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India has declined Australia’s push for tariff cuts on dairy and alcohol, stalling the second phase of a trade pact between the two countries that is slated to be concluded by year-end, according to Indian government sources.

A 2022 interim trade pact between India and Australia included lowered tariffs on a range of goods, but a broader Comprehensive Economic Cooperation Agreement (CECA) that covers goods, services and visas has not yet been finalised, as negotiations on dairy and wine emerge as key sticking points, said sources who did not wish to be identified since the trade talks are confidential.

Under the interim pact, tariffs on Australian wine that is priced above $5 per 750ml bottle were cut from 150 per cent to 100 per cent with a provision of a reduction to 50 per cent over 10 years; while for bottles above $15, tariffs dropped to 75 per cent, with a target of 25 per cent in a decade.

 

Also Read: India eyes fast-tracking ASEAN trade pact review

Indian dairy products, including cheese, high-protein whey concentrate, lactose, and processed items, are currently taxed between 20 per cent and 30 per cent. Australia is pressing for higher cuts on these and better access to dairy products.
However, dairy and agriculture products are politically sensitive topics for India, which has refused to concede on these despite pressure from powerful farm groups from the United States as well. 

A senior Indian official told Reuters on condition of anonymity that “there is no question of agreeing to Australia's demands for further tariff cuts on dairy and wine as it could have an impact on millions of farmers and our nascent wine industry and grape producers.”

Nevertheless, India is open to offer cutting tariffs on non-agricultural goods including industrial items, while seeking more access for services and visas, informed another official.

Farmer groups and politicians from Prime Minister Narendra Modi's home state Gujarat and grape-growing Maharashtra, along with the $35 billion alcoholic beverages industry, are strongly opposing any concessions, the official added.

But Australia says rising demand of Australian wine could benefit both Indian and Australian winemakers because they make different products.

“We’d like to see a reduction in the price at which tariff reductions kick in and a speeding up of those reductions,” said Lee McLean, CEO of industry body Australian Grape & Wine. 

Even relatively affordable Australian wines, he added, can retail for over A$100 ($65.77) in India due to high tariffs and taxes, despite costing just A$10-15 at home.

Karl Ellis of Dairy Australia said current tariffs are “prohibitive”, and that lower duties could help Australia tap into the $30-40 million market which is now served by European exporters.

“India's vast and culturally sensitive dairy sector limits mainstream exports, but niche products like high-protein whey, lactose, and select cheeses offer promise,” he noted.

Despite the stalemate, officials on both sides remain hopeful, although neither India’s commerce ministry, nor Australia’s Department of Foreign Affairs and Trade has issued any statement so far.

The Australian Department of Foreign Affairs said the talks for CECA are backed by both prime ministers, and conclusion of the pact would boost two-way trade, while building a more resilient economic partnership.

 

Australia PM on China visit to boost trade

Australian Prime Minister Anthony Albanese is on a visit to China this weekend to shore up trade relations that had soured in the last few years between the two countries; his second visit to China since his center-left Labor Party government was first elected in 2022. 

The Australian PM met with Shanghai Party Secretary, Chen Jining, on Sunday, the first in a series of high-level exchanges that will include meetings with Chinese President Xi Jinping, Premier Li Qiang and Chairman Zhao Leji of the National People's Congress.

Albanese is leading “a very large business delegation” to China, which underscores the importance of the economic relations between Australia and China, he told Chinese state broadcaster CGTN upon his arrival in Shanghai Saturday.

Albanese is also scheduled to meet business, tourism and sport representatives in Shanghai and Chengdu, including a CEO roundtable Tuesday in Beijing, his office said.

Ever since his party was reelected in May with an increased majority, Albanese has managed to persuade Beijing to remove a series of official and unofficial trade barriers introduced under the previous conservative government that cost Australian exporters more than 20 billion Australian dollars ($13 billion) a year.

Beijing severed communications with the previous administration over issues including Australia's calls for an independent inquiry into the origins of and responses to COVID-19. 

However, Albanese wants to reduce Australia's economic dependence on China, a free trade partner.

“My government has worked very hard to diversify trade … and to increase our relationships with other countries in the region, including India and Indonesia and the ASEAN countries,” he said before his visit, referring to the 10-member Association of Southeast Asian Nations.

“But the relationship with China is an important one, as is our relationships when it comes to exports with the north Asian economies of South Korea and Japan,” he added.

Chinese state-run Xinhua News Agency, in an editorial Sunday, described China's relationship with Australia as “steadily improving” and undergoing “fresh momentum.” 

“There are no fundamental conflicts of interest between China and Australia,” the editorial stated. “By managing differences through mutual respect and focusing on shared interests, the two sides can achieve common prosperity and benefit.”