more globalised because they are not shielded by subsidies or tariff barriers.

TDB: How protected do Australian manufacturers feel then? Isn’t it discouraging for them to an extent because you do not protect them while most countries – including US, especially post-2008 – shield their manufacturing corporations?

NW: Of course, people have always asked for protection. But we have seen that companies in Australia have been able to work in an environment with little protection for them and at the same time, are globally competitive. They are born global. So, if they can compete against Indian or Chinese or Korean suppliers at home, they will be able to compete with them in their countries as well. We believe that if we actually want to have genuine global trade, we have to be prepared to play the game ourselves. Our textile industry is a great example of this. We do not have companies that produce low-quality products because we can get that more economically from India or Bangladesh. Therefore, the textile industry in Australia is focused just on producing high-end sportswear, leisurewear and bridal-wear.

TDB: Australia’s Jacob Creek is one of the most widely imported wines in India. It’s more popular than even top French and Italian brands. Can you tell us the secret of the success of Australian wine in India?

NW: I think Australia has taken a very different approach towards marketing wine. If you look at French wine labels, it will not give you information that you readily understand. It will tell you the region, the vineyard and the year. In Australia, we realised that we need to tell people what kind of grape it is made out of. Telling them so will help them understand its flavour. We also tell the buyers what to do with it. We tell them what goes best with a particular wine. I think this is what really works in the Indian market, which is still an emerging market for wine. The little information make our wine brands more approachable. Another factor is new vinification (winemaking) techniques. We have taken our young wine makers to France for them to better understand vinification techniques. Our Minister for Tourism plans to bring a delegation of Australian wine makers to India to work with Indian wine producers who are interested in partnering with us. We will be sharing some of our winemaking knowledge with our Indian counterparts that will help them improve quality, range and productivity.

TDB: Indian duty on wine imports is one of the highest in the world.  What’s your view on this?

NW: From an Australian perspective, we face the same wine tariff as someone from US or France. So, this is not a competitiveness issue. The ones who are most affected by the high tariffs are the Indian consumers, who end up paying a lot for a bottle of wine.

TDB: The proposed Comprehensive Economic Cooperation Agreement (CECA) between India and Australia is yet to be signed. Can you tell us when the agreement will  come into effect?

NW: Australia is a very strong believer in multilateral and bilateral trade agreements. The current government in Australia has signed a Free Trade Agreement with Korea, Japan and we are working very hard for a deal with China. We are definitely looking at creating stronger multilateral trade deals. With both countries having new governments, I believe, now is a good time to look at how we can re-establish the CECA negotiations.

TDB: In most countries, including India, we see only big trading houses benefitting from these trade agreements. Don’t you think it is discouraging for small entrepreneurs as they are not really given a fair chance to compete against the big players?

NW: What we are trying to do is bring together benefits for both large and small companies. The Australian economy comprises of largely small and medium enterprises. We do not really have any big MNC as such. Small and mid-size companies are looking at opportunities to do business globally and entering markets that have an open working environment.

TDB: Education has been Australia’s dominant export to India. Do you see any other sector having the potential to scale up to those levels?

NW: At the moment, the traditional business in education has been to attract Indians to study in Australia. We have reaped really good economic dividends from this business model. But now our focus is more on diversification and to increase the range of courses that they undertake. The other opportunity that I see is skill development and vocational training, which is altogether a different model. Apart from skill development and vocational training, there’s much opportunity in areas such as age care. It is still in a nascent stage in India while Australia offers world-class service solutions in age care. So, we would be very interested in offering our services in India. It is a trend that I think is set to grow.

TDB: Does the Australian government give any incentive to its services and manufacturing sectors that India needs to emulate? Does it provide extra incentives to its exporters?

NW: There are a couple of programmes that Australia uses to support its new exporters. But those are not subsidies. They are supports to help them explore new markets or help produce marketing material that will be specific for one particular market such as, say, China or Mexico. We just did a survey with 4,000 Australian exporters and asked them what makes it difficult for them to come to India. The answer is not subsidies; it is information and access to advice.  

TDB: India’s auto and auto component manufacturers have not been able to make inroads into Australia. What do you think is the reason?

NW: The Australian automobile industry is going through a transition. A number of auto manufacturers will be scaling down their manufacturing operations in Australia in the coming years. While they all have come a long way, they still have challenges in the level of innovation that they have in their companies. I think the growth of the global automotive sector will not be in countries such as Australia – which has just 23 million people – but in high-growth and more populated markets like India, China, Indonesia and Malaysia.

TDB: What would be your message to Indian exporters who are looking at Australia as a potential market?

NW: My message would be simple. Australia is open to doing business. It has one of the most stable and open economies in the world. It has good, solid growth. There are already a number of support mechanisms for exporters in Australia. There is a large Indian community that they can tap into. Just do some preparation about what works in the market.