Trade Liberalization between Australia, India and South Africa: Prospects for a Dynamic Growth Triangle

Abstract

Australia's trade with India and South Africa has been growing steadily in recent times. These countries have become more liberalised in trade during last five years and they also play a significant role in the Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC). It has been proposed that Australia should take the initiative in forming effective cooperation with India and South Africa for complete free trade. This paper examines the trade links between these three countries and then evaluates quantitatively the likely effects of the establishment of a bilateral free trade agreement (FTA) between them. We use the GTAP (Global Trade Analysis Project) model to quantify the effects of the FTA. The results provide some indication of the magnitude of the welfare gains involved under free trade and shed some light on prospects for trade liberalisation in IOR countries.