International Economics Trade Iift

Looking East

Analysis of India–ASEAN Trade Pattern

Group – 8 Anand Joseph (7) Sushant Jain (51) Venkat Thogaru (55) Vipul Vikram Singh (58) Yash Saxena (59)

"I reiterate India's commitment to work with ASEAN and other East Asian countries to make the 21st century truly an Asian century“

Singh

-Prime Minister Manmohan

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

Agenda

• Identifying Sectors of Comparative Advantage  - Between India-ASEAN  - Between India-Indonesia  - Between India-Malaysia • Trade Intensity between India and ASEAN • Identifying Dynamic sectors of trade between IndiaASEAN • Intra Industry Trade • India-ASEAN Free Trade Agreement • Major Findings 

FTA

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

ASEAN

• ASEAN (Association of Southeast Asian Nations) is a geo-political and economic organization of 10 countries located in Southeast Asia • Formed in 1967 with 5 countries – Indonesia, Malaysia, Philippines, Singapore and Thailand • Since then membership has expanded to include Brunei, Cambodia, Laos, Myanmar, and Vietnam • Combined Nominal GDP of USD 1.4 trillion as per 2008 estimate

• •

n

ComparativeAdv.

Trade Intensity

IIT

India - ASEAN Top 5 Sectors of ASEAN comparative adv . HS Sectors (level-2) code '80 Tin and articles thereof '15 Animal,vegetable fats and oils, cleavage products, etc '16 Meat, fish and seafood food preparations nes '40 Rubber and articles thereof '46 Manufactures of plaiting material, basketwork, etc.

Reasons

RCA - RCA India ASEAN 0.32 7.77 0.65

5.95

0.55

2.77

0.84

2.75

0.31

2.21

Fish, Sea Food – Abundant coastline Tin Industry – High Abundance , Historical development Rubber Industry – Factor Abundance   

Dynamic Sec.

FTA

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

India - ASEAN Top 5 Sectors of Indian comparative adv . HS Sectors ( level - 2 ) RCA RCA ASEAN code Indi a '50 Silk 10.05 0.37 '13 Lac, gums, resins, 9.14 0.79 vegetable saps and extracts nes '57 Carpets and other 8.35 0.32 textile floor coverings '52 Cotton 8.35 0.53 '71 Pearls, precious 6.41 0.72 stones, metals, coins, etc

Silk • Wide base and sustaining domestic market demand,infrastructure created by the national sericulture project • Good research and training capabilities Vegetable saps and extracts Cheap labor and Expertise available in India,large no. of locust bean producers Carpets • India had an ancient heritage of carpet weaving • Availability of skilled labor and expertise Cotton • Suitable weather conditions in India • Cotton producing areas spread throughout the country • 

india share in ASEAN imports

8.77% 7.74% 9.11% 7.2% 4.96%

Pearls precious stones Thousands of skilled and cheaper labour Innovative product designs

n

ComparativeAdv.

India – Indonesia

Trade Intensity

IIT

Dynamic Sec.

FTA

n

ComparativeAdv.

India - Malaysia

Trade Intensity

IIT

Dynamic Sec.

FTA

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

Trade Intensity

Exports to ASEAN

Total Exports to World

Trade Intensity

 

2002

2003

2006

2007

India China ASEAN

1 . 56 1 . 29 4 . 04

1 . 69 1 . 31 4 . 59

1 . 79 1 . 32 4 . 48

1 . 71 1 . 40 4 . 53

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

Trade Intensity • India has a high Trade Intensity with ASEAN. • China has larger export volumes but relatively lower Trade Intensity with ASEAN. – This can be attributed to the dominance of US in overall Chinese trade. • Indian exports to ASEAN have relatively been flat. • Trade between China and ASEAN have grown tremendously post FTA. • ASEAN has a very high Trade Intensity within its group nations with trade volumes witnessing huge surge. – This proves the presence of a noodle bowl and an immense potential of growth in bilateral trade and thus, need of an FTA.  

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

Intra Industry Trade

• 2 digit level of disaggregation • Based on Grubel Lloyd Index  

Intraindustry Trade Index=1-

X-M X+M

• IIT ranges from 0 (no Intraindustry trade) to 1 (100 percent intraindustry trade). • The closer to 0, the less Intraindustry trade relative to interindustry trade. • The closer to 1, the more Intraindustry trade relative to Interindustry trade.

•

n

ComparativeAdv.

Trade Intensity

Category

Product

Export

Import

05 13

Products of animal origin Lac , gums , resins , vegetable saps and extracts nes Vegetable plaiting materials , vegetable products nes Organic chemicals

1342 13845

1739 15618

1040

1718

895604 92655

1109948 94125

65532

54161

8547

7757

4746

8221

200773 62717 9987

285685 59197 9801

14 29 32 33 35 37 38 54 56

Tanning , dyeing extracts , tannins , derivs , pigments etc Essential oils , perfumes , cosmetics , toileteries Albuminoids , modified starches , glues , enzymes Photographic or cinematographic goods Miscellaneous chemical products Manmade filaments Wadding , felt , nonwovens , yarns , twine , cordage , etc

IIT

Dynamic Sec.

FTA

IIT Index Remark for 87 . 11457 HIGH 2007x100 93 . 98228 HIGH 75 . 41697 MODERA 89 . 31247 TE HIGH 99 . 21298 VERY 90 . 49986 HIGH HIGH 95 . 15456 VERY 73 . 2012 HIGH MODERA 82 . 54484 TE HIGH 97 . 11272 VERY 99 . 06004 VERY HIGH HIGH

n

ComparativeAdv.

Trade Intensity

Product

Export

Import

3725

4911

13553

15567

22715

15229

'69

Special woven or tufted fabric , lace , tapestry etc Footwear , gaiters and the like , parts thereof Stone , plaster , cement , asbestos , mica , etc articles Ceramic products

13181

15573

'72

Iron and steel

609792

699275

'73

Articles of iron or 177483 steel

191571

'79

Zinc and articles thereof Other base metals , cermets , articles thereof Miscellaneous articles of base metal Ships , boats and other floating structures Miscellaneous manufactured articles

Categor y'58 '64 '68

'81 '83 '89 '96

IIT

Dynamic Sec.

FTA

IIT Index Remark for 86 . 26679 2007x100 HIGH 93 . 08379 HIGH 80 . 27093 HIGH 91 . 68116 HIGH 93 . 16437 HIGH 96 . 18267 VERY 76 . 20395 HIGH MODERA 80 . 14545 HIGH TE

31066

19123

2472

1653

10678

16325

79 . 08751

372571

547763

80 . 9643

12782

10383

89 . 64386

MODERA TE HIGH HIGH

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

INTRA INDUSTRY TRADE

Ø Ø Can be further classified into Homogenous, Horizontally Differentiated and Vertically Differentiated categories. Ø Values of intra-industry trade depend on how narrowly a particular industry or product group is defined. Ø More broadly defined groups will show more intraindustry trade. Ø More narrowly defined groups will show less intraindustry trade.

500% Growth in last 10 years Base year : 1995.

Dynamic Sector

At least 0.001% of world trade share In base year.

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

India-World Trade Dynamic Sectors 1 4 11 16 26 27 35 43 67 72 74 88 89 90 94 97

Live animals. Dairy produce, birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or included. Products of the milling industry; malt; starches; inulin; wheat gluten. Preparations of meat, of fish or of crustaceans, mollusks or other aquatic invertebrates Ores, slag and. ash. Mineral fuels, mineral oils and products or their distillation; bituminous substances; mineral waxes.substances; modified starches; glues; enzymes. Albuminoidal Fur-skins an artificial fur; manufactures thereof. Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles or human hair. Iron and steel. Copper and articles thereof Aircraft, spacecraft, and parts thereof. Ships, boats and floating structures. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof. Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated , illuminated -plate . Works of art,signs collectors' piecesname and antiques .

n

ComparativeAdv.

Trade Intensity

IIT

Indo-ASEAN Trade Dynamic Sectors

Dynamic Sec.

FTA

n

2

1

1 2

1 1

ComparativeAdv.

1

Trade Intensity

IIT

1

Dynamic Sec.

2 1 1 1

1

2

1 2

1

4 1

2

1

1

FTA

n

2

1

1 2

1 1

ComparativeAdv.

1

Trade Intensity

IIT

1

Dynamic Sec.

2 1 1 1

1

2

1 2

1

4 1

2

1

1

FTA

n

2

1

1 2

1 1

ComparativeAdv.

1

Trade Intensity

IIT

1

Dynamic Sec.

2 1 1 1

1

2

1 2

1

4 1

2

1

1

FTA

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

India – ASEAN FTA

Trade deal was scheduled to be signed. Delay in ratification of the trade pact by the governments of all ASEAN member countries and India FTA negotiations begins. Indo - Asean summits begins.

Signing of the deal postponed with an eye on the elections.

Talks bogged due to disagreement over reduction of import tariffs on palm oil by India but resumed after compromise

n

ComparativeAdv.

Trade Intensity

Certain features of the FTA

IIT

Dynamic Sec.

FTA

• • India is seventh on the list of ASEAN’s biggest trading partners, trailing Australia, South Korea, China and others, according to Asean figures. • • Total trade between ASEAN and India amounted to $37 billion in 2007, up 29 percent from the year before. India is looking forward to raising this volume to $50 billion by 2010. • • The agreement would reduce Indian tariffs to zero on 3,666 imported items from South-East Asia by the end of 2012. • • India will abolish duties for ASEAN imports on all but 518 items between 2012 and 2018. • •

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

Certain features of the FTA •

• •

• •

• •

• 

ASEAN-made goods expected to gain from zero tariff include refrigerators, fans, air-conditioner parts, jewellery and ornamental goods, rubber products and plastic resins. Concern about the deal's fallout on farmers because of cheap imports of palm oil, tea, coffee and pepper from Malaysia, Vietnam and Indonesia. When India began the tariff negotiations with ASEAN two years ago, tariffs on sensitive products like Palm oil, tea, coffee and pepper ranged between 80% and 100% - but now brought down to 60%. 4 categories created :

– Normal Track 1 - tariffs would be eliminated by 2011, – Normal Track 2 - tariffs would be brought down to 5% by 2011,eliminated by 2013 – Sensitive Track 1 - tariffs would be brought down to 5% by 2013 and eliminated by 2018 – Sensitive Track 2 - no reduction or elimination of tariffs

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

Economic Gains of FTA § The § § §

FTA provides for: Enhanced economic efficiency Greater Intra-ASEAN Trade Deepened specialization in production based on comparative advantage

§ § Trade creation as a result of lowering of tariffs § § Improved regional real income § § Greater market access resulting to economies of scale 

§ Lower prices and a greater variety of goods and services made available by market liberalization and increased competition § § Enhanced strategic alliances between ASEAN and India’s industries § §

§

FTA

n

ComparativeAdv.

Trade Intensity

IIT

Dynamic Sec.

FTA

Major Findings • India possesses a much larger gamut of goods with comparative advantage over the ASEAN countries • India has high trade intensity with ASEAN • India trade with ASEAN countries remained flat during the last few years • Immense growth potential exists for bilateral trade between India and ASEAN countries • India need to forge an evolved bilateral trade with an FTA • A high value of IIT index has been found in a number of categories • A majority of the products belong to homogenous and horizontally differentiated categories • Dynamic sectors identified were mainly in raw and semifinished goods category with a few exception like space sector & Automobiles.

•

n

ComparativeAdv.

Trade Intensity

IIT

Reference w w w . in tra ce n . o rg In d ia A S E A N Fra m e w o rk A g re e m e n t 2 0 0 3 w w w . u n co m p tra d e . co m In d ia Tra d e b y C M IE 

E x ce l F ile s Tra d e In te n sity & IIT. xlsx

In d o -A se a n D yn a m ic se cto rs. xls R C A -IN D IA &A S E A N -a d d itio n a l p ro ce ssin g vip . xlsx

Dynamic Sec.

FTA