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Gains and Losses of India-China Trade Cooperation - A Gravity Model Impact Analysis

32 Pages Posted: 10 May 2007  

Swapan K. Bhattacharya

National Graduate Institute for Policy Studies (GRIPS)

Biswa N. Bhattacharyay

Asian Development Bank Institute; Asian Development Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2007

Abstract

As revealed by the trade intensity indices, India and the People's Republic of China have significant bilateral trade potential, which has remained unexplored until now. These countries are presently negotiating for bilateral free-trade arrangements based on their complementarities. This paper makes an attempt to estimate the likely benefits in terms of gains or losses in imports of both India and China due to different preferential trading arrangements and free-trade arrangements using the gravity model. Empirical results show that in the short run India's potential gain is relatively lower compared to China's because of its high tariffs but in the long run, India's gains are higher than China's once its tariff levels are brought at par with them. Free-trade arrangement is a win-win situation for both countries and is consistent with their growing dominance in international trade.

Keywords: PTAs, FTA, gravity model, trade intensity indices, India- People Republic of China, bilateral trade flows, trade creation and trade diversion

JEL Classification: F02, F04, F13, F14, F15

Suggested Citation

Bhattacharya, Swapan K. and Bhattacharyay, Biswa N., Gains and Losses of India-China Trade Cooperation - A Gravity Model Impact Analysis (April 2007). CESifo Working Paper Series No. 1970. Available at SSRN: https://ssrn.com/abstract=985274

Swapan Kumar Bhattacharya

National Graduate Institute for Policy Studies (GRIPS) ( email )

7-22-1 Roppongi, Minato-Ku
Tokyo 106-8677, Tokyo 106-8677
Japan

Biswa Nath. Bhattacharyay (Contact Author)

Asian Development Bank Institute ( email )

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Tokyo, Tokyo 100-6008
Japan
(81-3)3593-5566 (Phone)
(81-3)3593-4270 (Fax)

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CESifo (Center for Economic Studies and Ifo Institute)

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