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Gains and Losses of India-China Trade Cooperation – a Gravity Model Impact Analysis


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  • Swapan K. Bhattacharya
  • Biswanath Bhattacharyay


As revealed by the trade intensity indices, India and the People’s Republic of China have significant bilateral trade potential, which remains unexplored until now. These countries are presently negotiating for free trade arrangements among them based on their complementarities. This paper makes an attempt to estimate the likely benefits in terms of gains or losses in imports of both India and China due to different preferential trading arrangements and free trade arrangements using the gravity model. Empirical results show that in the short run India’s potential gain is relatively less compared to China because of its high tariffs but in the long run, India’s gains are higher than China once its tariff levels are brought at par with them. Free trade arrangement is a win-win situation for both countries and is consistent with their growing dominance in the international trade.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1970.

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Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_1970

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Keywords: PTAs; FTA; gravity model; trade intensity indices; India- People Republic of China; bilateral trade flows; trade creation and trade diversion;


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  1. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
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Cited by:
  1. Biswa Nath Bhattacharyay & Kakali Mukhopadhyay, 2013. "Economy Wide Impact of the Trade Integration between Japan and India: A Computable General Equilibrium Analysis," CESifo Working Paper Series 4557, CESifo Group Munich.
  2. Sayeeda Bano, 2014. "An Empirical Examination of Trade Relations between New Zealand and China in the Context of a Free Trade Agreement," Working Papers in Economics, University of Waikato, Department of Economics 14/04, University of Waikato, Department of Economics.
  3. Shinyekwa, Isaac & Othieno, Lawrence, 2013. "Comparing the Performance of Uganda’s Intra-East African Community Trade and Other Trading Blocs: A Gravity Model Analysis," Research Series, Economic Policy Research Centre (EPRC) 150227, Economic Policy Research Centre (EPRC).


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