The India-ASEAN Free Trade Agreement: How Will Indian Industries Be Affected? (original) (raw)
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Impact of India’s Free Trade Agreement with ASEAN on Its Goods Exports: A Gravity Model Analysis
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The relationship between India and ASEAN has emerged as a crucial basis of their foreign policy. Both the regions signed a Free Trade Agreement in 2009, which came into effect in 2010. They are now reviewing the FTA to further enhance their economic cooperation. At this critical juncture, this study aimed to analyze the trade and export relationship between India and ASEAN and examine the extent to which the AIFTA effectively influenced it. Additionally, the study intended to determine what other factors influenced the trade and export relationship between the two regions and what future changes are needed in order to make this partnership mutually beneficial. To fulfill this objective, a gravity model was applied to a panel data from 2000–2019. A random effect model was utilized for the estimation. The empirical analysis concludes that the adoption of the AIFTA increased trade significantly; however, had no significant impact on raising exports. The study has identified rising NTMs...
2011
The study attempted to analyse the long-term effects of the FTA on India. It is argued that after full trade liberalization, India’s allocative efficiency will increase, but the terms of trade effect will worsen continuously and remain negative. India will be able to arrest the worsening in terms of trade once the gain in allocative efficiency is used to improve productivity in the export-oriented sectors as well as achieve economies of scale.
Working Papers, 2011
The Asia-Pacific Research and Training Network on Trade (ARTNeT) is aimed at building regional trade policy and facilitation research capacity in developing countries. The ARTNeT Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about trade issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. ARTNeT working papers are available online at www.artnetontrade.org. All material in the working papers may be freely quoted or reprinted, but acknowledgment is requested, together with a copy of the publication containing the quotation or reprint. The use of the working papers for any commercial purpose, including resale, is prohibited.
Estimating the Impact of the Indo-ASEAN Free Trade Agreement on India's Balance of Trade
Journal of Global Analysis, 2010
. In this paper we analyze one aspect of the possible impacts of the FTA: that on India's Balance of Trade. It is found that the impact of the agreement on India's balance of trade is expected to be negative. India's imports will rise significantly, however there will be no commensurate rise in India's export to these countries except to Indonesia.
Welfare Implication of India-ASEAN FTA: An Analysis using GTAP Model
The welfare effect under GTAP model computes a money metric equivalent of the utility change. This is calculated by measuring ‘equivalent variation’ (EV) which summarizes the regional welfare changes resulting from any policy shock and is given in dollar values (US $ million). In GTAP, this money metric change is broken down into different components, each of which relates to a quantity change interacting with a distortion in the model. Considering the welfare decomposition effect under multiple regions as proposed by Huff & Hurtel (2001) the current study gives an insight into the sources of welfare gain under various simulations describing stages of India-ASEAN FTA. ASEAN is so far the biggest bloc with which India has an operational FTA. Almost 9% of India’s trade is with ASEAN as a group. In this context, the paper makes an attempt to assess the welfare implication of this agreement considering various implementation stages. It has been noticed that relatively bigger ASEAN members will derive more benefits in terms of welfare growth. India will have higher benefits only when the agreement will fully get implemented. ASEAN members will gain from higher ‘terms of trade’ effect while India’s gain mainly will be from the resource reallocation and change in domestic production activities reflected through ‘allocative efficiency’. However, the overall gain gets dampened due to the presence of negative ‘terms of trade’ in India’s welfare equation. India’s import demand of several intermediate as well as final goods will remain high and ASEAN will have advantage to supply these at a higher price yet lower than average prevailing import price in India which will lead to negative ‘terms of trade’ effect for India. The value of ‘allocative efficiency’ for India increases significantly once there is full liberalization. With full liberalization India extends tariff concessions for large number of products which are otherwise included in its negative list and not allowed any concessions. This adds to allocative efficiency- one due to removal of protection from several of the inefficient production processes and second due to increased import taxes contributed by increased imports of many of the products otherwise featuring in the country’s negative list. Once we incorporate imperfect competition and presence of increasing return to scale in selected sectors in India, ‘scale economy’ effect, ‘profit shifting’, and various tax contributions will lead to more welfare gain in India. This indicates that with the presence of imperfect competition, profit shifting will allow India to invest in capital goods and technology leading to high ‘scale effect’ and thereby to increase exports further to ASEAN. The study brings up a very crucial issue that the gain from FTA with ASEAN hinges on India’s big firm’s ability to reduce average cost bringing better technology and quality inputs. This will improve production system in India which in turn will boost the export sector further
Mediterranean Journal of Social Sciences, 2015
This paper employs the gravity model with panel data to examine the impact of ASEAN+3 free trade agreements on ASEAN's trade flows in the period 2000-2013. Estimated results indicate that GDP, GDP per capita, incomegap and distance play a crucial role in bilateral trade among ASEAN members and ASEAN trade volumes with the rest of the world. Additionally, the results reveal that AFTA creates positive and significant trade-creation effects due to tariff eliminations. AFTA has been successful in promoting the bilateral trade not only among ASEAN countries but also between intra-bloc and extra-bloc countries. Conversely, ACFTA, AJCEP negatively affects intra-ASEAN trade and ASEAN's exports to the rest of the world. Meanwhile, ASEAN's imports from the rest of the world are negatively affected by ACFTA and AJCEP. Finally, AKFTA causes trade-diversion effect in terms of exports from member countries to non-member countries of AKFTA. AKFTA can be a positive factor in promoting exports among its members.
ASEAN–India Free Trade Agreement (FTA) and its Impact on India
Foreign Trade Review, 2013
The ASEAN–India Free Trade Agreement (FTA) has brought opportunities as well as challenges to the Indian industry since it came into force on 1 January 2010. There is no clear-cut estimates about the gains which will come to India especially in the sectors of agriculture, plantation and fisheries. However, some of the sectors which are labour intensive or unorganized will be facing bigger challenges. This article attempts to examine the impact of FTA where the tariff is either reduced or eliminated on some of the agricultural products like fisheries, tea and coffee, which have been projected as sensitive for India. The commitment of India and ASEAN under the FTA is analyzed along with the trade and tariff data. While doing so the article looks at some of the empirical evidence to examine the impact of India’s unilateral tariff liberalization in the Post-Uruguay Round by taking into consideration India’s imports, domestic production, etc. These results are then extrapolated to exami...
The Effects of ASEAN-China Free Trade Agreement on Bilateral Trades
Journal of Southwest Jiaotong University, 2021
This article adopts the augmented versions of the Gravity Model to examine the effects of the signing of the ASEAN-China Free Trade Agreement (ACFTA) on the bilateral aggregate trades. Specifically, ACFTA dummy variables are incorporated in the basic model is to estimate the direction and magnitude of the ACFTA effects. A total of 79 trading partners of ASEAN member countries plus China were examined in this article. The study finds that the Gross Domestic Product, population, natural endowment, distance, and common language are the main determining factors of the bilateral trade for ASEAN member countries and their trading partners. Estimated results from this Augmented Gravity Model showed that ACFTA had increased the bilateral aggregate trades not only between intra-bloc member countries but also intra-bloc and extra-bloc countries. With this positive finding, ASEAN and China could consider expanding their free trade area to a broader regional perspective, enhancing economic grow...
The effect of ASEAN-korea free trade agreement (AKFTA) on Indonesia trade: a gravity model approach
Jurnal Ekonomi Pembangunan
The aim of this research is to analyze the effect of ASEAN Korea Free Trade Agreement (AKFTA) on Indonesia Trade with gravity model approach using panel data. This research is using Hausman and Chow test to choose the best between the Fixed Effect model (FEM) and Random Effect Model (REM). The test result shows that REM is the best model choosen to analyze the effect from GDP per capita, Exchange rate, distance and AKFTA Policy to the import from 14 AKFTA country economies to Indonesia. The result from R2 shows that the variation of independent variables (GDP per capita, Exchange rate, distance and AKFTA Policies) affected the variation of dependent variable (Import) as 54 percent. Meanwhile, from the gravity theory, the trade among AKFTA economies to Indonesia has bring positive impact as the distance has positive sign and lead to form trade creation. The variable of dummy policy has negative and significantly affected the import.