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1367.5 - Western Australian Statistical Indicators, Jun 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 13/07/2005   
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Feature Article - Western Australia's changing trade relations - The emergence of China and India
This article was published in the June Quarter 2005 issue of Western Australian Statistical Indicators (Cat. No. 1367.5)


INTRODUCTION

Western Australia is Australia's largest net exporter (exports less imports), accounting for more than a quarter of the nation's exports and less than a tenth of national imports. International merchandise trade contributes substantially to the Western Australian economy, with net merchandise exports contributing 26.6% to Gross State Product in 2003-04.


In the last ten years, the Western Australian economy has become more exposed to trade with the rest of the world. The total volume of exports has risen from 40.1% of the output of the economy to 44.1%. Western Australia exports both goods and services, with goods accounting for a much higher proportion of total exports (93.1% in 2003-04) than services.


The direction of Western Australia's trade has seen major changes over the ten years to 2003-04, reflecting economic changes in Asia. In particular, China and India have emerged as two of the state's leading trade destinations, accounting for 11.4% and 6.6% of total merchandise trade respectively in 2003-04.


This article reviews Western Australia's international trade relations over the ten years to 2003-04. It then explores in more detail the state's trade relations with the emerging markets of China and India.


Merchandise trade data are classified by the Standard International Trade Classification (SITC), which is the United Nations recommended classification for the publication of international merchandise trade statistics. Commodity information presented in this article is at the three-digit level of detail. Further information on SITC is available from the International Merchandise Trade, Australia: Concepts, Sources and Methods publication, cat. no. 5489.0.



WESTERN AUSTRALIA'S MERCHANDISE TRADE

Over the last ten years, Western Australia's international trade has grown substantially. Between 1994-95 and 2003-04, the value of the state's merchandise exports rose by $15.9 billion (96.5%) and the value of merchandise imports increased by $5.9 billion (101.6%).

MERCHANDISE TRADE
Graph: MERCHANDISE TRADE



Western Australia's exports increased steadily over the ten year period, at an average of 8.2% per year. The most notable increase occurred in 2000-01 when the value of exports rose by 21.4% to $30.9 billion, aided by the recovery from the 1997 Asian financial crisis and strong commodity prices. Since then, export growth has moderated to an average of 1.6% per year, consistent with a slowing global economy and the impact of the September 2001 terrorist attack on the United States (US). The resulting fall in consumer and business confidence led to a decline in global investment and a weakening of commodity prices.


By 2002-03 however, the US economy had begun to recover and the Chinese economy was growing strongly, supporting global trade with its demand for raw materials, energy and various high level services. The Western Australian resources sector responded to the growing demand for minerals and energy products by expanding its production and transport capacity. The expansion, however, has taken some time to fully meet demand, and as a consequence, export growth in Western Australia has remained relatively flat since 2000-01.


Western Australia's imports have grown marginally faster than its exports. Import growth averaged 8.6% per year between 1994-95 and 2003-04, driven by rising domestic demand, growing consumer confidence, and rising levels of employment and income. Strong recovery in business investment in recent years has also fuelled demand for capital goods produced overseas.



BALANCE OF TRADE

The difference between the value of exports and imports is termed the balance of trade (or net exports). If exports exceed imports then a trade surplus is said to exist. An excess of imports over exports results in a trade deficit.


Western Australia recorded a trade surplus in every year between 1994-95 and 2003-04. The trade surplus almost doubled from $10.6 billion to $20.6 billion, during the period. The most favourable surplus occurred in 2000-01, when it increased by 35.5% (or $5.7 billion). This was largely driven by increases in exports of petroleum, iron ore and natural gas, and declines in imports of gold, industrial machinery and computers.


Between 1994-95 and 2000-01, the average rate of growth in Western Australia's trade surplus was 13.5% per year. Since its peak in 2000-01, the trade surplus has declined by an average of 1.5% annually, mainly due to strong domestic demand and an appreciating currency attracting more imports into the state.


Other factors limiting Western Australia's export growth, since 2000-01, were the adverse effects of the 2002 drought on farm production, and the impacts on world trade of severe acute respiratory syndrome (SARS) and the war in Iraq.

BALANCE OF MERCHANDISE TRADE IN GOODS
Graph: BALANCE OF MERCHANDISE TRADE IN GOODS



Western Australia's trade surplus far exceeds that of the other states and territories. Between 1994-95 and 2003-04, its average trade surplus was $16.2 billion, over three times the size of the next largest surplus, recorded in Queensland ($5.5 billion per year).



TERMS OF TRADE

The volume of goods and services flowing in and out of an economy is not the only important dimension of trade. Just as important are the relative prices of imports and exports. The terms of trade is the ratio of the prices received for Australia's exports to the prices paid for its imports. It tells us the rate at which Australia can trade its goods for those of other countries (e.g. the number of tonnes of raw materials Australia has to ship offshore to purchase a fixed quantity of manufactured goods). An increase in the terms of trade has the same effect on trade earnings as an increase in export volumes with constant prices. Between 1994-95 and 2003-04, Australia's terms of trade improved by 20.1%. This means that Australians could purchase, with the same volume of exports, 20.1% more imports in 2003-04 than they could in 1994-95.

TERMS OF TRADE, Goods trade - Australia: Seasonally adjusted
Graph: TERMS OF TRADE, Goods trade—Australia: Seasonally adjusted



As a major commodity exporter, Australia's terms of trade have traditionally been determined by commodity prices. In Western Australia, almost half of the state's merchandise exports, over the last decade, were made up of agricultural and mining products. Agricultural exports mainly comprised wheat and wool, while mining exports were mainly iron ore, gold, crude oil, natural gas, alumina and nickel.

COMMODITY PRICE INDEX
Graph: COMMODITY PRICE INDEX



Commodity prices began to rise sharply in 1999-2000. In that year, US dollar-denominated commodity prices rose by 22.6%, and by a further 6.7% in 2000-01. Commodities showing the largest increase in price were alumina, LNG and nickel. More recently, commodity prices increased by 13.7% in 2002-03 and by 17.0% in 2003-04. The rise in 2002-03 was mainly due to rural commodity prices, while the most recent increase was driven by rising mineral and energy commodity prices.


Commodity prices are among a number of factors that influence the Australian dollar exchange rate. Increasing export prices, particularly for base metals, tend to strengthen the exchange rate - although other factors have had a stronger effect in recent years.



EXCHANGE RATES

The exchange rate is the amount of foreign currency that can be bought with one Australian dollar. Movements in the exchange rate change the price of Australian goods relative to overseas goods and, therefore, affect the demand for imports and exports. If the dollar is strong, it buys more foreign currency, and overseas goods become correspondingly cheaper. Exports are also sensitive to the exchange rate. A strong dollar makes Australian goods more expensive to foreign buyers.


About two thirds of Australia's goods exports, and about half of its goods imports, are invoiced in US dollars, with most of the rest invoiced in Australian dollars. As a result, changes in the value of the Australian dollar against the US dollar have had a substantial impact on the value of Western Australia's exports and imports. The Australian dollar reached a record low value against the US dollar in 2001-02, falling to 51 US cents, on average, over the period. At the same time, the value of Western Australia's exports surpassed $30 billion for the first time. In the last two years, the Australian dollar has recovered much of its lost value, rising to an average of 71 US cents in 2003-04. The effect of currency appreciation on the value of Western Australian exports has, however, been largely offset by strong international demand for commodities.

AUSTRALIAN DOLLAR EXCHANGE RATES
Graph: AUSTRALIAN DOLLAR EXCHANGE RATES



Over the last ten years, the value of the Australian dollar has shown considerable variation against the currencies of other countries. There is, however, a convenient single measure of the Australian dollar exchange rate against the currencies of major trading partners. The Trade Weighted Index (TWI) is the average of several different exchange rates, each one weighted according to the amount of trade with Australia. As shown in the chart above, the Australian dollar has been far less volatile against the TWI than it has with the US dollar.



MAJOR TRADING PARTNERS

Until the 1960s, the United Kingdom (UK) was Western Australia's major trading partner and agricultural products were the state's major exports. Since the mid-1970s, minerals and energy have dominated Western Australia's commodity exports, and Asia has become increasingly important as both a consumer of the state's commodities, and as a producer of its manufactured imports.


Over the ten years to 2003-04, Japan has been Western Australia's major trading partner, followed by the Republic of Korea, the US and China. The average value of Japan's total merchandise trade with Western Australia, during the ten year period, was $7.4 billion per year - more than double that of the Republic of Korea ($3.2 billion) and the US ($3.1 billion), and almost three times that of China ($2.6 billion). Recently, however, the growth in Japanese trade has been overshadowed by growth in trade with China. Japan's stagnating economy in the 1990s, and the impact of the Asian financial crisis in mid-1997, have had a moderating effect on its demand for imports.


In 2003-04, Japan was still Western Australia's largest trading partner, with total trade valued at $8.3 billion, although it was now followed by China at $5.0 billion. China's share of total Western Australian trade increased from 5.2% in 1994-95 to 11.4% in 2003-04, while Japan's share declined from 27.9% to 18.8%. Other countries to record notable gains in their share of total Western Australian trade included India (from 0.5% to 6.6%), Indonesia (from 3.6% to 5.2%) and South Africa (from 0.7% to 2.2%). Gains in the share of trade by these countries were largely at the expense of Western Australia's more traditional trading partners such as Japan, the US, Singapore, Taiwan and Malaysia - all of which recorded declines in their share of the state's total trade, over the period.

MAJOR TRADING PARTNERS, Value of total merchandise trade - 2003-04

Value of trade
Composition of trade
Exports
Imports
Total
Exports
Imports
Total
Share of total WA trade
Rank(a)Country
$m
$m
$m
%
%
%
%

1 (1)Japan
6,942.3
1,314.8
8,257.1
84.1
15.9
100.0
18.8
2 (5)China
4,412.3
612.4
5,024.8
87.8
12.2
100.0
11.4
3 (3)Republic of Korea
3,210.5
461.5
3,672.0
87.4
12.6
100.0
8.4
4 (23)India
2,811.5
95.2
2,906.7
96.7
3.3
100.0
6.6
5 (2)USA
1,548.7
1,338.5
2,887.1
53.6
46.4
100.0
6.6
6 (7)Indonesia
1,028.4
1,245.6
2,274.0
45.2
54.8
100.0
5.2
7 (6)UK
1,917.1
313.5
2,231.2
85.9
14.1
100.0
5.1
8 (4)Singapore
1,238.7
870.8
2,109.4
58.7
41.3
100.0
4.8
9 (12)Thailand
724.9
448.3
1,173.2
61.8
38.2
100.0
2.7
10 (13)Canada
845.9
167.5
1,013.5
83.5
16.5
100.0
2.3
11 (8)Taiwan
791.8
214.8
1,006.6
78.7
21.3
100.0
2.3
12 (21)South Africa
788.1
188.9
977.0
80.7
19.3
100.0
2.2
13 (14)New Zealand
470.5
417.9
888.4
53.0
47.0
100.0
2.0
14 (11)Malaysia
332.3
548.8
881.1
37.7
62.3
100.0
2.0
15 (9)Germany
197.5
518.1
715.6
27.6
72.4
100.0
1.6

(a) Countries are ranked on their total value of trade (exports plus imports) with Western Australia in 2003-04. Corresponding rankings in 1994-95 are in brackets.
ABS data available on request, International Merchandise Trade, Australia, cat. no. 5422.0.



MERCHANDISE TRADE WITH CHINA

As an exporter of natural resources and importer of manufactured goods, Western Australia is well placed to take advantage of the recent expansion of the Chinese economy. China has had one of the world's fastest growing economies since beginning the transition to a market-based economy in the late 1970s. In 2003-04, China's Gross Domestic Product (GDP) was more than three times the size it was ten years earlier. In the last two years, China has recorded economic growth of 9.0% per year. The Chinese government has indicated it will aim to maintain an average growth rate of 7.0% per year until 2010. In 2001, China was admitted to the World Trade Organisation and, as a condition of entry, began liberalising its foreign trade and foreign investment policies. By 2003, China's international trade was estimated at $A1,305.0 billion (World Bank 2004), making it one of the world's top five trading countries. China has now become Western Australia's second ranked trading partner.


Western Australia's exports to China far outweighed its imports between 1994-95 and 2003-04. The state's trade surplus with China grew, over the period, from $825.1 million to $3.8 billion. Growth in the trade surplus was strongest over the last five years (1999-2000 to 2003-04), rising at an annual average rate of 25.4%, compared to 8.1% annual growth in the previous five years.


The improvement in Western Australia's balance of trade with China can be attributed to a sharp rise in merchandise exports. The value of exports to China increased from $987.8 million in 1994-95 to $4.4 billion in 2003-04, with almost three quarters of this growth occurring since 1999-2000.

MERCHANDISE TRADE WITH CHINA
Graph: MERCHANDISE TRADE WITH CHINA



EXPORTS TO CHINA

China is the world's largest importer of iron ore. This commodity has been Western Australia's major goods export to China over the last ten years, totalling $10.3 billion or 45.1% of total exports to China. The value of iron ore exports to China increased from $483.1 million in 1994-95 to $1.9 billion in 2003-04. During the same period, the volume of iron ore exported to China more than tripled, increasing from 21.1 million tonnes to 69.5 million tonnes. The surge in China's demand for iron ore and steel has been driven by the rapid expansion of its manufacturing and construction industries.

MAJOR COMMODITY EXPORTS TO CHINA - 1994-95 to 2003-04

Value of exports
1994-95
2003-04
10 year total
Share of total WA exports to China
Rank(a)Commodity
$m
$m
$m
%

1Iron ore
483.1
1,871.7
10,321.5
45.1
2Confidential Items
317.1
1,081.4
5,431.6
23.7
3Wool
134.0
256.9
1,759.4
7.7
4Petroleum oils
6.2
473.3
1,719.5
7.5
5Pigments and paints
6.1
127.0
630.4
2.8

(a) Commodities are ranked on their total value of exports from Western Australia to China between 1994-95 and 2003-04.
ABS data available on request, International Merchandise Trade, Australia, cat. no. 5422.0.


Over the ten year period, exports of Confidential items (including alumina, mineral sands and some nickel) to China totalled $5.4 billion. According to the Western Australian Department of Industry and Resources (DOIR 2004), China receives 16.0% of Western Australia's alumina exports. Over the last four years, China's aluminium industry has almost doubled its production from 3.4 million tonnes in 2001 to 6.6 million tonnes in 2004 (International Aluminium Institute 2005). China is also a major market for Western Australia's mineral sands and nickel mining industries, accounting for 13.0% and 8.0% of the state's exports of these commodities (DOIR 2004).

EXPORTS TO CHINA BY COMMODITY
Graph: EXPORTS TO CHINA BY COMMODITY



Western Australia's next highest value export to China was Wool, with exports totalling $1.8 billion over the ten year period. In volume terms, wool exports to China increased from 25,535 tonnes in 1994-95 to 44,665 tonnes in 2003-04. Notably, the growth in wool exports to China occurred at a time when Western Australia's total volume of wool exports decreased by more than a third. Much of China's demand for wool came from its textile industry, which produced around 17.0% of the world's textiles in 2003. China uses wool to manufacture a range of fabrics used in furniture, curtains, bedding, cushions and blankets, as well as clothing such as jumpers and men's suits, for both domestic use and, increasingly, for export.


Despite it being a major producer of oil during the 1990s, China's fourth largest imports from Western Australia, over the ten years to 2003-04, were petroleum oils. In recent years, China has been unable to produce enough oil to meet the growing needs of its expanding economy. As a result, China has become more dependent on the international market to meet its petroleum needs. Exports of Crude petroleum oils from Western Australia to China totalled $1.7 billion over the period, increasing from $6.2 million in 1994-95 to $473.3 million in 2003-04.


IMPORTS FROM CHINA

Western Australia is a net importer of manufactured goods. Over the last ten years, the state has increasingly looked overseas for its supply of clothing and footwear, furniture and bedding products, and other manufactured articles. Manufactured goods (91.2%) accounted for almost all of the $449.7 million increase in imports from China to Western Australia between 1994-95 and 2003-04, reflecting the rapid growth of the Chinese manufacturing sector. Between 1993 and 2003, China's manufacturing industry increased production by an average of 10.3% per year (World Bank 2004).

MAJOR COMMODITY IMPORTS FROM CHINA - 1994-95 to 2003-04

Value of imports
1994-95
2003-04
10 year total
Share of total WA imports from China
Rank(a)Commodity
$m
$m
$m
%

1Baby carriages, toys, games and sporting goods
8.2
32.6
174.5
5.5
2Furniture
2.6
50.0
153.5
4.8
3Made-up textile articles
7.4
18.5
120.1
3.8
4Manufactures of base metals
3.2
21.5
116.9
3.7
5Clothing
7.1
17.3
115.4
3.6

(a) Commodities are ranked on their total value of imports to Western Australia from China between 1994-95 and 2003-04.
ABS data available on request, International Merchandise Trade, Australia, cat. no. 5422.0.


In the ten years to 2003-04, Western Australia's major category of imports from China was Baby carriages, toys, games and sporting goods, totalling $174.5 million or 5.5% of total Chinese imports. The value of these imports increased from $8.2 million in 1994-95 to $32.6 million in 2003-04. These commodities were typical of China's growing manufacturing sector over the period. Much of the growth has been driven by foreign firms, attracted by low-cost labour, shifting their low technology and labour intensive manufacturing operations to China.

IMPORTS FROM CHINA BY COMMODITY
Graph: IMPORTS FROM CHINA BY COMMODITY



Of the major commodity imports from China, the fastest growth over the last ten years was in Furniture and bedding products. The value of these imports increased from $2.6 million in 1994-95 to $50.0 million in 2003-04. Over the period, China has continued to supply more of the state's office, kitchen, upholstered and bedroom furniture, as well as non-upholstered seats and seat parts. The rise in demand for furniture and bedding products in Western Australia has coincided with recent growth in household wealth and consumption expenditure, associated with the state's strong housing market.


Western Australia's imports of Chinese manufactured base metals have also shown substantial growth in the last ten years. Base metals imports from China rose from $3.2 million to $21.5 million between 1994-95 and 2003-04. Much of the recent growth in imports of base metals from China has coincided with the high level of activity in Western Australia's construction industry.


Other major imports into Western Australia from China were textiles and clothing. Western Australia's imports from China of Made-up textile articles and Clothing totalled $235.5 million, between 1994-95 and 2003-04. Imports of Made-up textile articles, which included items such as cleaning cloths, bags, linen and tents, increased at an average rate of 12.1% per year over the period. Annual Clothing imports, mainly consisting of T-shirts, jumpers, baby garments and swim wear, rose by an average of 9.1%.



MERCHANDISE TRADE WITH INDIA

India is another country to recently emerge as a major trading partner for Western Australia. Like China, India has been an importer of raw materials and exporter of manufactured goods. Over the last ten years, India's per capita income has doubled, enhancing its potential as a market for the state's exports. It has also recently implemented economic reforms associated with increased trade liberalisation, and relaxed foreign investment restrictions. Coinciding with the liberalisation of the Indian economy, has been a large increase in the exports it receives from Western Australia. India's share of Western Australia's exports grew from 0.5% in 1994-95 to 8.7% in 2003-04 - taking it from the state's 27th largest export market to its 4th largest over the period.


Over the last ten years, Western Australia has enjoyed a trade surplus with India, ranging from $44.4 million in 1994-95 to $2.7 billion in 2003-04. The strong growth in the state's trade surplus with India was driven by a $2.2 billion increase in the value of total exports in 2003-04, compared to growth of just $6.3 million in imports. In 2003-04, Western Australia accounted for more than half of the value of Australia's exports to India.

MERCHANDISE TRADE WITH INDIA
Graph: MERCHANDISE TRADE WITH INDIA



EXPORTS TO INDIA

Underpinning India's emergence as one of Western Australia's major trading partners was a large jump in gold exports in 2003-04. In that year, Western Australia's gold exports to India increased by $2.3 billion, accounting for all of the increase in total exports to India. Nearly half (48.1%) of the total value of gold exported from Western Australia in 2003-04 was destined for India, making it the state's largest export market for gold.

MAJOR COMMODITY EXPORTS TO INDIA - 1994-95 to 2003-04

Value of exports
1994--95
2003-04
10 year total
Share of total WA exports to India
Rank(a)Commodity
$m
$m
$m
%

1Non-monetary gold
1.5
2,670.6
3,506.5
67.1
2Confidential Items
11.0
17.8
699.0
13.4
3Wool
36.9
53.1
471.8
9.0
4Base metal ores
17.5
10.0
151.8
2.9
5Vegetables
-
4.8
77.5
1.5

- nil or rounded to zero (including null cells)
(a) Commodities are ranked on their total value of exports from Western Australia to India between 1994-95 and 2003-04.
ABS data available on request, International Merchandise Trade, Australia, cat. no. 5422.0.


Many factors have contributed to the rapid increase in the state's gold exports to India. On the supply side, the formation of a partnership of three major firms in the Australian gold refining industry in 2002 resulted in most Australian, and some overseas, gold being refined in Western Australia. Therefore, part of the state's increase in gold exports in recent years represents gold that previously would have been refined in, and exported from, other states. On the demand side, India has traditionally been the world's largest consumer of gold, accounting for more than one quarter of total world demand for the metal. Recent economic growth, and the Indian government's relaxation of gold import restrictions in January 2004, have helped drive up the country's imports of gold. With the Indian government committed to further economic reforms, and aiming for 7.0 to 8.0% annual GDP growth (DFAT 2004), demand for gold from Western Australia is likely to remain high in the near future.


Commodities other than gold comprised just one third of Western Australia's total exports to India between 1994-95 and 2003-04. These exports mainly consisted of raw materials used in India's traditional textile and metal product manufacturing industries. Confidential items comprised 13.4% of the value of the state's exports to India from 1994-95 to 2003-04, while Wool accounted for 9.0% and Other ores and concentrates (mostly zinc, lead and titanium) made up 2.9%. From relatively low levels, most of these exports have shown only modest gains in the last ten years.


As economic reforms continue to open up the Indian economy and generate further growth, more opportunities for export of Western Australian agricultural and mineral commodities may arise. According to the Western Australia Department of Industry and Resources (DOIR 2005), recent investment by Indian firms in major resource projects in the state are likely to boost exports to India. It is expected that these projects, such as the Burrup Fertilisers ammonia plant and the Nifty copper mine, will export their output to India.


IMPORTS FROM INDIA

Less than 1.0% of Western Australia's total imports from 1994-95 to 2003-04 came from India. The state's major goods imports from India over the ten year period were products of its manufacturing industries, including Textile yarn, $50.3 million; Manufactures of base metals, $20.0 million; and Tubes and pipes, $19.3 million. Imports of Base metal ores, at $21.7 million, were the second ranked import over the period. These were comprised almost entirely of titanium ore, of which $19.1 million was imported in the last three years.

MAJOR COMMODITY IMPORTS FROM INDIA - 1994-95 to 2003-04

Value of imports
1994-95
2003-04
10 year total
Share of total WA imports from India
Rank(a)Commodity
$m
$m
$m
%

1Textile yarn
3.9
2.9
50.3
9.5
2Base metal ores
0.6
11.0
21.7
4.1
3Confidential items
0.6
1.5
21.1
4.0
4Manufactures of base metals
1.6
2.3
20.0
3.8
5Tubes and pipes
0.7
3.3
19.3
3.6

(a) Commodities are ranked on their total value of imports to Western Australia from India between 1994-95 and 2003-04.
ABS data available on request, International Merchandise Trade, Australia, cat. no. 5422.0.



SERVICES TRADE WITH CHINA AND INDIA

Trade in services accounts for approximately one tenth of Western Australia's total international trade. Western Australia's trade in services is mainly comprised of tourism, education and transport. Over the last ten years, services exports have increased by an average of 2.6% per year, compared to an annual increase of 5.9% in imports of services. As a result, the state recorded a deficit of $725.0 million in services trade in 2003-04, with exports of $2.7 billion and imports of $3.4 billion.


In 2003-04, Western Australia contributed 8.6% of Australia's total trade in services - 8.1% in services exports and 9.1% in services imports. China and India are among Australia's major trading partners in services. Australia recorded a surplus of $305.0 million in services trade with China in 2003-04, with services exports totalling $1,187.0 million (3.5% of total Australian services exports). Australians purchased $881.0 million of services from China (2.6% of total services imports), making it our ninth largest source of services. In 2003-04, Australia also recorded a surplus in services trade with India, totalling $531.0 million. During the year, services exports to India contributed $564.0 million (or 1.7%) to total Australian services exports. Services imported from India totalled $33.0 million (or 0.1%) of total services imported by Australia.


Travel services accounted for the largest proportion of Australia's services trade exports with both China ($884.0 million) and India ($451.0 million). Travel services include all goods and services acquired for personal use by international visitors on business and personal travel. As incomes have increased in both countries, more Chinese and Indian citizens have travelled overseas. According to the Chinese National Tourist Office (2005), the number of outbound tourists increased from 8.4 million persons in 1998 to 20.2 million in 2003. In 1997, the Chinese government granted Approved Destination Status to Australia, allowing its citizens to visit the country as tourists.


Detailed trade in services data by country are not available at the state level. However, of Western Australia's service exports with all countries in 2003-04 , $1.6 billion (59.0%) was earned through travel services. In 2003-04, of the 2.6 million short-term visitors holidaying in Australia, 231,194 (8.9%) visited Western Australia. The state total included 1,160 visitors from China and 386 from India, representing 1.3% and 2.4% respectively of short-term holidaymakers from each country in Australia.


Personal travel services exports also include expenditure by international students. In China and India, the domestic education system cannot meet demand and, as a consequence, many students complete their education overseas. According to Australian Education International (2005), of the 30,464 overseas students in Western Australia in 2004, 3,606 (11.8%) were from China, an increase of 16.7% on the previous year. Students from India totalled 585 in 2004, up from 468 in 2003. While Western Australia hosted 9.8% of Australia's international students in 2004, its share of Chinese and Indian student enrolments was 5.2% and 2.8% respectively.



CONCLUSION

Western Australia benefits significantly from trade with China and India. It is a net importer of the manufactured goods that these countries supply to world markets, particularly labour intensive consumer goods. In turn these countries are net importers of minerals, energy and agricultural goods, in which Western Australia specialises. Their large populations, and rapid economic growth, have the potential to substantially increase the state's export earnings while holding down the price of imports.


To date, this potential has been realised more in China's case than it has for India. While growth in trade with India has largely been restricted to exports of gold, trade with China has increased substantially over a range of goods. China's rapidly growing demand for minerals and energy has led it to invest heavily in Western Australia's resource projects. The strong trading partnership being formed is expected to generate considerable benefits for both China and Western Australia well into the future. The Indian economy, though smaller than China's, is growing rapidly and is being increasingly opened up to foreign trade and investment. India's trade with Western Australia is currently dominated by one commodity and it is yet to be seen whether it will further consolidate its position as one of the state's major trading partners.



REFERENCES

Australian Education International (2005): Recent Annual Statistics, viewed 20 May 2005


China National Tourist Office (2005): China Tourism Statistics, viewed 9 February 2005


Department of Foreign Affairs and Trade (DFAT) (2004):Tradewatch: Economic Outlook for India, viewed 20 January 2005


International Aluminium Institute (2005): IAI Statistics, viewed 23 May 2005

Western Australian Department of Industry and Resources (DOIR) (2004): Mineral and Petroleum Statistics Digest 2003-04


Western Australian Department of Industry and Resources (DOIR) (2005): WA provides the key to unlock India's huge ferro-alloy industry potential, viewed 6 January 2005,


Western Australian Department of Treasury and Finance (2005): Western Australian Economic Summary, Summer 2004-05


World Bank (2004): China at a Glance, viewed 28 April 2005


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