Are textile and clothing the doorway in India -EU FTA?

Abstract

India and the EU have been trading partners since many decades now. Both India and the EU have comparative disadvantages in a few sectors and they are known to employ protectionist measures to safeguard those sectors because of which they have not been able to sign the FTA officially called Broad-based Trade and Investment Agreement (BTIA). The past researches have estimated the impact of removal of sectoral NTMs and tariffs or at HS 6-digit level for all 5111 products while this paper concentrates only on the top 74 Textile and Clothing products exported by India to the EU. It has made use of cross-sectional data covering the year 2013 and it estimates the impact of partial as well as complete removal of NTMs and Tariffs on India’s T&C exports to the EU. Five different scenarios have been taken considering various combinations of NTMs and Tariffs using SMART (Single Market Partial Equilibrium Simulation Tool). The results illustrate the Trade Creation and Trade Diversion effect of removal of tariffs and NTMs on India’s Textile and Clothing exports to the EU along with the Trade Diversion effect on India’s competitors viz. China, Bangladesh, Vietnam, Pakistan and Sri Lanka.