India and RCEP Agreement: The Cost and Benefit of Joining the Trade Deal

The number and coverage of the free trade agreements across the world has increased significantly in recent decades. The belief that removal of market access barriers enhances economic gain has made many developed and developing countries enter into several bilateral, regional and multilateral trade...

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Bibliographic Details
Published in:The ICFAI journal of applied economics 2022-10, Vol.21 (4), p.7-22
Main Author: Sahu, Pritish Kumar
Format: Article
Language:English
Subjects:
Agreements
Developing countries
Exports
Free trade
GDP
Gravity
Gross Domestic Product
International trade
LDCs
Macroeconomics
Negotiations
Regional Comprehensive Economic Partnership
Simulation
Tariffs
Trade agreements
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Summary:The number and coverage of the free trade agreements across the world has increased significantly in recent decades. The belief that removal of market access barriers enhances economic gain has made many developed and developing countries enter into several bilateral, regional and multilateral trade agreements. The Regional Comprehensive Economic Partnership (RCEP) is one such trade agreement that 10 ASEAN members and its five trading partners have entered into. In this context, the present study attempts to estimate the cost and benefit of joining RCEP for India in two different scenarios. First, using the SMART partial simulation analysis, the study finds that if India joins RCEP, the trade deficit could widen by as much as $23.9 bn annually. Second, the empirical estimation by employing an augmented gravity model shows the relative low impact of tariff on trade among RCEP partners, compared to other explanatory variables in the model. Based on the findings, the study concludes that India 's decision to not join RCEP is a wise one at this stage.
ISSN:0972-6861