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An Analysis of Tariff Reductions in the Trans-Pacific Partnership (TPP): Implications for the Indian Economy

Author

Listed:
  • Badri Narayanan

    (Badri Narayanan, Research Economist, Center for Global Trade Analysis, Purdue University, West Lafayette, Indiana, USA, email: badri@purdue.edu)

  • Sachin Kumar Sharma

    (Sachin Kumar Sharma, Assistant Professor, Center for WTO Studies, Indian Institute of Foreign Trade, New Delhi, India, email: sksharma.jnu@gmail.com)

Abstract

Our purpose is to undertake a comparative analysis of the likely impact of tariff reduction under the Trans-Pacific Partnership (TPP) on various macro and trade variables of the Indian economy under different scenarios. The TPP was concluded in October 2015, but it is yet to be ratified by the partner countries, and while Asian giants like India, China and Korea have not joined the TPP, there are some talks about their joining the partnership in future. Ours is a unique study that evaluates India’s perspective on joining the TPP, in terms of tariff reduction, and not in terms of the removal of non-tariff barriers. We employ the widely used standard Global Trade Analysis Project (GTAP) model for this exercise. This is a unique framework with a global economy-wide approach, in a Computable General Equilibrium (CGE) setting. Five different scenarios of complete integration in terms of tariff reduction between different regions are simulated using the GTAP model. Under each scenario, the tariff among members of a group of regions is eliminated, but is unchanged for other regions. Higher welfare arising from allocative efficiency comes with the cost of a relatively lower consumption of domestic products and investment, resulting in a loss in terms of GDP. Therefore, we conclude that there are mixed prospects and no strong reason for India to pursue being part of the TPP in future, from a perspective of tariff reductions. JEL Classification: F15, F17

Suggested Citation

  • Badri Narayanan & Sachin Kumar Sharma, 2016. "An Analysis of Tariff Reductions in the Trans-Pacific Partnership (TPP): Implications for the Indian Economy," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(1), pages 1-34, February.
  • Handle: RePEc:sae:mareco:v:10:y:2016:i:1:p:1-34
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    Citations

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    Cited by:

    1. Narayanan, G. Badri, 2016. "A comment on potential effects of a trans-pacific partnership on forest industries," Forest Policy and Economics, Elsevier, vol. 73(C), pages 262-263.
    2. Muhammad Aamir Khan & Naseeb Zada & Kakali Mukhopadhyay, 2018. "Economic implications of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on Pakistan: a CGE approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-20, December.
    3. World Bank, "undated". "South Asia Economic Focus, Spring 2017," World Bank Other Operational Studies 26373, The World Bank.
    4. Habtamu Shiferaw Amogne & Taiji Hagiwara, 2021. "Impact of alternative regional trade arrangements on the Ethiopian economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-26, December.

    More about this item

    Keywords

    GTAP; TPP; CGE; India;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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