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“
-Prime Minister Manmohan
Singh
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

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 India-
ASEAN
• Intra Industry Trade
• India-ASEAN Free Trade Agreement
• Major Findings

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 Dynamic Sec. FTA

India - ASEAN
Top 5 Sectors of ASEAN comparative
adv .
HS Sectors (level-2) RCA - RCA -
code India ASEAN
'80 Tin and articles 0.32 7.77
thereof
'15 Animal,vegetable fats 0.65 5.95
and oils, cleavage
products, etc
'16 Meat, fish and 0.55 2.77
seafood food
preparations nes
'40 Rubber and articles 0.84 2.75
thereof
'46 Manufactures of 0.31 2.21
plaiting material,
basketwork, etc.

Reasons
Fish, Sea Food – Abundant coastline
Tin Industry – High Abundance , Historical development
Rubber Industry – Factor Abundance



n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

India - ASEAN
Top 5 Sectors of Indian Silk
comparative adv . • Wide base and sustaining domestic
HS Sectors ( level - 2 ) RCA RCA -
ASEAN
india
share
market demand,infrastructure
code - created by the national
Indi in
a
ASEAN sericulture project
imports
'50 Silk 10.05 0.37 8.77% • Good research and training
'13 Lac, gums, resins, 9.14 0.79 7.74% capabilities
vegetable saps and Vegetable saps and extracts
extracts nes
'57 Carpets and other 8.35 0.32 9.11% Cheap labor and Expertise available in
textile floor
coverings India,large no. of locust bean
'52 Cotton 8.35 0.53 7.2% producers
'71 Pearls, precious 6.41 0.72 4.96% Carpets
stones, metals, coins,
etc • India had an ancient heritage of
carpet weaving
Pearls precious stones • Availability of skilled labor and
Thousands of skilled and cheaper
expertise
Cotton
labour
Innovative product designs • Suitable weather conditions in
India
• Cotton producing areas spread
throughout
• the country
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

India – Indonesia
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

India - Malaysia
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

Trade Intensity

Exports to ASEAN

Total Exports to
World
  2002 2003 2006 2007
India 1 . 56 1 . 69 1 . 79 1 . 71
China 1 . 29 1 . 31 1 . 32 1 . 40
ASEAN 4 . 04 4 . 59 4 . 48 4 . 53
Trade Intensity
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
 X-M
Intraindustry Trade Index=1-
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 IIT Dynamic Sec. FTA

Category Product Export Import IIT Index Remark

05 Products of animal 1342 1739 for
87 . 11457
origin HIGH
13 Lac , gums , resins ,
vegetable saps and
13845 15618 2007x100
93 . 98228
HIGH
extracts nes
14 Vegetable plaiting 1040 1718 75 . 41697
materials , vegetable MODERA
products nes
29 Organic chemicals 895604 1109948 89 . 31247 TE
HIGH
32 Tanning , dyeing 92655 94125 99 . 21298
extracts , tannins , VERY
derivs , pigments etc
33 Essential oils ,
perfumes , cosmetics ,
65532 54161 90 . 49986 HIGH
HIGH
toileteries
35 Albuminoids , modified 8547 7757 95 . 15456
starches , glues , VERY
enzymes
37 Photographic or
cinematographic goods
4746 8221 73 . 2012 HIGH
MODERA
38 Miscellaneous
chemical products
200773 285685 82 . 54484 TE
HIGH
54 Manmade filaments 62717 59197 97 . 11272
VERY
56 Wadding , felt , 9987 9801 99 . 06004
nonwovens , yarns , VERY
HIGH
twine , cordage , etc
HIGH
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

Categor Product
Export Import IIT Index Remark
y'58 for
Special woven or 3725 4911 86 . 26679
tufted fabric ,
lace , tapestry etc
2007x100 HIGH
'64 Footwear , gaiters 13553 15567 93 . 08379
and the like , parts HIGH
thereof
'68 Stone , plaster , 22715 15229 80 . 27093
cement , asbestos , HIGH
mica , etc articles
'69 Ceramic products 13181 15573 91 . 68116
HIGH
'72 Iron and steel 609792 699275 93 . 16437
HIGH
'73 Articles of iron or 177483 191571 96 . 18267
steel VERY
'79 Zinc and articles
thereof
31066 19123 76 . 20395 HIGH
MODERA
'81 Other base metals , 2472 1653 80 . 14545
cermets , articles HIGH
TE
thereof
'83 Miscellaneous 10678 16325 79 . 08751
articles of base MODERA
metal
'89 Ships , boats and
other floating
372571 547763 80 . 9643 TE
HIGH
structures
'96 Miscellaneous 12782 10383 89 . 64386
manufactured HIGH
articles
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 At least 0.001% of world trade share
last 10 years In base year.
Base year : 1995.

Dynamic Sector
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

India-World Trade Dynamic Sectors

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

Indo-ASEAN Trade Dynamic Sectors

 2 1 1
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

1 1 2
2 1 1

1 1
1

1 1
2

4
2 1 1

2 1 1
 2 1 1
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

1 1 2
2 1 1

1 1
1

1 1
2

4
2 1 1

2 1 1
 2 1 1
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

1 1 2
2 1 1

1 1
1

1 1
2

4
2 1 1

2 1 1
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

India – ASEAN FTA

Signing of the deal

postponed with an
Trade deal was scheduled to be eye on the
signed. elections.
Delay in ratification of the trade
pact by
the governments of all ASEAN member
countries and India

FTA negotiations Talks bogged due to

begins. disagreement over reduction
of import tariffs on palm oil
Indo - Asean summits by India but resumed after
begins. compromise
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

Certain features of the 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. FTA

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
§
§

§
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 semi-
finished goods category with a few exception like space
sector & Automobiles.
•
n ComparativeAdv. Trade Intensity IIT Dynamic Sec. FTA

Reference

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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
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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