IDEAS home Printed from https://ideas.repec.org/a/spr/snbeco/v3y2023i12d10.1007_s43546-023-00591-5.html
   My bibliography  Save this article

Potential impacts of Bangladesh–China free trade area: a general equilibrium analysis

Author

Listed:
  • Sharif M. Hossain

    (Jagannath University)

  • Ishtiaque Selim

    (Jagannath University)

Abstract

In recent times, both Bangladesh and China have shown interest to sign free trade area (FTA) deal. However, to the best of our knowledge, no studies have examined the potential impacts of such deal on member countries. The current study attempts to fill this gap as we examine the possible impacts of the proposed Bangladesh–China bilateral FTA using a static general equilibrium framework. Employing the standard Global Trade Analysis Project (GTAP) model and exploiting the latest available version (version 10) of GTAP database, we perform two alternative simulations to analyze the potential impacts of the proposed FTA. In simulation 1, both the FTA members fully abolish all tariffs and non-tariff barriers on member country’s imports, while in simulation 2, the FTA deal considers a special and differential (S&D) treatment for Bangladesh. The findings suggest that under simulation 1, implementation of FTA would worsen the aggregate welfare in Bangladesh. At the same time, Bangladesh would not fully utilize the duty-free access to expand its export to China. By contrast, in simulation 2, Bangladesh can improve its overall welfare by partially protecting its domestic market for Chinese imports. However, the expansion of Bangladesh’s RMG sector would be hampered, as the price of imported intermediate inputs from China would become relatively expensive in simulation 2. In both the simulations, China would be the net gainer in terms of aggregate welfare by utilizing market access provisions under the proposed FTA.

Suggested Citation

  • Sharif M. Hossain & Ishtiaque Selim, 2023. "Potential impacts of Bangladesh–China free trade area: a general equilibrium analysis," SN Business & Economics, Springer, vol. 3(12), pages 1-20, December.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:12:d:10.1007_s43546-023-00591-5
    DOI: 10.1007/s43546-023-00591-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s43546-023-00591-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s43546-023-00591-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Yang, Shanping & Martinez-Zarzoso, Inmaculada, 2014. "A panel data analysis of trade creation and trade diversion effects: The case of ASEAN–China Free Trade Area," China Economic Review, Elsevier, vol. 29(C), pages 138-151.
    2. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, vol. 12(2), pages 263-290.
    3. Mahfuz Kabir & Ruhul Salim, 2010. "Can Gravity Model Explain BIMSTEC’s Trade?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 144-166.
    4. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    5. Brockmeier, Martina, 2001. "A Graphical Exposition Of The Gtap Model," Technical Papers 28706, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Muhammad Ullah & Kazuo Inaba, 2012. "Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 445-460, December.
    7. Thomas W. Hertel & Wallace E. Tyner & Dileep K. Birur, 2010. "The Global Impacts of Biofuel Mandates," The Energy Journal, , vol. 31(1), pages 75-100, January.
    8. Priyadarshi, Shishir & Biswas, Trineesh, 2014. "The role of trade-led economic growth in fostering development: Lessons for the post-2015 development agenda," WTO Staff Working Papers ERSD-2014-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    9. Arvind Panagariya, 1999. "Trade Policy in South Asia: Recent Liberalisation and Future Agenda," The World Economy, Wiley Blackwell, vol. 22(3), pages 353-378, May.
    10. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    11. Caporale, Guglielmo Maria & Sova, Anamaria & Sova, Robert, 2015. "Trade flows and trade specialisation: The case of China," China Economic Review, Elsevier, vol. 34(C), pages 261-273.
    12. Hong Bo, 2023. "Implications of the Ukraine war for China: can China survive secondary sanctions?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 21(2), pages 311-322, April.
    13. Tristan Kohl, 2014. "Do we really know that trade agreements increase trade?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(3), pages 443-469, August.
    14. Mustafizur Rahman & Wasel Bin Shadat & Narayan Chandra Das, 2006. "Trade Potential in SAFTA: An Application of Augmented Gravity Model," CPD Working Paper 61, Centre for Policy Dialogue (CPD).
    15. Raihan, Selim, 2012. "SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications," MPRA Paper 37884, University Library of Munich, Germany.
    16. Lianbiao Cui & Yi Sun & Rasa Melnikiene & Malin Song & Jianlei Mo, 2019. "Exploring the impacts of Sino–US trade disruptions with a multi-regional CGE model," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 4015-4032, January.
    17. Syed H. Shah & Muhammad A. Kamal & Da L. Yu, 2022. "Did China‐Pakistan free trade agreement promote trade and development in Pakistan?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3459-3474, July.
    18. Khondaker Golam Moazzem & Mehruna Islam Chowdhury & Saifa Raz, 2014. "Bilateral Free Trade Agreements (FTAs): Opportunities and Challenges for Bangladesh – Framework Issues," CPD Working Paper 107, Centre for Policy Dialogue (CPD).
    19. Angel Aguiar & Maksym Chepeliev & Erwin L. Corong & Robert McDougall & Dominique van der Mensbrugghe, 2019. "The GTAP Data Base: Version 10," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(1), pages 1-27, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adam Rose & Terrie Walmsley & Dan Wei, 2021. "Spatial transmission of the economic impacts of COVID-19 through international trade," Letters in Spatial and Resource Sciences, Springer, vol. 14(2), pages 169-196, August.
    2. Raihan, Selim, 2012. "SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications," MPRA Paper 37884, University Library of Munich, Germany.
    3. Raihan, Selim, 2011. "Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation," MPRA Paper 37883, University Library of Munich, Germany.
    4. Kym Anderson, 2005. "On the Virtues of Multilateral Trade Negotiations," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 414-438, December.
    5. Ken Itakura & Hiro Lee, 2023. "Should the United States rejoin the Trans-Pacific trade deal?," International Economics and Economic Policy, Springer, vol. 20(2), pages 235-255, May.
    6. Inkyo Cheong & Valijon Turakulov, 2022. "How Central Asia to Escape from trade isolation?: Policy targeted scenarios by CGE modelling," The World Economy, Wiley Blackwell, vol. 45(8), pages 2622-2648, August.
    7. Glyn Wittwer & Mark Horridge, 2018. "SinoTERM365, Bottom-up Representation of China at the Prefectural Level," Centre of Policy Studies/IMPACT Centre Working Papers g-285, Victoria University, Centre of Policy Studies/IMPACT Centre.
    8. Aguiar, Angel & Corong, Erwin & van der Mensbrugghe, Dominique, 2020. "The GTAP Recursive Dynamic (GTAP-RD) Model: Version 1.0," Conference papers 333133, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Kym Anderson & Ernesto Valenzuela, 2021. "What impact are subsidies and trade barriers abroad having on Australasian and Brazilian agriculture?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(2), pages 265-290, April.
    10. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    11. Corong, Erwin & Strutt, Anna, 2020. "Exploring the Impacts of Changing Energy Costs on New Zealand Agriculture to 2030: A GTAP-E-RD Application," Conference papers 333173, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Britz, Wolfgang & Li, Jingwen & Shang, Linmei, 2021. "Combining large-scale sensitivity analysis in Computable General Equilibrium models with Machine Learning: An Example Application to policy supporting the bio-economy," Conference papers 333285, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. My Duong & Mark J. Holmes & Anna Strutt & Steven Lim, 2019. "Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence from Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 116-126.
    14. Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    15. Taheripour, Farzad & Baumes, Harry & Tyner, Wally Taheripour, Farzad, 2019. "Impacts of the U.S. Renewable Fuel Standard on Commodity and Food Prices," Conference papers 333127, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    16. Nelson Villoria & Rachael Garrett & Florian Gollnow & Kimberly Carlson, 2022. "Leakage does not fully offset soy supply-chain efforts to reduce deforestation in Brazil," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    17. Cerqua, Augusto & Montalbano, Pierluigi & Temerbulatova, Zhansaya, 2024. "A decade of Eurasian integration: An ex-post non-parametric assessment of the Eurasian economic union," International Economics, Elsevier, vol. 178(C).
    18. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    19. De, Prabir & Raihan, Selim & Kathuria, Sanjay, 2012. "Unlocking Bangladesh-India trade : emerging potential and the way forward," Policy Research Working Paper Series 6155, The World Bank.
    20. Ilaria Fusacchia & Jean Balié & Luca Salvatici, 2022. "The AfCFTA impact on agricultural and food trade: a value added perspective," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(1), pages 237-284.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:snbeco:v:3:y:2023:i:12:d:10.1007_s43546-023-00591-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.