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Some Common Lessons from Uncommon FTAs

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  • Kumar Gaurav
  • Nalin Bharti

Abstract

The present study endeavours to observe the trade creation and trade diversion effects of three free trade agreements (FTAs) in Asia, namely, India–Japan CEPA (IJCEPA), India–Sri Lanka FTA (ISFTA), and India–Bhutan FTA (IBFTA). The article aims to evaluate three uncommon FTAs that include developing–developed, developing–developing and developing–least developed countries. The objective is to evaluate the effects of these FTAs on exports and draw lessons for both the contracting parties and for other economies to commence FTAs that promote trade liberalization. This paper also aims to debunk the myth that FTAs between developing-least developed countries is not beneficial for the developing or least developed counterpart. The study applies augmented gravity model to capture the trade creation and trade diversion effects. The results confirm that ISFTA and IBFTA have trade creation effect, while in case of IJCEPA, there is trade diversion. These bilateral agreements can open the ways for multilateral trade liberalization in the long-run. JEL : F10, F13, F14

Suggested Citation

  • Kumar Gaurav & Nalin Bharti, 2019. "Some Common Lessons from Uncommon FTAs," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 138-157, March.
    • Handle: RePEc:sae:soueco:v:20:y:2019:i:1:p:138-157
    DOI: 10.1177/1391561418824479
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    More about this item

    Keywords

    FTA; trade; trade diversion; trade creation; gravity model; trade liberalization;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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