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India-ASEAN Free Trade Agreement

Against the backdrop of stalling multilateralism and proliferating regional trade initiatives, India signed a regional trade agreement with the Association of Southeast Asian Nations in August 2009. But the agreement has raised apprehensions on the possibility of large-scale import of commodities from the ASEAN countries, affecting the livelihood of many stakeholders. Fisheries is one area of concern since some of the ASEAN members - Thailand, Vietnam and Indonesia - are leading exporters of fisheries products. Using simple revealed comparative advantage indices, this paper looks at the likely impact of the agreement on India's fisheries trade by identifying the complementarity and competing product categories. The simulation results show that tariff reduction will have a trade creation effect, an improvement in welfare and limited tariff revenue decline. The study also shows that the India-ASEAN FTA may not lead to large-scale import of marine products and affect the livelihood of fisherfolk.

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India-ASEAN Free Trade Agreement

Implications for Fisheries

B P Sarath Chandran, P K Sudarsan

Against the backdrop of stalling multilateralism and proliferating regional trade initiatives, India signed a regional trade agreement with the Association of Southeast Asian Nations in August 2009. But the agreement has raised apprehensions on the possibility of large-scale import of commodities from the ASEAN countries, affecting the livelihood of many stakeholders. Fisheries is one area of concern since some of the ASEAN members – Thailand, Vietnam and Indonesia – are leading exporters of fisheries products. Using simple revealed comparative advantage indices, this paper looks at the likely impact of the agreement on India’s fisheries trade by identifying the complementarity and competing product categories. The simulation results show that tariff reduction will have a trade creation effect, an improvement in welfare and limited tariff revenue decline. The study also shows that the India-ASEAN FTA may not lead to large-scale import of marine products and affect the livelihood of fisherfolk.

B P Sarath Chandran (bpschandran@yahoo.com) is with VVM’s Shree Damodar College of Commerce and Economics, Margao, Goa and P K Sudarsan (sudhapazhu@yahoo.com) is with the department of economics, Goa University, Goa.

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I
ndia and the Association of Southeast Asian Nations (ASEAN) signed a historic regional trade agreement (RTA) in August 2009 paving the way for increased economic and trade cooperation between the two regions of Asia in an increasingly regionalised world. This agreement is in line with a number of RTAs that have come up in the world in the post1990s with multilateral trade liberalisation efforts under the World Trade Organisation (WTO). India, after an initial hesitation, started regional trade engagements and signed bilateral trade agreements with Sri Lanka, Singapore, Thailand and South Korea. But the importance of southeast Asia, as a region, in India’s economic and strategic outlook and the prospect of greater cooperation in regional integration efforts made India place a special focus on the region through various policy initiatives such as “Look East Asia”. The sustained and intense negotiations between India and the ASEAN countries led to the signing of a framework agreement in October 2003 and the fi nal India-ASEAN Free Trade Agreement (FTA) on 13 August 2009, which came into effect on 1 January 2010.

India-ASEAN FTA generated a heated debate on its likely impact on various sectors/sections of the economy. Similar agro-climatic conditions make India and ASEAN produce similar products and compete with each other after the agreement. There is a strong apprehension among a section of stakeholders on the possibility of large-scale import of agricultural products, plantation crops and fisheries products from ASEAN. This can put pressure on domestic prices that could result in large-scale displacement of people from their traditional occupations, jeopardising their livelihoods. In this context, this paper attempts to understand the trade structure in India and ASEAN countries in the fisheries sector and explores whether they are complementary or similar to each other. The likely impact of India-ASEAN FTA on India’s fi shery sector is examined through a partial equilibrium simulation method.

1 Fishery Trade Profile of ASEAN and India

In 2008, total fish production in the world, excluding aquatic plants (capture and aquaculture) had reached 142.287 million tonnes. Of this total production, 55.89% was from the marine fishery areas, 36.93% from aquaculture and 7.18% from inland fishing. While the production from marine waters and inland waters has reached long-term stability, the additional supply is entirely from increases in aquaculture production. Country-wise capture and production of fishery in 2008 shows that China is way ahead (33.4%), with India a distant second

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(5.33%) and Peru third (5.2%). Other Table 2: Composition of Indian Marine Exports

Item 2009-10 2010-11 2009-10 2010-11 Per Cent Growth 2010-11

leading producers of fi shery products

Quantity (T) Quantity (T) Value Value Quantity Price Share in Unit in the world are Indonesia (4.67%), Million ($) Million ($) Quantity Value in $

the US (3.41%), Japan (3.5%), Chile (3.09%), Vietnam (3.18%), Thailand (2.69%) and Philippines (2.32%).

The world fishery exports reached $101.98 billion in 2008 which increased from the $93.57 billion in 2007.

Frozen shrimp 1,30,553.13 1,50,661.82 4,182.35 5,696.85 15.40 42.36 18.67 8.34

Frozen fish 2,60,986.06 3,09,772.33 2,032.47 2,602.22 18.46 34.28 38.31 1.87

Frozen cuttle fish 63,504.41 58,694.04 923.83 1,094.25 -7.57 23.85 7.27 4.13
Frozen squid 61,444.60 86,442.91 622.63 996.91 40.68 66.87 10.71 2.55
Dried item 47,053.03 79,051.53 981.11 953.72 68.00 1.55 9.79 2.68
Live items 5,492.26 5,187.17 139.14 141.58 -5.55 6.16 0.64 6.04
Chilled items 28,816.88 20,911.03 264.49 252.97 -27.44 0.09 2.59 2.67

During the corresponding period, glo-Others 80,585.70 96,941.86 902.50 1,087.46 20.30 23.08 12.01 2.50

bal imports increased from $98.04 bil-Total 6,78,436.07 8,07,062.69 10,048.53 12,825.96 18.96 33.17 100.00 3.52

Source: MPEDA, Ministry of Commerce and Industry, Government of India.

lion to $107.13 billion. The largest exporter of fisheries products in the world is China ($10.11 bil-economic zone (EEZ), including 0.530 million sq km of a contilion) followed by Norway ($6.94 billion) and Thailand ($6.53 nental shelf (Planning Commission “Report of the Working billion). Other leading exporters are Denmark, Vietnam, the Group on Fisheries for the Eleventh Five-Year Plan (2007-12)”, US and Chile. The top three importers of fisheries products in Government of India 2006). Fisheries play an important role 2008 were Japan ($14.95 billion), the US ($14.14 billion) and in the national economy, providing full-time or part-time Spain ($7.10 billion). Shrimp, groundfish, tuna and salmon are employment to 14.66 million people. The contribution of the important species traded internationally. fisheries to the gross domestic product (GDP) at current prices

Indonesia, Vietnam, Thailand, Philippines and Myanmar (2003-04) is 1.07%. It is also a major contributor to foreign are the major producers of fishery products in ASEAN (Table 1). exchange earning, fetching $2.1 billion in 2009-10. Indonesia is the largest producer in ASEAN (6.65 million As per the provisional export figures for 2010-11, the export tonnes in 2008), followed by Vietnam (4.44 million tonnes), of marine products from India has reached an ever-time Thailand (3.83 million tonnes), Philippines (3.3 million tonnes) record of $2.84 billion exporting 8,07,063 million tonnes (mt) and Myanmar (3.17 million tonnes). But the leading exporters of seafood products. from the region are Thailand and Vietnam, followed by Indo-According to the provisional figures given by the Marine nesia. Thailand (6.41%) and Vietnam (4.46%) were the third Products Export Development Authority (MPEDA), frozen and fifth largest exporters of fi shery products in the world in shrimp continues to be the major export item, recording an 2008. Per capita fish availability is high in Malaysia and increase of 15.40%, 36.21% and 42.36% in quantity, rupee Singapore, and the average consumption is considerably value and dollar value, respectively (Table 2). Fish, the princihigher in the ASEAN countries compared with India. pal export item in quantity terms and the second largest ex-

India is endowed with vast fisheries resources in terms of a port item in value terms, accounts for a share of about 38.31% coast line of 8,118 km and 2.02 million sq km of an exclusive in quantity and 20.38% in dollar earnings. European Union (EU) continues to be the largest export

Table 1: Fishery Profile of India and ASEAN Countries (Average 2005-07)

Production Imports Exports Fish Supply Per Capita market for India in 2010-11 with a share of 26.66% in dollar (Tonnes) (Tonnes) (Tonnes) (Tonnes) Supply (Kg/Year)

terms followed by the US (15.40%), south-east Asia (16.42%),

India 69,91,903 14,995 6,11,408 60,06,975 5.2

China (15.45%), Japan (13.14%), west Asia (5.17%) and others

Brunei 3,108 10,160 160 13,252 35.1 (neg.) (0.39) (0.0) (7.79%). Fisheries trade with the southeast Asian countries has

Cambodia 4,80,300 5,499 54,337 4,31,462 30.6registered a positive growth of 55.08% in quantity and 48.09%

(2.28) (0.21) (0.94)

in US dollar realisation.

Indonesia 61,17,401 62,747 9,36,839 52,00,008 23.4

(29.08) (2.39) (16.26)

2 Tariff Elimination of Marine Products

Lao PDR 1,07,800 4,850 0 1,12,640 18.8

(0.51) (0.18) (0.0) Under the India-ASEAN FTA, commodities are grouped into fi ve Malaysia 14,72,870 5,00,929 3,37,406 13,98,691 53.6categories for tariff reduction, namely, Normal Track-1 (NT-1),

(7.00) (19.09) (5.86)

Normal Track-2 (NT-2), Sensitive and Highly Sensitive Track

Myanmar 25,46,497 2,537 4,09,726 13,66,557 28.0

(12.11) (0.10) (7.11) Table 3: No of Tariff Lines under Tariff Elimination Category of India-ASEAN FTA Philippines 29,92,873 1,60,082 2,22,252 29,30,640 33.6HS-4 Classification No of Tariff Lines NT-1 NT-2 ST EL

(14.23) (6.10) (3.86)

Live fish 0301 7 7 ---Singapore 9,179 3,17,321 1,16,521 2,09,979 48.0

Fish, fresh or chilled 0302 29 15 -06 08

(neg) (12.09) (2.02)

Fish frozen 0303 41 21 03 -17

Thailand 40,27,702 14,62,456 23,55,905 21,83,395 32.9

Fish fillets and other fish meat 0304 14 ---14

(19.15) (55.73) (40.89) Fried fish, salted or in brine 0305 18 15 --03

Vietnam 37,57,809 97,689 13,29,001 23,02,498 27.0

(17.86) (3.72) (23.06) Crustaceans whether in shell or not 0306 14 05 --09

ASEAN 2,10,35,239 26,24,270 57,62,147 1,61,49,122 33.1 Molluscs, whether in shell or not 0307 19 19 ---World 13,79,53,425 3,66,22,139 3,85,65,397 11,07,80,734 16.8 Total 142 82 03 06 51neg is negligible. (Figures in bracket indicate percentage share in ASEAN). (100.00) (57.75) (2.11) (4.23) (35.92)

Source: FAO Statistics. Source: Extracted from India-ASEAN FTA.

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(ST), Special Products (SP) and Exclusion List (EL).1 Of the 12,169 products with eight digit classification, 63.89% products are in NT-1, 10.29% products are in NT-2, 14.83% in ST, 0.33% in SP and 10.66% in EL. Rule of Origin (RoO) applicable for the agreement is 35% value addition. The agreement also provides safeguard measures for a country experiencing serious injury to domestic industries and under the provisions of General Agreement on Tariffs and Trade (GATT) and WTO.

Marine products are classified into seven major categories (HS-4 digits) and under that there are 142 tariff lines. India-ASEAN FTA envisages tariff reduction for marine products through three different modes, namely, Normal Track-1, Normal Track-2, Sensitive Track (ST) and an Exclusion List (EL) which is created to protect vulnerable products from tariff liberalisation. Of the 142 products, 82 are in NT-1, three are in NT-2, six are in the ST and 51 are kept in the EL (Table 3, p 66). While all products in the category of live fish and molluscs are kept in the NT-1, the entire products under fi sh fillets and other fish meat (0304) are under the EL.

Table 4 provides import and export share of India’s trade with ASEAN region for 2008 and their categorisation in the India-ASEAN FTA agreement. India’s largest items of import are shrimps and prawns which are placed under the EL. The third and fifth important items of import are also kept in the EL while the fourth largest item is in the sensitive list (SL). On India’s top 10 items of marine imports, five are in EL and in SL. While 60.61% marine imports are placed in the EL category, the share goes to 69.9% when the ST list is added to it. This shows that the major items of India’s import are adequately protected under the agreement. Similar care is taken on the export side also. The top six items of India’s export which alone accounted 76.18% of India’s export are placed in the negative list. The total export share in the EL is 77.60% and this increases to 81.87% when SL is added to it.

Table 4: India’s Trade Share and Product Categories of Marine Products under India-ASEAN FTA
3 RCA Index for India and ASEAN

Product Product Name Import Category Product Product Name Export Category

Share under Share under

Countries in Fisheries Products

(% of total) AIFTA (% of total) AIFTA

This section provides the Revealed

030613 Shrimps and prawns 34.88 EL 030374 Mackerel (Scomber scombrus, Scomber) 17.58 EL 030741 Live, fresh or chilled 26.22 NT-1 030379 Other 15.80 EL Comparative Advantage (RCA)2 of

030490 Other 19.42 EL 030624 Crabs 15.14 EL India and six major countries of

030269 Other 9.29 ST 030613 Shrimps and prawns 12.89 EL ASEAN, namely, Cambodia, Malaysia, 030379 Other 4.81 EL 030342 Yellowfin tunas (Thunnus albacares) 7.78 EL Philippines, Singapore, Thailand and 030322 Atlantic salmon 2.23 NT-1 030420 Frozen fillets 6.99 EL

Vietnam in the marine products cate

(Salmo salar) and D

gory. The RCA for the period 2002-07

030420 Frozen fillets 1.27 EL 030749 Other 4.35 NT-1

is calculated and the mean value is

030559 Other 0.57 NT-1 030269 Other 4.27 ST

taken for comparison. India’s mean

030319 Other 0.56 NT-1 030741 Live, fresh or chilled 3.50 NT-1

RCA for HS-33 is 2.48 which demon

030563 Anchovies 0.23 EL 030343 Skipjack or strip-bellied bonito 3.28 NT-1

(Engraulis spp) strates that India has got comparative 030729 Other 0.21 NT-1 030739 Other 1.06 NT-1 advantage in this product category. 030110 Ornamental fish 0.15 NT-1 030371 Sardines (Sardina pilchardus, 0.83 EL

But the decomposition of this cate-

Sardinops spp), sardinella (sardinella spp),

gory into HS-4 digits shows India has

brisling or sprats (sprattus sprattus)

a definite comparative advantage in

030799 Other 0.10 NT-1 030110 Ornamental fish 0.79 NT-1 030569 Other 0.06 NT-1 030232 Yellowfin tunas (Thunnus albacares) 0.59 EL select products (Table 5).

Total EL 60.61 Total EL 77.60 Total EL+ST (69.9) Total EL+ST (81.87)

Source: Computed by authors.

Table 5: Mean RC and RCA for India and ASEAN in Marine Products

HS-4 Digit Index India Cambodia Malaysia Philippines Singapore Thailand Vietnam

03 RCA 2.48 0.0 0.63 1.30 0.26 3.36 13.83

RC 4.63 -27.90 0.00 1.30 -0.55 0.50 2.87

Live fish 0301 RCA 0.17 1.26 2.66 4.48 2.09 1.60 3.83

RC 6.56 3.72 0.98 2.74 0.50 3.33 2.85

Fish, fresh or chilled 0302 RCA 0.26 0.15 0.18 0.27 0.04 0.49 1.52

India’s highest RCA is in crustaceans whether in shell or not (7.21) followed by molluscs, whether in shell or not (3.20) and frozen fi sh (1.84). India has comparative disadvantage in live fish (0.17), fresh or chilled fish (0.26), fi sh fi llets (0.25) and fried fi sh (0.31). India’s import is very low, giving positive values for

RC 1.12 -1.89 -1.84 3.40 -2.94 0.05 2.19 comparative trade advantage. Re-

Fish frozen 0303 RCA 1.84 0.44 0.16 1.97 0.40 0.80 2.43vealed competitiveness (RC)4 is calcu

RC 6.17 0.28 -1.62 0.46 -0.22 -2.26 0.80 lated from relative export advantage Fish fillets and other fish meat 0304 RCA 0.25 0.01 0.10 0.36 0.20 2.56 16.41 and relative import advantage and the RC -1.43 2.45 -1.47 1.52 -0.07 2.34 3.41

positive values of RC shows revealed

Fried fish, salted or in brine 0305 RCA 0.31 0.10 0.09 0.80 0.35 1.41 4.93

competitiveness. Cambodia has got

RC 3.12 4.78 -1.45 3.51 -0.53 2.16 3.71

revealed comparative advantage in

Crustaceans whether in shell or not 0306 RCA 7.21 2.67 1.69 2.05 0.14 7.89 32.19

live fish (1.26) crustaceans whether

RC 5.68 0.03 0.81 4.27 -1.26 2.34 3.21

in shell or not (2.67) and revealed

Molluscs, whether in shell or not 0307 RCA 3.20 0.04 1.01 1.81 0.27 6.45 16.62

comparative disadvantage in other

RC 5.15 3.09 1.42 1.52 -0.78 1.80 3.47 Source: Computed by authors. categories in fresh or chilled fi sh

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Table 6: Comparison of RCA between India and ASEAN Countries

RCA-based Classification

India Cambodia Malaysia Philippines Singapore Thailand Vietnam

03 * * * *

Live fish 0301 * * * * * *

Fish, fresh or chilled 0302 *

Fish frozen * ** ** * ** ** *

Fish fillets and other fish meat 0304 * *

Fried fish, salted or inbrine 0305 * *

Crustaceans * * * * ** * *

Molluscs *** ** * ** * *

* Indicates RCA>1 and the country has comparative advantage, ** represents India’s possible export market. Source: Based on authors’ calculations.

Table 7: Comparison of RC between India and ASEAN Countries

India Cambodia Malaysia Philippines Singapore Thailand Vietnam
03 * * * *
Live fish 0301 * * * * * * *
Fish, fresh or
Chilled 0302 * * * *
Fish frozen * * * *
Fish fillets and
Other fish meat 0304 * * * *
Fried fish, salted or
in brine 0305 * * * * *
Crustaceans * * * * * *
Molluscs * * * * * *

* Indicates positive RC and the country got competitiveness in that product category. Source: Based on authors’ calculations.

(0.15), frozen fish (0.44), fi sh fillets and other fish meat (0.01) and molluscs (0.04). Malaysia’s comparative advantage is in live fi sh (2.66) and crustaceans whether in shell or not (1.69) and has a disadvantage in other product categories. Philippines’ comparative advantage is in live fish (4.48), frozen fi sh (1.97), crustaceans whether in shell or not (2.05) and molluscs (1.81). Thailand is a leading fish exporter and it gets a high comparative advantage of 3.36. The highest RCAs for Thailand are in crustaceans whether in shell or not (7.89) and molluscs, whether in shell or not (6.45). Thailand also has got comparative advantage in fi sh fillets and other fish meat (2.56), fried fish (1.41) and live fish (1.60). Thailand’s comparative disadvantages are in fresh or chilled fish (0.49) and frozen fi sh (0.80). The highest RCA for the whole ASEAN region is for V ietnam and it has got very high RCA values in crustaceans, whether in shell or not (32.19), fi sh fi llets and other fi sh meat

(16.41) and molluscs, whether in shell or not (16.62). Vietnam got high RCAs across all product groups and there is no comparative disadvantage.

The mean RCA values for fish products in HS-2 and HS-4 digits classification for India and six ASEAN countries explain the trade structure of marine products for India and ASEAN countries. RCA for HS-3 shows there is RCA for India, Philippines, Thailand and Vietnam and comparative disadvantage for Cambodia, Malaysia and Singapore. The two ASEAN countries, namely, Vietnam and Thailand enjoy very high RCA indicating their strong advantage in this product category. The decomposition of this into HS-4 digits shows countries enjoying an advantage in specific product categories. India’s comparative advantage lies in frozen fish, crustaceans and molluscs. Malaysia has a comparative advantage in live fi sh and crustaceans, while Singapore gets comparative advantage in only live fi sh. Thailand has got a comparative advantage in all except fresh or chilled fish (0302) and frozen fi sh (0303), while Vietnam gets exceptionally high RCA across all product categories.

A comparison of RCA across ASEAN countries and India (Table 6) on HS-4 digits shows that India enjoys a comparative advantage in frozen fish, crustaceans and molluscs. For frozen fish, India has got trade complementarity (TC) with Cambodia, Malaysia, Singapore and Thailand, for crustaceans with Singapore and for molluscs with Cambodia, Malaysia and Singapore.

The RC shows that India has got economic competitiveness in all HS-4 digit categories except fi sh fillets. But other major ASEAN fish economies such as Thailand, Vietnam and Philippines also have got RC in all categories (Table 7). In order to get the relative strength of the TC index, the RC is classifi ed into four categories, namely, 0 to 2, 2 to 4, 4 to 6, and above six (Table 8). The relative strength of the RC shows India enjoys high RCA in five product categories. This includes frozen fi sh where India has got high export share.

4 SMART Simulation on Fish Products

In order to understand the impact of India-ASEAN FTA on marine products, SMART5 simulation method of the World Integrated Trade Solution (WITS)6 is employed with different tariff

Table 8: Relative Strength of RC between India and ASEAN Countries

Revealed Competitiveness (RC) Values

HS-4 Digit <0 0-2 2-4 4-6 >6

03 Cambodia Singapore Live fish 0301 Fish, fresh or Cambodia chilled 0302 Malaysia nam Singapore Fish frozen Malaysia Philippines Singapore Thailand Fish fillets and India other fish Malaysia meat 0304 Singapore Fried fish, salted Malaysia or in brine 0305 Singapore Crustaceans Singapore Molluscs Singapore Malaysia Philippines Thailand Malaysia Singapore India Thailand Cambodia Vietnam Philippines Cambodia Malaysia Malaysia Philippines Thailand Vietnam Cambodia Philippines Thailand Vietnam Philippines Vietnam Cambodia Thailand Vietnam India Philippines Thailand Vietnam Thailand Vietnam Cambodia Vietnam India Cambodia India Philippines India India India

The shades indicate different degree of revealed competitiveness. Darker shade is for high degree of revealed competitiveness and lighter shade is lower degree of revealed competitiveness. Source: Based on authors’ calculations.

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cuts. SMART is a partial equilibrium simulation model using infinite elasticity of substitution. Four alternate scenarios of tariff reduction, namely, 16.66%, 33.3%, 66.6% and 100% cut are employed in the simulation to get the requisite results. India’s most favoured nation (MFN) tariff for the marine products is 30% and this works out as 5%, 10%, 20% and all 30% reduction in tariff rates. Sensitive products whose tariff will

Table 9: SMART Simulation Results for Marine Products under Various Tariff Cuts (in $ ‘000)

Tariff Reduction Trade Trade Total Trade Trade Revenue Welfare Creation Diversion Effect Value Effect Effect

16.66% cut 179.07 0 179.07 1,906.50 23.828 43.503

33.3% cut 357.926 0 357.926 1,906.50 33.187 82.25

66.6% cut 715.852 0 715.852 1,906.50 8.515 141.75

100% cut 1,074.85 0 1,074.85 1,906.50 -74.503 175.068

Source: Computed based on WITS SMART simulation. Table 10: Market View of Tariff Reduction (in $ ‘000)

Tariff Line Imports Imports Tariff Tariff Tariff Consumer Code Before Change Revenue New Change in Surplus Revenue Revenue

Total 1,906.50 1,074.85 450.632 376.129 -74.503 175.068

Ornamental fish 46.193 5.427 7.754 0 -7.754 0.456

Pacific salmon 306.656 0.111 91.224 90.869 -0.355 0.033

Livers and roes 3.049 2.11 0.229 0 -0.229 0.079

Halibut 2.749 0.131 0.206 0 -0.206 0.005

Others (030349) 170.074 151.769 4.301 0 -4.301 1.919

Cod 11.453 17.627 1.48 0.761 -0.718 1.369

Sea bass 237.427 12.504 23.246 1.881 -21.364 0.659

Pacific salmon and Danube salmon 262.525 0.175 78.009 77.666 -0.343 0.052

Other (030549) 1.715 0.013 0.46 0.435 -0.025 0.003

Other fish, salted but not

dried or smoked and

fish in brin (030559) 392.652 868.711 116.453 111.265 -5.188 167.136

Other mussels (Mytilus

spp, Perna spp): Live,

fresh or chilled (030729) 189.225 8.545 48.447 29.649 -18.799 1.734

Live, fresh or chilled (030731) 2.795 0.538 0.545 0 -0.545 0.052

Other (030739) 122.234 1.132 36.447 35.885 -0.562 0.333

Other (030759) 81.27 6.055 23.993 9.881 -14.112 1.236

Other (030799) 76.485 0.002 17.839 17.838 -0.001 0.001

Source: See source of Table 9.

not fall to zero and the EL products are removed from the database to get the India-ASEAN FTA impact.

The simulation results show trade creation from the RTA increases as the tariff reduction increases (Table 9). When there is 100% tariff reduction, trade is created to the tune of $1.07 million. This together with the initial trade of $1.906 million takes the total trade to $2.981 million. The revenue collection from tariff reductions increases in the initial stage, but turn into negative as there is a 100% tariff cut. Keeping similar trend with trade creation, consumer welfare also increases as there was deeper tariff reductions. The increase in consumer welfare from 100% tariff cut of marine products turns out to be $175.068 million.

Market View

The market view shows the trade creation, revenue change and consumer surplus at six digit product categories (Table 10). The two product groups which show the highest trade creation

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for India are other categories in other fish, salted but not dried or smoked and fish in brin (030559) and Bluefi n (Thunnus thynnus) (030349). The highest drop in revenue is taking place in sea bass (030377) and other molluscs (030729). The biggest consumer surplus is recorded in Pacific salmon and Danube salmon (030559) with an increase of $167,000.

Exports View

The export view shows that Thailand and Singapore increase their exports to India in marine trade after the implementation of India-ASEAN FTA (Table 11). Thailand’s total exports are expec ted to grow from $86,262 to $867,173, an increase of $780,911. Almost the entire growth in exports is coming from Mumbai duck, seer without head, sprats and others. Marine exports of Singapore are also expected to grow by $323,833 from an initial export of $410,952 to $734,785 after the implementation of India-ASEAN FTA.

Before After in Revenue

Table 11: Export View of Marine Products under India-ASEAN FTA (in $ ‘000) Exporter/HS Tariff Line Code Name Exports Exports Export Change

Total Thailand 86.262 867.173 780.911
Other (030559) 11.264 764.072 752.808
Other (030759) 38.836 52.668 13.832
Sea bass 17.063 24.265 7.202
Ornamental Fish 19.096 26.162 7.066
Other (030799) 0.003 0.006 0.003
Total Singapore 410.952 734.785 323.833
Other (030349) 57.344 213.309 155.965
Other (030559) 5.963 126.405 120.442
Other (030729) 79.239 98.941 19.702
Cod (Gadus morhua, Gadus ogac) 8.695 26.543 17.848
Sea bass 030377 213.256 219.396 6.14
Liver and roes (030270) 3.049 5.159 2.11
Other (030739) 2.126 3.751 1.625
Live, fresh or chilled (030731) 2.795 3.333 0.538
Pacific salmon (Oncorhynchus spp), Atlantic salmon
(Salmo salar) and Danube salmon (Hucho hucho)
(030541) 3.328 3.815 0.487
Pacific salmon (Oncorhynchus spp), Atlantic salmon
(Salmo salar) and, Danube salmon (Hucho)
Atlantic: Farmed, Not farmed, Chinook (king),
Chum (dog), Pink (humpie), Sockeye (red),
Coho (silver) (030212) 3.436 3.871 0.435
Halibut (030331) 2.749 2.88 0.131
Other (030549) 0.241 0.278 0.037
Source: See source of Table 9.
Table 12: Simulation Results for Sensitive Products (in $ ‘000)
Tariff Reduction Trade Trade Total Trade Value Revenue Welfare
Creation Diversion Trade Effect Effect Effect
5 % 0.487 0 0.487 122.412 -0.935 0.117

Source: See source of Table 9.

Sensitive Products

Simulation results for sensitive products (tariff elimination up to 5%) show that marginal trade creation and welfare effect are lower than the revenue loss (Table 12).

Conclusions

This study attempted to understand the trade complementarity between India and ASEAN countries in the context of India-ASEAN FTA. India is one of the world’s signifi cant fi sh

SPECIAL ARTICLE

exporters, but the share of fish import in India’s total imports is very small. India’s huge national population makes the per head availability of fi sh one of the lowest in the world. Under the India-ASEAN FTA, 59.86% tariff lines in marine products are kept under Normal Track (NT-1 an NT-2) and 35.92% tariff lines are kept in EL. Marine products accounting to 60.61% of India’s imports and 77.6% of exports are under EL. India’s comparative advantage in marine exports is mainly in the crustaceans whether in shell or not (0306) and molluscs, whether in shell or not (0307) and here all the major ASEAN countries have got a trade similarity with India. The same trend follows in other indices also. The RC index shows that

Notes

1 India-ASEAN agreement divides tariff lines into four broad categories, namely, Normal Track-1, Normal Track-2, Sensitive Track and Excluded List. Normal Track (NT): Applied most favoured nation (MFN) rates will be gradually reduced and removed. There are two categories in NT. For NT-1 tariff elimination by 2018 and NT-2 tariff elimination by 2021. Sensitive Track (ST): Applied MFN rates will be reduced to 5%. Sensitive Track (ST): Tariff reduction at a gradual pace compared than NT-1 and NT-2. Excluded List (EL): No tariff reduction commitment as of now.

2 Revealed Comparative Advantage (RCA) Index shows how competitive is a product in countries’ export compared to the products share in the world trade. A product with high RCA is competitive and can be exported to countries with low RCA. The RCA index of country “I” for

India has got competitiveness in all products except fi sh fillets (0304). The relative strength of RC shows India enjoys high RC values in fi ve HS-4 categories indicating India’s competitiveness in that category. SMART simulation results show that tariff elimination leads to reasonable trade creation and marginal welfare increase with nominal tariff revenue decline. When we incorporate India’s increased trade with ASEAN due to tariff reduction, the trade-off is not substantial. The study reveals that India has taken adequate precaution to protect its marine sector from large-scale dumping. The apprehension that India-ASEAN FTA will lead to substantial import of marine products in to India is unfounded.

product “j” is often measured by the product’s share in the country’s exports in relation to its share in world trade:

(Xij/Xit) RCAij = /X)

(Xwjwt

Where xij and xwj are the values of country i’s exports of product j and world exports of product j and where Xit and X refer to the country’s

wt

total exports and world total exports. When the RCA exceeds unity, the country is said to have a revealed comparative advantage in the product.

3 “Harmonised Commodity Description and Coding System” – Nomenclature developed by the World Customs Organisation for customs tariffs and international trade statistics to organise products through hierarchical categories.

4 Revealed Competitiveness (RC) is one of the three alternative specifications of revealed comparative advantage (RCA) offered by Vollrath (1991). It is defined as the difference of log Relative Export Advantage (RXA) and log Relative Import Advantage (RMA).

RC = RXA-RMA where, RXA = Balassa Index and RMA = (mij/ mit)/(mnj/mnt)

Vollrath, T L (1991): “A Theoretical Evaluation of Alternative Trade Intensity Measures of Revealed Comparative Advantage”. Weltwirtschaftliches Archiv, 130: 265-79.

5 Partial equilibrium model embedded in WITS which allows users to estimate the impact of tariff reductions on trade flows, tariff revenue, and consumer surplus for a single market at a time.

6 World Integrated Trade Solution database and software package developed by UNCTAD and World Bank to allow analysis of market access conditions and the impact of own and partner country liberalisation.

EPWRF’s Online Data Base Services

www.epwrſts.in India Time Series

The EPW Research Foundation has introduced an online database service christened as the `India Time Series’, (www.epwrſts.in) as a part of the project funded by the University Grants Commission (UGC) and executed by the EPW-EPWRF and the Tata Institute of Social Sciences, Mumbai.

This service is particularly for the beneſt of students, research scholars, professionals and the academic community, both in India and abroad.

The service envisages dissemination of data in 16 modules displaying time series on a wide range of macroeconomic and ſnancial sector variables in a manner convenient for research and analytical work.

EPWRF has so far released six modules since early 2011-12: (i) Financial Markets; (ii) Banking Statistics;

  • (iii) Domestic Product of States of India; (iv) Price Indices; (v) Agricultural Statistics; and (vi) Power Sector. Seven more modules will be released soon: (i) Industrial Production; (ii) Finances of Government of India;
  • (iii) Finances of State Governments; (iv) Combined Government Finances; (v) National Accounts Statistics;
  • (vi) Annual Survey of Industries; and (vii) External Sector.

    The other three modules, (i) Education; (ii) Health; and (iii) Insurance will be added thereafter.

    The demo version can be accessed by free registration. The existing members already registered with us and accessing member services at www.epwrf.in will require no fresh registration. To gain full access, very affordable subscription rates are available on our website.

    For any further details or clariſcations, please contact: The Director, EPW Research Foundation, C-212, Akurli Industrial Estate, Akurli Road, Kandivli (East), Mumbai - 400 101 (phone: 91-22-2885 4995/4996) or mail: epwrf@vsnl.com

    april 21, 2012 vol xlviI no 16

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