TRADE FLOWS BETWEEN AUSTRALIA AND INDIA: AN EMPIRICAL ANALYSIS Available to Purchase

Economic theory suggests that the best commercial policy for a country is free trade, regardless of the measures taken by its competitors. This policy, however, has certain drawbacks and consequences. Commitment to free trade subjects the economy to the dictates of events beyond its control, which at times can be detrimental. To maximize the benefits from free trade, therefore, a country must be willing and able to make internal adjustments, as changes in external circumstances require. It must be quick to capitalize on opportunities and yet flexible enough to alter direction in the face of adversity. Both Australia and India had similar trade and industry polices in the 1950s and 1960s.