Abstract
This paper analyses India's transition from a reluctant participant in preferentialism to a proactive negotiator in the last decade. While the deadlock of the Doha Round may have also played a part in this transition, our analysis suggests that the two main drivers of India's recent wave of preferentialism are minimizing trade diversion and promoting deeper integration with her trading partners. We do not, however, find evidence for India’s trade strategy in this regard to be motivated by mercantilist interests. Finally, we find that neutralizing China's competitive advantages may be getting overemphasized as an objective behind India's recent involvement in trade agreements. In fact, the dragon and the tiger may rather be following each other in negotiating trade accords with their common set of major trading partners.
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Notes
- 1.
Farasat, India’s Quest for Regional Trade Agreements: Challenges Ahead, Journal of World Trade 42 (2008) 3, p. 433.
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Chaisse/Chakraborty/Nag, The Three-Pronged Strategy of India’s Preferential Trade Policy: A Contribution to the Study of Modern Economic Treaties, Connecticut Journal of International Law 26 (2001) 2, p. 415, available at http://www.law.uconn.edu/files/Chaisse,%20Chakraborty,%20&%20Nag.pdf.
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Farasat, India’s Quest for Regional Trade Agreements: Challenges Ahead, Journal of World Trade 42 (2008) 3, p. 433.
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Hamanaka, Unexpected Usage of Enabling Clause? Proliferation of Bilateral Trade Agreements in Asia, Journal of World Trade 46 (2012) 6, p. 1239.
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Asher/Sen, India-East Asia Integration: A Win-Win for Asia, Economic and Political Weekly 40 (2005) 36, p. 3932.
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Whalley, Why Do Countries Seek Regional Trade Agreements?, in: Frankel (ed.), The Regionalization of the World Economy, 1998, p. 63.
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ADB, How to design, negotiate and implement a free trade agreement in Asia, Office of Regional Economic Integration, Asian Development Bank, 2008.
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Farasat, India’s Quest for Regional Trade Agreements: Challenges Ahead, Journal of World Trade 42 (2008) 3, p. 433.
- 19.
Seshadri, Evolution in India’s Regional Trading Arrangements, Journal of World Trade 43 (2009) 5, p. 903.
- 20.
Chaisse/Chakraborty/Nag, The Three-Pronged Strategy of India’s Preferential Trade Policy: A Contribution to the Study of Modern Economic Treaties, Connecticut Journal of International Law 26 (2011) 2, available at http://www.law.uconn.edu/files/Chaisse,%20Chakraborty,%20&%20Nag.pdf.
- 21.
Chaisse/Chakraborty/Nag, The Three-Pronged Strategy of India’s Preferential Trade Policy: A Contribution to the Study of Modern Economic Treaties, Connecticut Journal of International Law 26 (2011) 2, p. 415.
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MOC (2011). ‘Strategic Plan: Department of Commerce,’ available at http://commerce.nic.in/ann/StrategicPlan.pdf.
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Pal, India and RTAs: Getting tangled in the noodle bowl, Economic & Political Weekly 46 (2011) 15.
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The Services Trade Restrictiveness Index (STRI) is a measure of regulation in services markets recently released by the World Bank. Compiled from responses to questionnaires sent out by the World Bank to 79 developing countries on “impediments to international integration” and from publicly available information for OECD countries, the STRI is a quantitative index of restrictions on services trade encompassing 103 countries, 5 major service sectors, and 19 sub-sectors. The information is also available by modes of service delivery. World Bank, Services Trade Restrictiveness Database, Trade Department, Washington, D.C.: The World Bank, http://iresearch.worldbank.org/servicetrade/.
- 25.
We report the incidence of international tariff peaks in Table 3, which are defined as those tariff lines where the tariff rate is in excess of 15%.
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Commonwealth Secretariat, Innocent Bystanders: Implications of an EU-India Free-Trade Agreement for Excluded Countries, 2009.
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Sauvé/Shingal, Reflections on the Preferential Liberalization of Services Trade, Journal of World Trade 45 (2011) 5, p. 953.
- 29.
This is measured by the Finger-Kreinin Index, which evaluates the extent to which production profiles may be similar between partner countries, by looking at their export profiles. The index ranges from 0 (completely dissimilar) to 1 (completely similar).
$$ \mathrm{FK}={\displaystyle \sum \mathrm{i}}\kern0.5em \min \kern0.5em \left(\left[\mathrm{Xia}/{\displaystyle \sum \mathrm{Xia}}\right],\left[\mathrm{Xib}/{\displaystyle \sum \mathrm{Xib}}\right]\right), $$where Xia/ΣXia is the share of product i in country a’s total exports; Xib/ΣXib is the share of product i in country b’s total exports.
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- 33.
This is a term for the dense and complex network of regional supply chains in East and Southeast Asia responsible for the web of intermediate products being produced and traded between countries in the region.
- 34.
Baldwin, WTO 2.0: Global governance of supply-chain trade, CEPR Policy Insight (2012) 64.
- 35.
The IIT index was developed by Grubel and Lloyd in 1970 and measures the extent to which partners may be trading in the same product. The index ranges from 0 (no IIT) to 1 (complete IIT).
$$ \mathrm{GLijk}=1-\left[\mathrm{abs}\left(\mathrm{Xijk}-\mathrm{Mijk}\right)/\left(\mathrm{Xijk}/\mathrm{Mijk}\right)\right], $$where Xijk is export of commodity k from country i to country j; Mijk is import of commodity k into country i from country j, and “abs” stands for absolute value.
- 36.
World Bank, Sustaining India’s Services Revolution: Access to foreign markets, domestic reforms and international negotiations, 2004.
- 37.
The RCA index measures the share of a commodity’s exports in a country’s total exports relative to the share of that commodity’s exports in the comparator’s (usually ROW) total exports.
$$ \mathrm{RCA}=\left[\mathrm{Xik}/\mathrm{Xit}\right]/\left[\mathrm{Xnk}/\mathrm{Xnt}\right], $$where X represents exports, i is an exporting country, k is a commodity, t is the sum of all commodities, and n is a set of other countries, usually the rest of the world (ROW).
An RCA value greater than 1 suggests that country i has a comparative advantage over ROW in exporting commodity k.
- 38.
Baldwin, Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade, The World Economy 29 (2006) 11, p. 1451.
- 39.
This shows how the political economy of preferentialism leads to an enlargement of trading blocs. Essentially, “an event that triggers closer integration within an existing bloc harms the profits of non-member exporters, thus stimulating them to boost their pro-membership political activity” (Baldwin, Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade, The World Economy 29 (2006) 11, p. 1).
- 40.
This is an offshoot of the domino theory that explains why FTAs seem to be “contagious.” The threat of trade diversion emanating from the preceding round of PTA formation in turn leads to more PTAs.
- 41.
Baldwin/Jaimovich, Are Free Trade Agreements contagious?, Journal of International Economics 88 (2012) 1, p. 1.
- 42.
Chaisse/Chakraborty/Nag, The Three-Pronged Strategy of India’s Preferential Trade Policy: A Contribution to the Study of Modern Economic Treaties, Connecticut Journal of International Law 26 (2011) 2, available at http://www.law.uconn.edu/files/Chaisse,%20Chakraborty,%20&%20Nag.pdf.
Acknowledgments
We would like to thank the Swiss NCCR in Trade Regulation for financial support and Shiva Santosh Yelamanchili for his initiative and excellent research assistance. The usual disclaimer applies.
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Shingal, A., Kander, M. (2013). India and Her Trade Agreements: What Lies Beneath?. In: Herrmann, C., Krajewski, M., Terhechte, J. (eds) European Yearbook of International Economic Law 2014. European Yearbook of International Economic Law, vol 5. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-40913-4_15
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