Is 'WTO-Plus' a Policy Option for India-China Agriculture Trade? A CGE Analysis

Abstract

This paper examines the effect of bilateral tariff reduction in the agriculture sector between India and China. The results are evaluated in terms of welfare, output, employment and the potential trade flows between India and China using the GTAPmodel. The present study suggests that partial tariff reduction on imports of agricultural commodities between India and China may be welfare-enhancing for both India and China while complete tariff reduction on imports of agricultural commodities may have welfare loss for India, though there will be substantial welfare gains for China. The study reveals that welfare gains for China are larger in comparison to India. The study suggests that a well calculated and strategically negotiated tariff reduction in the agriculture sector may create a win-win situation for both partners. The study further argues that China should offer preferential market access to India for mutually beneficial and welfare-enhancing engagements for both countries. Finally, the study concludes that there exists a narrow scope for 'WTO-Plus' approach for India-China agriculture trade relations. India should assess all pros and cons as it has revenue loss and impact on economically marginalised 'Farming Community'