Economic impact of the proposed Bangladesh–India FTA: potentials and realities

Chanwahn Kim (Department of Indian and ASEAN Studies, Graduate School of International and Area Studies, Hankuk University of Foreign Studies, Seoul, South Korea)
Mohammad Masudur Rahman (Bangladesh Foreign Trade Institute, Dhaka, Bangladesh)
Laila Arjuman Ara (School of Business Studies, Southeast University, Dhaka, Bangladesh)

South Asian Journal of Global Business Research

ISSN: 2045-4457

Publication date: 29 July 2014

Abstract

Purpose

The purpose of this paper is to investigate the potential economic effects of the proposed Bangladesh-India free trade agreement (FTA).

Design/methodology/approach

The authors have used the computable general equilibrium (CGE) analysis of Global Trade Analysis Project (GTAP) database. The analysis highlights the possible costs and benefits of the two nations within three different scenarios. Under Scenario I all bilateral import tariffs between Bangladesh and India are removed; Scenario II represents the setting where Bangladesh cuts its all tariffs by 75 and in Scenario III Bangladesh cuts tariffs by 50 percent. India cuts all their tariffs by 100 percent in all three scenarios.

Findings

The findings indicate that India may gain more in terms of welfare and real GDP via the improved terms of trade while Bangladesh is going to have welfare loss, but if Bangladesh is able to make a preferential FTA like Scenario III with India its welfare, real GDP and exports will be increased substantially.

Originality/value

This paper is the first-ever attempt to estimate the effect of the proposed Bangladesh-India FTA using CGE analysis of GTAP database version 7.

Keywords

Acknowledgements

JEL Classifications — F10, F15, F17 

This research work was supported by the Hankuk University of Foreign Studies Research Fund of 2013, Seoul, Korea.

Citation

Kim, C., Masudur Rahman, M. and Arjuman Ara, L. (2014), "Economic impact of the proposed Bangladesh–India FTA: potentials and realities", South Asian Journal of Global Business Research, Vol. 3 No. 2, pp. 135-153. https://doi.org/10.1108/SAJGBR-04-2012-0049

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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