Fighting Irrelevance: The Role of Regional Trade Agreements in International Production Networks in Asia

This chapter contains the sectoral case study on the Indian automotive sector. The automotive industry in India has thus undergone a transition, from comprising a few auto manufacturers, virtually no auto components makers and only low-quality auto ancillary producers to the league of global auto manufacturers, competitive component manufacturers and emerging ancillary producers. Several studies have revealed that previously the Indian automotive industry was not competitive enough for the global market due to inferior quality, lower labour productivity and high cost of raw materials in India (e.g., Pradosh and others, 2006). However, as in other markets, globalization has made the automotive market very competitive and brought profit margins to a very low level.trade liberalization, international production networks, regional trade agreements, value chain, Asia, automotive, East Asia, India

Rules of origin and development of regional production network in Asia: case studies of selected industries

Rules of Origin (RoO) are essential part of trade rules that become very important in the context of increasing globalisation of production process. Most industrial goods today incorporate inputs from a wide variety of countries (e.g. automobiles, electronic goods etc) and when traded it becomes important to determine their country of origin as tariffs depend on country of origin. The current study performs a critical investigation of RoO in selected regional trade agreements (RTAs) in the Asia Pacific region, and has made attempts to study linkages with intra-regional trade in some sectors such as textiles, electronics in the form of integrated circuits, and automobile components.Rules of origin, international production network, free trade agreement, preferential trade agreement

Services in Regioanl Trade Agreements: Implications for India

Service sector has emerged as the largest and fastest-growing sector in the global economy in the last two decades, providing more than 60 per cent of global output and, in many countries, an even larger share of employment. The growth in services has also been accompanied by the rising share of services in world transactions. In fact trade in services has grown as fast as trade in goods in the period 1990- 2003 (6% per annum). In recent years the number of international agreements aiming to liberalize and promote trade in services has increased dramatically. The General Agreement on Trade in Services (GATS), negotiated as part of the Uruguay Round and followed up in Doha round has propelled the process of services negotiation but till date has limited success. In contrast to this, much of the recent and current international treaty addressing trade in services has occurred at the regional and bilateral levels. Traditionally, Regional Trade Agreements (RTAs) have focused on the liberalization of merchandise trade among members but new trends show inclusion of services. Examples include the Chile, Singapore Free Trade Agreements (FTAs) with the US, and the North America Free Trade Agreement (NAFTA), which have provisions allowing temporary entry of business professionals into member countries to facilitate trade in services. Among the roughly 153 RTAs operational in the world today, 43 are economic integration agreements notified under the GATS Article V.2 Between 2001 and 2006, 35 RTAs with services, constituting approximately 20% of all notifications, were notified to the WTO. Some of the important agreements in Asia Pacific region which included services are Australia and New Zealand Closer Economic Relations Trade Agreements (ANCERTA), ASEAN Framework Agreement on Services (AFAS), etc. These efforts were followed by a proliferation of similar agreements such as that between Singapore and Australia in 2001, and Singapore and the US in 2002. As of 2006, the US has concluded more than 10 RTAs with strong services chapters. The EU has also entered into RTAs with services chapters with countries such as South Africa, Mexico and Chile. While the preceding examples are drawn from North-South RTAs, even the South-South RTAs are seen to be conforming to the trend. The growth of output in the service sector in India has been spectacular in recent times which got reflected in a higher contribution in the GDP. As a consequence of this, along with its move in the GATS negotiation, India has also plunged into Comprehensive Economic Cooperation Agreement (CECA) through signing the India-Singapore CECA. Of late, its attempt to convert India-Sri Lanka FTA into another CECA and negotiation attempts with partners like EU, Malaysia, etc. clearly shows its inclination to include services in the new agreements. Services are intangible, mostly indivisible and can’t be stored. Its developmental impact though quite overwhelming is difficult to measure. The data on service sector is also difficult to capture. Due to all these, it is problematic for a developing country to develop its offers and commitments in a structured fashion in case of trade negotiation for services sector. At the same time, many service sectors are under tight control even in developed countries. Licensing, quota, regulatory structure, citizenship criteria, local content, subsidies etc are quite common in service sectors. Since services trade often requires (temporary) movement of provider or consumer, restrictions on services mostly arises from regulations and discriminating requirements regarding this movement. Therefore barriers to trade in services are particularly difficult to identify. Also, most of these barriers do not occur at the border. Developing countries are apprehensive in case of north-south services negotiation due to lack of transparency and information about the developed country service sector. Service sector commitments are riddled with lots of market access limitations and MFN exemptions which is common even in case of regional negotiation. Depending upon the sensitivity as well as technological levels, several components of different services are generally kept unbound. Sometimes, some modes of services (such as mode 4) have been kept unbound even for sub-component of a sector. Developmental impact of any services agreement needs to be judged from the commitment as well as negotiation strategy. This is important as several countries are pursuing GATS Plus commitments. The CECA has progressed beyond GATS understanding the current business environment. Negotiations on domestic regulation in GATS have progressed to the level of framing a text for adoption while in case of regional agreements more ambitious approaches are observed. The present paper focuses on India’s attempt to integrate with the world economy with service sector liberalistaion and understanding its strategy in services negotiation. The structure of the paper is as follows. Initial section will focus on introduction and an overview of some select RTAs having special attention towards service sectors. Section 2 provides a brief overview of India’s performance in the services sector, followed by a more detailed examination of the contribution of the service sector to growth, and the composition of services trade in Section 3. In particular, we’ll discuss the change in pattern of trade from the traditional goods sector to services. Section 4 examines India’s involvement in regional trade blocs keeping an eye on services sector. Several potential RTAs with services focus will also be discussed. The paper will make an attempt to develop a negotiating format for some of the important services understanding the current status of services in the partner countries as well as in India. While doing so, it will make an attempt to identify major barriers faced by India in some of the exportable services. These issues will be discussed in section 5. Section 6 will provide conclusion and induction from the major findings.regional trade; services

Impact of India-ASEAN Free Trade Agreement: A cross-country analysis using applies general equilibrium modelling

The study attempted to analyse the long-term effects of the FTA on India. It is argued that after full trade liberalization, India’s allocative efficiency will increase, but the terms of trade effect will worsen continuously and remain negative. India will be able to arrest the worsening in terms of trade once the gain in allocative efficiency is used to improve productivity in the export-oriented sectors as well as achieve economies of scale.India-ASEAN Free Trade Agreement, cross-country analysis, general equilibrium model

Changing Features of the Automobile Industry in Asia:Comparison of Production, Trade and Market Structure in Selected Countries

The global automotive industry, increasingly characterized by global mergers and relocation of production centers to emerging developing economies, is in the grips of a global price-war. The industry is subject to imperfect competition which has resulted in too much of everything — too much capacity, too many competitors and too much redundancy and overlap. The industry is concerned with consumer demands for styling, safety, and comfort; and with labor relations and manufacturing efficiency. In this context, the study examines the growth patterns, changes in ownership structures, trade patterns and role of governments of selected Asian countries (viz. China, India, Indonesia and Thailand) in the automobile sector.Automobile, Asia, Market Structure

Cubulating Drilled bundles over graphs

We start with a Gromov-hyperbolic surface bundle $E$ over a graph, and drill out essential simple closed curves from fibers to obtain a drilled bundle $F$. We prove that for such drilled bundles $F$, the fundamental group $\pi_1(F)$ is relatively hyperbolic with $(\mathbb{Z}\oplus \mathbb{Z})$ peripheral groups. Combining the relative hyperbolicity of $\pi_1(F)$ thus obtained with a theorem of Wise, we establish virtually special cubulability of $\pi_1(F)$ provided that the maximal undrilled subbundles of $F$ are cubulable.Comment: 37 pages, no figure

Empirical study to segment firms and capture dynamic business context using LCA

The usual methods of segmenting firms are insufficient as they do not consider hidden (unobserved) groupings and do not consider the dynamic market context such as in the apparel industry. An empirical analysis was done using latent class analysis on a cross-section survey of 334 Indian apparel exporting firms. Five latent classes were found by empirical estimation – (i) very old manufacturers in tier 1 cities with large turnover, (ii) manufacturers in tier 2 and 3 cities, (iii) small merchants from the quota-system period dealing in some high fashion, (iv) new firms dealing in some high fashion and women’s garments, (v) new firms not in high fashion. These latent classes are found valid in market context and hence this method can be further explored. An incentive policy structure for the target latent groups in the industry can be better designed from the results

Perceptions of international trade barriers: Empirical study of small apparel firms

Perceptions of international trade barriers are important in the decision of firms to export.This study makes an empirical analysis of the perceptions with respect a particular sector. Two industrial hubs (locations) were chosen. The perceptions of the firms were very different in the two locations (in the same geographical region of the country).In one of these, lack of knowledge (in particular, lack of staff for export planning) was found to be the most important barrier as perceived by the firms, while competition was found as the most important barrier in the other. We also found further clusters within each of the two industrial ‘clusters’. It is not just the firms which can be associated with some stages of internationalization but the clusters can also be in different evolutionary stages of internationalization, in view of the differences.Policy makers may note these and focus their export promotion and information dissemination plans based on cluster membership so as to improve perceptions

Services in Regioanl Trade Agreements: Implications for India

Service sector has emerged as the largest and fastest-growing sector in the global economy in the last two decades, providing more than 60 per cent of global output and, in many countries, an even larger share of employment. The growth in services has also been accompanied by the rising share of services in world transactions. In fact trade in services has grown as fast as trade in goods in the period 1990- 2003 (6% per annum). In recent years the number of international agreements aiming to liberalize and promote trade in services has increased dramatically. The General Agreement on Trade in Services (GATS), negotiated as part of the Uruguay Round and followed up in Doha round has propelled the process of services negotiation but till date has limited success. In contrast to this, much of the recent and current international treaty addressing trade in services has occurred at the regional and bilateral levels. Traditionally, Regional Trade Agreements (RTAs) have focused on the liberalization of merchandise trade among members but new trends show inclusion of services. Examples include the Chile, Singapore Free Trade Agreements (FTAs) with the US, and the North America Free Trade Agreement (NAFTA), which have provisions allowing temporary entry of business professionals into member countries to facilitate trade in services. Among the roughly 153 RTAs operational in the world today, 43 are economic integration agreements notified under the GATS Article V.2 Between 2001 and 2006, 35 RTAs with services, constituting approximately 20% of all notifications, were notified to the WTO. Some of the important agreements in Asia Pacific region which included services are Australia and New Zealand Closer Economic Relations Trade Agreements (ANCERTA), ASEAN Framework Agreement on Services (AFAS), etc. These efforts were followed by a proliferation of similar agreements such as that between Singapore and Australia in 2001, and Singapore and the US in 2002. As of 2006, the US has concluded more than 10 RTAs with strong services chapters. The EU has also entered into RTAs with services chapters with countries such as South Africa, Mexico and Chile. While the preceding examples are drawn from North-South RTAs, even the South-South RTAs are seen to be conforming to the trend. The growth of output in the service sector in India has been spectacular in recent times which got reflected in a higher contribution in the GDP. As a consequence of this, along with its move in the GATS negotiation, India has also plunged into Comprehensive Economic Cooperation Agreement (CECA) through signing the India-Singapore CECA. Of late, its attempt to convert India-Sri Lanka FTA into another CECA and negotiation attempts with partners like EU, Malaysia, etc. clearly shows its inclination to include services in the new agreements. Services are intangible, mostly indivisible and can’t be stored. Its developmental impact though quite overwhelming is difficult to measure. The data on service sector is also difficult to capture. Due to all these, it is problematic for a developing country to develop its offers and commitments in a structured fashion in case of trade negotiation for services sector. At the same time, many service sectors are under tight control even in developed countries. Licensing, quota, regulatory structure, citizenship criteria, local content, subsidies etc are quite common in service sectors. Since services trade often requires (temporary) movement of provider or consumer, restrictions on services mostly arises from regulations and discriminating requirements regarding this movement. Therefore barriers to trade in services are particularly difficult to identify. Also, most of these barriers do not occur at the border. Developing countries are apprehensive in case of north-south services negotiation due to lack of transparency and information about the developed country service sector. Service sector commitments are riddled with lots of market access limitations and MFN exemptions which is common even in case of regional negotiation. Depending upon the sensitivity as well as technological levels, several components of different services are generally kept unbound. Sometimes, some modes of services (such as mode 4) have been kept unbound even for sub-component of a sector. Developmental impact of any services agreement needs to be judged from the commitment as well as negotiation strategy. This is important as several countries are pursuing GATS Plus commitments. The CECA has progressed beyond GATS understanding the current business environment. Negotiations on domestic regulation in GATS have progressed to the level of framing a text for adoption while in case of regional agreements more ambitious approaches are observed. The present paper focuses on India’s attempt to integrate with the world economy with service sector liberalistaion and understanding its strategy in services negotiation. The structure of the paper is as follows. Initial section will focus on introduction and an overview of some select RTAs having special attention towards service sectors. Section 2 provides a brief overview of India’s performance in the services sector, followed by a more detailed examination of the contribution of the service sector to growth, and the composition of services trade in Section 3. In particular, we’ll discuss the change in pattern of trade from the traditional goods sector to services. Section 4 examines India’s involvement in regional trade blocs keeping an eye on services sector. Several potential RTAs with services focus will also be discussed. The paper will make an attempt to develop a negotiating format for some of the important services understanding the current status of services in the partner countries as well as in India. While doing so, it will make an attempt to identify major barriers faced by India in some of the exportable services. These issues will be discussed in section 5. Section 6 will provide conclusion and induction from the major findings