SSRN-id3007040.pdf (original) (raw)

World trading system is experiencing emergence of large number of Regional Trade Agreements in the recent past particularly after the establishment of WTO. As the centre of world economic activity slowly shifts to Asian continent, ASEAN is becoming an important RTA in Asia influencing world trade. Realising the importance of ASEAN in the region, India signed an RTA with ASEAN which came to existence from January 1, 2010. It is generally understood that complementarity in the trade structure of the members of RTA facilitates more export and import between them and there is scope for mutual benefit from this increased trade. Hence identifying and measuring trade complementarity is an important task in realizing trade potential and enhanced trade cooperation between RTA partners. Manufacturing sector is very important for the country engaged in FTA as it provides high value added products and generates employment to the local economy. Regional Trade Agreements are effective and successful only if they are carefully designed by identifying and collating complementary products and sectors. In this paper an attempt is made to construct the Revealed Symmetric Advantage Index (RSA) for India and ASEAN countries and to see whether there is increased trade cooperation between these two trading partners. Revealed Comparative Advantage (RCA) Index Revealed Comparative Advantage Index is a simple tool which can be used to understand in which product group a country got comparative advantage against the average trade of the world. A product with high RCA is competitive and can be exported to countries with low RCA. Measures of revealed comparative advantage (RCA) have been used to help assess a country's export potential. The RCA indicates whether a country is in the process of extending the products in which it has a trade potential, as opposed to situations in which the number of products that can be competitively exported is static. It can also provide useful information about potential trade prospects with new partners. Countries with similar RCA profiles are unlikely to have high bilateral trade intensities unless intra-industry trade is involved. RCA measures, if estimated at high levels of product disaggregation, can focus attention on other nontraditional products that might be successfully exported. The RCA index of country 'i' for product j is often measured by the product's share in the country's exports in relation to its share in world trade: í µí±¹í µí±ªí µí±¨í µí²Ší µí²‹ = (í µí²™ í µí²Ší µí²‹ í µí±¿ í µí²Ší µí²• ⁄) (í µí²™ í µí²˜í µí²‹ í µí±¿ í µí²˜í µí²•) ⁄