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Prospects of Wheat and Sugar Trade between India and Pakistan : A Simple Welfare Analysis

Author

Listed:
  • Abid A. Burki

    (LUMS)

  • Mushtaq A. Khan
  • S.M. Turab Hussain

Abstract

This paper asks how opening up of wheat and sugar trade between two nuclear neighbours, India and Pakistan, would affect welfare in the two countries. We conduct a partial equilibrium analysis to simulate welfare implications of trade between the two countries under three alternative trade regimes : a) under an FTA between India and Pakistan, b) under SAFTA, and c) under a grant of mostfavoured nation (MFN) to India by Pakistan. We conduct simple welfare analysis for wheat, on the basis of real world data of FY2005, and for sugar, based on data for FY 2000-01. In both these years, India had a net surplus and Pakistan had a net deficit for both wheat and sugar. We show that among other things, favourable weather conditions play a critical role in generating these surpluses, which are most likely to get reversed in years when weather conditions become more favourable to Pakistan. While we find there would be net gains to both countries, in case trade happens, the highest welfare gains accrue to both countries under free trade agreement. Further analysis reveals that if subsidies to Indian wheat farmers are removed, their competitive edge disappears in favour of wheat farmers in Pakistan.

Suggested Citation

  • Abid A. Burki & Mushtaq A. Khan & S.M. Turab Hussain, 2006. "Prospects of Wheat and Sugar Trade between India and Pakistan : A Simple Welfare Analysis," Trade Working Papers 22249, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:tradew:22249
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    File URL: http://www.eaber.org/node/22249
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    References listed on IDEAS

    as
    1. Indra Nath Mukherji, 2004. "South Asian Free Trade Area and Indo-Pakistan Trade," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 943-958.
    2. Gulati, Ashok & Narayanan, Sudha, 2003. "The Subsidy Syndrome in Indian Agriculture," OUP Catalogue, Oxford University Press, number 9780195662061.
    3. Mubarik Ali, 1990. "The Price Response of Major Crops in Pakistan: An Application of the Simultaneous Equation Model," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 29(3 and 4), pages 305-325.
    4. Mullen, Kathleen & Orden, David & Gulati, Ashok, 2005. "Agricultural policies in India," MTID discussion papers 82, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Zakee SAADAT & Dawood MAMOON, 2016. "Destination EU and USA: Improving Export Potential of Pakistan by Trading with India," Journal of Economics and Political Economy, KSP Journals, vol. 3(4), pages 659-669, December.
    2. Jibran Hussain & Ahsan Ali & Muhammad Haseeb, 2017. "Regional Trade Between India and Pakistan: Prospect of Most Favourite Nation (MFN)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(12), pages 1179-1196, December.

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    More about this item

    Keywords

    wheat; sugar; trade; weather conditions; Pakistan; India; subsidies;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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