India-Korea CEPA: Potentials and Realities
The present study investigates the potential economic impacts of India- Korea CEPA using trade indices, partial equilibrium and computable general equilibrium. One hypothetical scenario is examined in SMART model and two hypothetical tariff liberalization scenarios are examined in GTAP model focusing on short run and long run. Using the partial equilibrium WITS-SMART model, we tried to assess the impact of liberalization under the CEPA, assuming full liberalization of imports from the India into Korea and vice versa. We more specifically looked at consumer surplus, trade creation and diversion results as well as the impact on tariff revenues. Using GTAP model, it is a good instrument for identifying the winning and losing countries and sectors under policy changes. GTAP can be used to capture effects on output mix, factor usage, trade effects and resultant welfare distribution between countries as a result of changing trade policies at the country, bilateral, regional and multilateral levels. Finally, bilateral investment flows has also been discussed. The GTAP results reveal that Korea gains while India loses in terms of welfare. Sectoral output and employment effects are mixed. Both countries are gaining significantly in their bilateral trade flows. The SSA results reveal that the CGE results are robust. Using partial equilibrium analysis, SMART model indicates positive effect on consumer surplus and on other trade flows. However, tariff revenues will be reduced by this agreement. India is expected to loose US$-768.37 million while Korea will loose by US$ -1232.6 million. The study recommends the following in light of our findings. First, in order to tamper the losses in budget revenues, countries should seek to diversify their tax base and develop alternative less distortionary revenue generating strategy. Secondly, if the consumers are to truly benefit of CEPA, the national capacity to limit rent capture by importers and exporters should be strengthened.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- K. Kalirajan, 1999. "Stochastic varying coefficients gravity model: An application in trade analysis," Journal of Applied Statistics, Taylor & Francis Journals, vol. 26(2), pages 185-193.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:26206. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.