India-MERCOSUR Preferential Trade Agreement: An Ex-Post Evaluation under Modern Gravity Framework

Kumari, Mamta

doi:.0.0.0

Mamta Kumari,

Alliance University, Bengaluru, Karnataka, India

Corresponding Author: Mamta Kumari ,Email: mamtakumari.0990@gmail.com

ABSTRACT

Against the backdrop of expanding the tariff concession list of 450 products to 1500-2000 under India - Southern Common Market Preferential Trade Agreement (India-MERCOSUR PTA), the study analyses the effects of the India-MERCOSUR PTA on the trade flows of member states. The study employs structural gravity model framework to estimate total bilateral, unilateral, and heterogenous trade effects of this PTA. The results indicate that bilateral trade between India and MERCOSUR countries have increased by 63% at the expense of trade diversion from domestic sales. The study also provides evidence that PTA significantly increased India’s trade with non-MERCOSUR countries by 90%. In addition, the hypothesis of heterogeneity effects of PTA across each of its member countries and the direction of trade is confirmed by the estimates. Such empirical evidence of large average impacts on goods trade gives significant boost to the ongoing negotiations for further deepening the existing trade agreement.

JEL Classification

F13: Trade Policy; International Trade Organizations
F14: Empirical Studies of Trade
F15: Economic Integration