Quantitative Proof: The Impact of Free Trade on India & Thailand

1. GSIS
Seoul National University

2. PURPOSEI
THEORETICAL BACKGROUND
EXPECTATIONS & HYPOTHESIS
RESULTS
ANALYSIS
CREDITS
II
IV
III
VI
V

3. I
Investigate Revealed Comparative Advantage and
Specialization Index by comparing India and Thailand over
a five year observational period
Investigate Revealed Comparative Advantage and
Specialization Index within India’s industry
INDIA RCA & SI

4. II
RCA allows one to observe where a country has a
comparative advantage in relative to its other goods and
total goods in circulation, and SI represents its strength of
exports for a particular good or industry relative to its
imports.
INDIA: RCA & SI

5. III
When tariffs are reduced between India and Thailand, both countries will
experience an increase in RCA and SI where both indicators are initially strong
When tariffs are reduced between India and Thailand, both countries will
experience and decrease in RCA and SI where both indicators are initially weak
When tariffs are reduced between India and Thailand and both countries are
competitive in the same industry, one country will decrease its RCA and SI in
that industry
INDIA RCA & SI

6. IV
RCA and SI are Significantly Correlated to Each Other
We calculated the correlation between RCA and SI for all India’s 2 digit HS Code’s
exported between 2003 and 2007. We then calculated an average correlation
RCA-SI Correlation: .64
INDIA RCA & SI

7. IV
See Excel for RCA Results
INDIA RCA & SI

8. IV
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2003 2004 2005 2006 2007
RCA
RCA: Animals & Vegetables
Animal & Products 1
Animal & Products 2
Veg Prod 1
Veg Prod 2
Veg Prod 3
Veg Prod 4
Veg Prod 5
Veg Prod 6
Veg Prod 7
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2003 2004 2005 2006 2007
RCA
RCA: Food, Minerals, Chemicals, Raw Hides
Food Stuffs 1
Food Stuffs 2
Food Stuffs 3
Mineral Products
Chemicals 1
Chemicals 2
Chemicals 3
Raw Hides - Leather - Fur 1
Raw Hides - Leather - Fur 2
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2003 2004 2005 2006 2007
RCA
RCA: Textiles
Textiles 1
Textiles 2
Textiles 3
Textiles 4
Textiles 5
Textiles 6
Textiles 8
Textiles 9
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2003 2004 2005 2006 2007
RCA
RCA: Stone,Metals, Misc
Foot-HeadGear 1
Foot-Head Gear 2
Stone / Glass 1
Metals 1
Metals 2
Metals 3
Metals 4
Series4
INDIA RCA & SI

9. IV
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2003 2004 2005 2006 2007
RCA
INDIA Aggregate Industry RCA
Animal & Animal Products
Vegetable Products
Foodstuffs
Mineral Products
Chemicals & Allied Industries
Plastics / Rubbers
Raw Hides, Skins, Leather, & Furs
Raw Hides, Skins, Leather, & Furs
Wood & Wood Products
Textiles
Footwear / Headgear
Stone / Glass
Metals
Machinery / Electrical
Transportation
2003 2004 2005 2006 2007
1.81 1.68 1.65 1.63 1.59
INDIA RCA & SI – Animation Slide

10. I
Investigate Revealed Comparative Advantage and
Specialization Index by comparing India and Thailand over
a five year observational period
India and Thailand signed an FTA in 2004, and so therefore
this research seeks to investigate the effects of free trade
on each country’s RCA and SI, and who is the winner or
loser
INDIA-THAILAND FTA

11. II
When countries engage in free trade, presumably they
increase exports where they have a comparative
advantage. Therefore, we expect RCA and SI to increase
where it is strong and decrease where it is weak after
India and Thailand enter an FTA with each other.
INDIA-THAILAND FTA

12. India-Thailand FTA: With regard to an FTA-dealt item, A country has a higher CA
and B country has a lower CA.
India-Thailand FTA: Both countries benefit each other via FTA.
INDIA-THAILAND FTA
III

13. HS Code & Description of 84 Items
IV
See Excel for RCA Results
INDIA-THAILAND FTA

14. Period Tariff reduction on
applied MFN tariff rates
as of 1st January 2004
2004. 3. 1 – 2005. 2. 28 50%
2005. 3. 1 – 2006. 2. 28 75%
2006. 3. 1 100%
IV
INDIA-THAILAND FTA

15. RCA Analysis
ANALYSISV
See Excel for RCA Results
INDIA-THAILAND FTA

16. Competitiveness TSI Index Implications
Increasing
Competitiveness
0 <TSI o< TSI t More competitive Exports Items
TSI o <0< TSI t Importing Items -> Exporting Items
TSI o <TSI t <0 Potential Exporting Items
Decreasing
Competitiveness
0< TSI t< TSI o Less competitive Exports Items
TSI t< 0< TSI o Exporting Items -> Importing Items
TSI t< TSI o <0 Competitiveness lost-Items
Periodical Competitiveness Analysis
TSIo = 2003 TSI, TSIt = 2007 TSI
V
INDIA-THAILAND FTA

17. HS 2dg HS Classification
2003-2007
SI In. SI Th.
8 Vegetable Products 0.02 0.32
10 Vegetable Products 0.36 0.85
16 Foodstuffs 0.98 0.98
25 Mineral Products 0.03 0.63
26 Mineral Products 0.09 -0.48
28
Chemicals & Allied Industries
-0.58 -0.61
29 Chemicals & Allied Industries -0.07 -0.21
39 Plastics / Rubbers -0.16 0.19
44 Wood & Wood Products -0.80 0.31
71 Stone / Glass -0.18 0.13
72 Metals -0.17 -0.55
73 Metals 0.17 -0.19
76 Metals -0.16 -0.38
84 Machinery / Electrical -0.57 0.20
85 Machinery / Electrical -0.59 -0.04
87 Transportation 0.36 0.48
90 Miscellaneous -0.63 -0.06
91
Miscellaneous
-0.41 0.03

18. 2. The FTA benefits Thailand much more than India
1. The items chosen are not appropriate for the FTA
The India-Thai FTA is not successful!
V
INDIA-THAILAND FTA

19. CREDITS
Kim Taejin
Ko Youngjin
Kane Kevin