India Japan Comprehensive Economic Partnership Agreement

April 10, 2021 | Posted By: | Uncategorized |

This paper attempts to analyze the first effects of the India-Japan Comprehensive Economic Partnership Agreement on both trade and investment relations and other areas of cooperation. Although it is too early to conduct an in-depth impact assessment, the objective of the study is to highlight some facts about the effectiveness of the agreement. The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16 February 2011 and came into force on 1 August of that year. In addition to accelerating activity, the agreement aimed to eliminate tariffs on 90% of Japanese exports to India, such as auto parts and electrical equipment, and on 97% of imports from India, including agricultural and fisheries products, by 2021. Since the introduction of the EPA, trade between India and Japan has increased by 38%, with bilateral trade expected to reach $24 billion by March 2013. In accordance with the agreement, Mukhopadhyay and Bhattacharyay (2011) assessed the macroeconomic impact of trade integration between Japan and India on the basis of the analysis of the Global Trade Analysis Project (GTAP). It was found that production for both India and Japan would increase slightly in 2020, after a reduction in tariffs, compared to business as (BAU). The results were expected of marginal export growth, adequate value-added in trade and an improvement in the well-being of both countries by 2020, with the successful implementation of the EPA. The process of globalization has allowed global economies to share the fruits of free trade, labour migration, capital flows and technology transfer. The importance of trade has been studied as part of the theory of endogenous growth, where it has crystallized with other traditional inputs as one of the peripheral factors of economic growth. In order to strengthen international trade, many studies have, over time, empirically examined different trade theories and developed appropriate strategies. The invention of modern trade theory has highlighted the role of comparative advantage (branch trade) and differentiation of production (intra-enterprise trade) as the basis for trade patterns.

In the recent past, global economies have placed the importance they deserve on inter-economic partnerships. India has turned to institutionalizing economic partnership with some Asian countries. Examples: Comprehensive Economic Cooperation Agreement between India and Singapore (ECSC) in 2005; 2010 CEPA India-Korea; India-Malaysia CECA in 2011. In 2007, Japan and India agreed to increase two-way trade flows to $20 billion by 2010. However, the sum did not meet the target and reached only 1290 billion yen (about 15.85 billion dollars). For 2011-12, bilateral trade between India and Japan amounted to $18.31 billion, an increase of 32% over the previous year. The Comprehensive Trade Pact between India and Japan aims to nearly double bilateral trade to $25 billion by 2014. Japan exports mainly machinery, electronics, iron and steel to India, while India exports mainly oil, iron ore and chemicals to Japan. Japan is India`s 12th largest trading partner, while India is Japan`s 27th largest trading partner. Bilateral trade and investment flows between the two countries have not been spectacular, with Japanese companies focusing on activities with China and Southeast Asia.