Are the India’s trade agreements deep enough to support production networks?

The analysis so far recognizes the important role of regional integration and/or preferential trade agreements (PTAs) in influencing successful development of international production networks (IPNs). Intuitively, one would expect a positive impact of reciprocal trade liberalization as it should bring about a reduction of border barriers to trade, and make the flows of goods, services and resources easier and cheaper, thus allowing further fragmentation of production and efficient allocation of resources. However, it turns out that in reality PTAs are not necessarily producing these results due to at least two groups of (related) problems. One concerns a transformation of agreements’ schedules into actual free and unobstructed trade flows, as it appears that many PTAs are not satisfactorily utilized and that a significant portion of trade ends up being left out of the liberalization coverage. India only recently started to entertain the idea of “substantially all trade” when negotiating the coverage of tariff liberalization. Yet, even if all products were on the list for liberalization, there would be problems in accessing the market under these liberalized conditions. The most frequent culprit for this is found in rules of origin (RoO), so this chapter reviews the substantial empirical analyses done under ARTNeT to highlight implications in the case of India.

Related Subject(s): International Trade and Finance

Countries: India