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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

Abstract

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.

Suggested Citation

  • Swapan K. Bhattacharya & Biswanath Bhattacharyay, 2007. "Gains and Losses of India-China Trade Cooperation – a Gravity Model Impact Analysis," CESifo Working Paper Series 1970, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1970
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1970.pdf
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    References listed on IDEAS

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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. Bhattacharyay, Biswa Nath & Mukhopadhyay, Kakali, 2015. "A comprehensive economic partnership between India and Japan: Impact, prospects and challenges," Journal of Asian Economics, Elsevier, vol. 39(C), pages 94-107.
    2. Yvonne Sperlich, 2015. "From power transition to economic integration theory: A review of the BRICS literature," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 15101, Institut d'Economie et Econométrie, Université de Genève.
    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 150227, Economic Policy Research Centre (EPRC).
    4. Biswa Nath Bhattacharyay & Madhurima Bhattacharyay, 2016. "Trends and Patterns of Growth, Development, Achievements of China and India: A Comparative Analysis," CESifo Working Paper Series 5788, CESifo Group Munich.
    5. 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.
    6. Shinyekwa, Isaac & Lawrence, Othieno, 2013. "Comparing the Performance of Uganda’s Intra-East African Community Trade and Other Trading Blocs: A Gravity Model Analysis," Research Series 159667, Economic Policy Research Centre (EPRC).
    7. 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 14/04, University of Waikato.

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