Australia and India

Author: Peter Drysdale

The first visit of the Indian External Affairs Minister, Mr. Pranab Mukherjee, to Australia this week will help both the Indian Government and the new Rudd Government in Australia get the importance of Australia’s growing relationship into better perspective in both countries. There is little capacity in either the Australian or Indian press for informed analysis of what the issues for both countries are.

As I said in the Crawford Lecture in New Delhi in April, India and Australia are on the cusp of an historic opportunity for sharing a new, much more important relationship in the future than we have shared in the past.

Australia is already deeply integrated into the East Asian economy. Australia’s external economic relations are more closely tied to the East Asian economy than are those of any other country in the world. The whole structure of our interests in global economic and political affairs was changed fundamentally over the past four or five decades by the development of our relationships with Japan and East Asia.

India has embarked on a great externally-oriented reform. The scale and the nature of forces that are driving India’s involvement in the global economy are also deepening integration across Asia. This huge process in which India and Australia are both now engaged in the Asian economy, from different ends, will inexorably draw us more and more closely together.

This is a strategic opportunity, and to capture it is important not only to Australia and to India but also regionally and globally.

The direct imperative that will shape the future of the Australian and Indian partnership in Asia is the deep complementarity between our two economies. Already that is having its impact on the growth and importance of our bilateral trade and investment.

Australia’s trade and economic relationship with India is now one of our fastest growing. In the past five years commodity exports have increased fourfold and last year alone Australia’s 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. But there is more to the relationship than the resource trade. The rapid growth of services trade both ways, as Australia educates Indian students and entertains Indian visitors in growing numbers, and migration are new and major elements.

What is now happening between Australia and India, is the emergence of a trade pattern that is well established in Australia’s relationships with East Asia. The trade relationship with Australia is also strategically important to East Asia. Australia alone 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 is Saudi Arabia. These are large, deep, reliable relationships, critical to the prosperity and stability of the entire Asian region.

India’s continued growth and industrialization is forging a relationship between Australia and South Asia that, 10 or 20 years hence, is likely to match the well-established relationship with East Asia.

Among the important challenges will be to address the question of uranium exports in the context of efforts to strengthen the Nuclear Non Proliferation Regime. There is no prospect of progress on uranium exports without cooperation between Australia and India in these global endeavours.

In regional affairs, India must also play a key role. Despite the locus of East Asian community-building interests in ASEAN and ASEAN+3, many of the challenges the Asian economies confront can only be met – or at least met best – by regional institutions that comprehend trans-regional and global interests. Asia’s rise is a global phenomenon and the region needs strategies that are globally oriented to manage the response to it. The systemic stresses associated with the rise of Asia will be managed more readily if there is a regional framework in which China and India can develop a common regional voice on both economic and political affairs.

This is why the incorporation of India in the EAS was important, not as a diplomatic tactic but because it provided a critical platform for strategic economic cooperation between India, China, Japan, Southeast Asia and Australasia.

On all the big global issues that beg coherent Asian initiative − dealing with climate change, reforming the trade regime and international financial system, promoting deep structural reform and global integration − the broader framework for cooperation in the EAS alone is capable of effective delivery. As yet there is no effective Asia coalition for negotiating these issues. The EAS is a platform for building one.
Is India ready to assume its global responsibilities and play a proactive role in that?

The huge shifts in the structure Asian power have political and security dimensions as well as economic dimensions, and the structure of regional institutions needs to address them. This is the logic on which APEC was built, as it sought to accommodate the rise of Japan and East Asia. It is also the logic for India’s engagement in the EAS and for incorporating India into APEC, on terms that other APEC members have accepted. Both provide a bridge to the Asia Pacific Community idea that the Rudd government has proposed and would encompass political and security affairs.

Globalisation and the rise of ad hoc economic and political bilateralism have taken Asia further than ever from the European model and towards a new model of integration in our region. East Asia already has higher levels of trade and investment integration than Europe achieved over twice as many decades.

The imperative is to deal strategically with the global pressures that challenge Asia’s economic rise. In the coming decade this imperative will grow more intense. An Asian regionalism and Asia Pacific Community that foster a regional economy that is internally integrated, closely connected with North America, Europe and other international markets, and assumes a responsibility and influence in global economic arrangements more commensurate with its new economic weight will bolster both Asian and global welfare and lessen the attendant political risks to global trade and economic transformation.