Indian Australia FTA in services: a feasibility study

Abstract

The trade and investment relationship between Australia and India is important to both countries and is growing rapidly. Two-way trade in goods and services in 2007 totaled $13.3 billion, making India Australia s fastest growing trade partner. In August 2007, Australia and India commenced a joint feasibility study on the merits of a free trade agreement (FTA) between the two countries. The feasibility study, is examining the potential impact on Australia and India of an FTA, including implications for economic growth, trade in goods and services, and investment, as well as for other commercial linkages. However, the focus of most FTA discussions has been manufacturing/goods imports/exports. In this study, we take a look at the service trade flows between the 2 nations; and see if there is scope for expansion of trade relations in a mutually beneficial manner. We begin with an overview of the trade, investment scenario and bilateral relations between India and Australia in goods and services. We follow this by econometric modeling using RCA analysis to see if there are sectors within services with complementarities. This threw up the sectors of computer and information, communications, travel and other business services. We have done a peripheral analysis of the synergies in multiple sectors, followed by an in depth analysis of travel and tourism and education. We conclude that there is considerable trade activity going on between the 2 nations, and there is room for expansion of trade in services; hence an FTA study needs to be undertaken to analyze and quantify the benefits.