A Consideration of the Commercial Foundation for and the Economic Impact of a China-India FTA

ABSTRACT: While in absolute terms the volume of trade between China and India continues to grow rapidly, there still remains tremendous space for growth when it comes to level of trade interdependence and complementarity between the two countries. Analysis using SMART modeling indicates that the establishment of an FTA between China and India will enable both states to enjoy benefits from trade growth, while simultaneously reaping greater benefits from rapid growth in trade flows for products formerly subject to high tariff rates. For this reason, China and India should unite in promoting establishment of a bilateral FTA, which might be advanced as follows: (1) promote multi-tiered engagement and dialogue between the two countries; (2) enhance transparency across markets in each respective country; (3) rapidly establish institutions for settlement of trade disputes and provisional guarantee mechanisms; (4) prioritize resolution of issues related to the status of China’s market economy; (5) promote a favorable environment for trade and investment between the two countries.