Evaluation of ASEAN–India Free Trade Regime: A General Equilibrium Approach

Abstract

The study uses ex-ante simulations of the general equilibrium model to analyze deeper integration and forward looking liberalization measures undertaken by the ASEAN and India to assess the Indo-ASEAN trade in its present dispensation and its futuristic goals. In the first scenario, complete trade liberalisation takes place including both tariff and non-tariff barriers among the ASEAN countries itself. Although the tariffs are quite low among the ASEAN countries, yet there is need to go for complete tariff and non-tariff liberalisation as it constitutes an important part of the trade barriers. The deeper integration measures across ASEAN and India include not only tariff and non-tariff liberalisation but also movement of capital, introduction to output-oriented technologies in sectors like transport and communication, light manufacturing and meat, and meat products with input oriented technological progress in land and natural resources. We use the GTAP-10 to analyse the same and the results reveal huge gains for India and ASEAN nations in the deeper integration simulation scenario. If ASEAN nations liberalize unilaterally on its own as a standalone liberalization, then there would be negative welfare returns for India while it would turn positive for India in case of deeper integration. JEL Classification: F13, F15