Empirical Issues in International Trade and Finance

Transcription

1 Proceedings of 3 rd IIFT Conference on Empirical Issues in International Trade and Finance January 10 th 11 th, 2013 Held at Science City, Kolkata Editors Triptendu Prakash Ghosh Bibek Roy Chaudhuri Indian Institute of Foreign Trade 1

2 Contents Preface... 3 Section A: Trade and Development... 9 Section B: Application of Gravity Model Section C: Theoretical Issues in Trade and Finance Section D: Firm Level Analysis of Trade Section E: Performance of Banks and Global Financial Crisis Section F: India s Trade Performance Section G: Foreign Investment Section H: Stock Market Returns in the International Context Section I: Comparative Analysis between India and China Section J: Trade Policy Section K: Impact of Microfinance on the Poor Section L: Testing Trade Theories Section M: International Spillovers of Volatility, Vulnerability & FDI Section N: Foreign Direct Investment Section O: Shorter Abstracts

3 Preface There has been a recent spurt on papers related to international trade and finance. The renewed interest of researchers in this field is a direct consequence of the rapid process of globalization of the world. While Globalization has increased the ease with which goods money and people can travel across borders, it has also increased the complications of such transactions as they have to account for inter country differences. The objective of this conference is to bring scholars working in this field together so that they can exchange notes and be fully aware of each other s work. We had received a large number of submissions for the conference. Out of them only 63 could be accommodated. Papers will be presented in five parallel sessions each of two hours duration. Four papers will be presented in each session. A discussant has been assigned to each paper. It is thus expected that the presenter will have about 20 minutes to present the paper. The observations of the discussant and other participants will have to be accommodated in 10 minutes. We sincerely hope that the authors and their discussants will keep up the discussion even after the presentation formalities are over and during the tea and lunch breaks. In organizing this proceedings there are several options open to us. For instance the papers could have been arranged thematically or sequentially according to their presentation time. At the end none of these could be followed. This is mainly because we have not received extended abstract for all the papers and publishing extended abstracts along with shorter abstracts did not make much of a sense. We have lumped shorter abstracts together at the end of the proceedings. The main part of the proceedings thus consists of extended abstract. For the sake of completeness the reference list of original papers have been appended to these extended abstract. Participants interested in the title of the particular paper not only get a clear view of the content of the paper through the extended abstract they will also be able to look at the related literature in the subject. 3

4 One of the main problems of such a large conference is that there are always last minute changes in the programme. We have thus refrained from printing the programme along with the proceedings. The programme schedule will be provided separately. The papers reported here may not exactly match the papers actually presented as there might be last minute drop outs. For a similar reasons the list of authors, chair persons and discussants may not match with the ex post circumstances. However, we are confident that the proceedings provide a clear, if not exact, representation of the papers to be presented in the conference. Triptendu Prakash Ghosh and Bibek Roy Chaudhuri 4

5 List of Track Chairs Abhijit Das, Indian Institute of Foreign Trade, New Delhi Abhiroop Sarkar, Indian Statistical Institute, Kolkata. Ajitava Roy Chowdhury, Jadavpur University, Kolkata Alok Ray, Indian Institute of Management, Calcutta Amita Shah, Gujarat Institute of Development Research Amitava Bose, Indian Institute of Management, Calcutta Anup Kumar Sinha, Indian Institute of Management, Calcutta Arpita Dhar, Jadavpur University, Kolkata C. Veeramani, Indira Gandhi Institute of Development Research, Mumbai Julien Chaisse, (Chinese University of Hong Kong) Jyotsna Jalan, Centre for Studies in Social Sciences, Kolkata Lucian CERNAT, Chief Economist, DG Trade, European Commission Manas Ranjan Gupta, Indian Statistical Institute, Kolkata Rajat Acharyya, Jadavpur University, Kolkata Rakesh Mohan Joshi, Indian Institute of Foreign Trade, New Delhi Ravi Shanker, Indian Institute of Foreign Trade, New Delhi Sahid Ahmed, Jamia Millia Institute Saikat Sinha Roy, Jadavpur University, Kolkata Sarmila Banerjee, University of Calcutta, Kolkata Saumen Sikdar, Indian Institute of Management, Calcutta Suchat Katina, Mekong Institute, Thailand Sunitha Raju, Indian Institute of Foreign Trade, New Delhi Sushil Khanna, Indian Institute of Management, Calcutta Vijaya Katti, Indian Institute of Foreign Trade, New Delhi 5

6 List of Discussants Ambar Nath Ghosh, Jadavpur University, Kolkata Amit Kundu, Jadavpur University, Kolkata Ananda Pal, MBM, University of Calcutta Anil Kanungo, Indian Institute of Foreign Trade, New Delhi Anindita Sen, Burdwan University Anita Gupta Chattopadhyay, Muralidhar College for Girls, Kolkata Annesa Bandopadhyay, St. Xavier s College, Kolkata Archana Srivastava, IIT Kanpur Arijita Dutta, University of Calcutta Arjun Kumar Singh, ICSSR&JNU Avijit Mondal, Moulana Azad College, Kolkata Bibek Ray Chaudhuri, Indian Institute of Foreign Trade, Kolkata Bidisha Chakraborty, Jadavpur University, Kolkata Bipradas Rit, Jogesh Chandra Chaudhuri College, Kolkata Byasdeb Dasgupta, Kalyani University Christopher Balding, HSBC Business School, Peking. Debashis Chakraborty, Indian Institute of Foreign Trade, New Delhi Diganta Mukherjee, ISI, Kolkata Gagari Chakraborty, Presidency University Jayanta Kumar Seal, Indian Institute of Foreign Trade, Kolkata Jayasri Acharyya, Lady Brabourne College, Kolkata Jaydeep Mukherjee, Indian Institute of Foreign Trade, New Delhi Joyjit Dhar, Hooghly Mohsin College, Kolkata Kausik Gupta, Rabindra Bharati University, Kolkata Kausik Lahiri, Surendranath College, Kolkata Kumarjit Mandal, University of Calcutta. Malabika Roy, Jadavpur University, Kolkata Michael Telda, IFPRI 6

7 Mousumi Datta, Presidency University, Kolkata Nilanjan Sen, St. Xavier s College, Kolkata P. K. Das, Indian Institute of Foreign Trade, Kolkata Partha Paul, Indian Institute of Management, Calcutta Partha Pratim Ghosh, St. Xavier s College, Kolkata Polami Lahiri, Institute of Development Studies, Kolkata Pradyut Kumar Pyne, Indian Institute of Foreign Trade, Kolkata Pralok Gupta, Indian Institute of Foreign Trade, New Delhi Pranab Das, Centre for Studies in Social Sciences, Kolkata Priyanka Chakraborty, Indian Institute of Foreign Trade, Kolkata. Rabindranath Mukhopadhyaya, University of Calcutta Rahul Sen, AUT, Newzeland Ranjan Nag, St. Xavier s College, Kolkata Riddhi Chatterjee, Seth Anandaram Jaipuria College, Kolkata Rilina Basu (Banerjee), St. Xavier s College, Kolkata Saibal Kar, Centre for Studies in Social Science Samarjit Das, Indian Statistical Instutute, Kolkata Samrat Roy, St. Xavier s College, Kolkata Sandeep Kaur, Punjab University Sanmitra Ghosh, Jadavpur University, Kolkata Sayantanbandhu Majumder, University of Calcutta, Kolkata Senjuti Jha, Institute of Development Studies, Kolkata Shirshendu Mukherjee, St. Paul s Cathedral Mission College, Kolkata Subhanil Chowdhury, Institute of Development Studies, Kolkata Subhasree Bhattacharya, Dept. of Business Management, University of Calcutta Subrata Majumder, St. Xavier s College, Kolkata Sudeshna Chattopadhyay, Bidhannagar College, Kolkata Sukanta Bhattacharyya, University of Calcutta. Suparna Basu, Ashutosh College, Kolkata 7

8 Susmita Chatterjee, Globsyn Business School, Kolkata. Swapnendu Bannerjee, Jadavpur University, Kolkata Swati Ghosh, Rabindra Bharati University, Kolkata T P Ghosh, Indian Institute of Foreign Trade, Kolkata Tanmoyee Bannerjee, Jadavpur University, Kolkata Usri Sengupta, Jadavpur University, Kolkata Vivekananda Mukherjee, Jadavpur University, Kolkata 8

9 Section A: Trade and Development Globalization, Inequality and Corruption Harald Badinger * and Elisabeth Vienna University of Economics and Business, Department of Economics, Althanstrasse 39-45, A-1090, Vienna, Austria * elisabeth.nindl@wu.ac.at Both the determinants of corruption (rent-seeking behavior) and its welfare consequences have been subject to extensive theoretical and empirical research (e.g., Krueger, 1974; Murphy et al., 1993; Mauro, 1995; Bliss and Di Tella, 1997; Das and DiRienzo, 2009; Bhattacharyya and Hodler, 2010), leading to a large body of literature on the nexus between globalization, institutional quality, and corruption. It is widely agreed that natural resource rents increase corruption, whereas detection technologies (high level of economic development, good institutions, competitive elections, political rights and press freedom, education) decrease corruption. Previous studies concentrated on the role of globalization as a determinant of institutional quality and corruption. Ades and Di Tella (1999) emphasize the procompetitive effect of trade and find that imports and proximity to world s major exporters significantly reduce corruption, whereas fuel and mineral exports increase corruption. Emerson (2006) shows that corruption significantly decreases the number of firms and thus competition within a country. Corruption can be interpreted as a more general indicator of institutional quality, reflecting a country s underlying legal, economic, cultural and political institutions (Svensson, 2005). The analysis of the determinants of corruption is thus closely related to the literature on democracy and institutional quality. This nexus allows us to apply the theoretical argument by Acemoglu and Robinson (2005) relating institutional quality, globalization and income inequality. They show that emergence and survival of democracy depend on 9

10 the distribution of income (factor prices). In a Heckscher-Ohlin framework with labor abundant developing countries as a representative case, opening up to trade leads to an increase in the wage-rental ratio. This reduces the income gap between factors and thereby the risk of political conflict, since voters of lower income groups have less demand for highly redistributive policies, making democracy less threatening to upper income groups and the elite. A similar argument applies to financial openness, which increases the elasticity of capital supply, leading to an inflow of capital. If the developing country is land abundant, trade increases the income of land owners (typically a small elite), inequality increases and democracy becomes less likely. Altogether, the effect of globalization on democracy (and corruption) remains an empirical question. López-Córdova and Meissner (2008), analyzing the determinants of democracy, provide support for the close relation between international trade, natural resources and institutional outcomes based on a sample spanning from , and Using the same data set, empirical evidence on the positive effect of financial integration on democracy is given by Eichengreen and Leblang (2008). However, none of these studies have considered trade and financial openness simultaneously or explicitly taken into account the role of inequality as a transmission channel. Against this background, this paper makes following contributions: First, we use an encompassing model that relates corruption to globalization in terms of both trade and financial openness, paying particular attention to the potential endogeneity of our globalization measures. Second, we explicitly consider the role of inequality as a determinant of corruption and its interplay with globalization, allowing us to provide some evidence on the transmission channels through which globalization affects corruption. Third, we use a panel of 102 countries over the period , allowing us to increase the number of observations, exploit time-variation in the data, and to control for region-specific effects. In line with recent studies we find that a higher level of development, more education and political rights, and a lack of natural resource rents reduce corruption. Globalization (trade and financial openness) appears to play an important role in diminishing corruption, particularly in developing countries. Accounting for the effect of inequality, 10

11 which itself increases corruption, the effect of globalization is halved, which provides empirical support for the theoretical argument by Acemoglu and Robinson (2005) that globalization affects democracy (and thereby, institutional quality and corruption) through its negative effect on inequality. Keywords: Globalization, inequality, corruption JEL Codes: F1, F3, F4, O1 References Ades, A. and Di Tella, R. (1999). Rents, competition and corruption, The American Economic Review 89(4), Aizenman, J. and Noy, I. (2009), Endogenous financial and trade openness, Review of Development Economics, 13(2), Badinger, H. (2009), Globalization, the output-inflation tradeoff and inflation, European Economic Review 53, Baier, S. L. and Bergstrand, J. H. (2007). Do free trade agreements actually increase members international trade?, Journal of International Economics, 71(1), Barbieri, K. and Keshk, O. (2012). Correlates of war project trade data set codebook, version 3.0, Bhattacharyya, S. and Hodler, R. (2010). Natural resources, democracy and corruption, European Economic Review, (54), Bliss, C. and Di Tella, R. (1997). Does competition kill corruption, The Journal of Political Economy, 105(5), Das, J. and DiRienzo, C. (2009). The nonlinear impact of globalization on corruption, The International Journal of Business and Finance Research, 3(2): Eichengreen, B. and Leblang, D. (2008). Democracy and globalization, Economics & Politics, 20(3): Emerson, P. M. (2006). Corruption, competition and democracy, Journal of Development Economics, 81: Frankel, J. A. and Romer, D. (1999). Does trade cause growth?, The American Economic Review, 89(3): Goldberg, P. K. and Pavcnik, N. (2007). Distributional effects of globalization in developing countries, NBER Working Paper Series, (12885). Guerin, S. S. (2006). The role of geography in financial and economic integration: a comparative analysis of foreign direct investment, trade and portfolio investment flows, World Economy, 29(2), Krueger, A. O. (1974). The political economy of the rent-seeking society, The American Economic Review, 64(3): Lalountas, D. A., Manolas, G. A. and Vavouras, I. C. (2011). Corruption, globalization and development: How are these three phenomena related?, Journal of Policy Modeling, 33,

12 Lane, P. R. and Milesi-Ferretti, G. M. (2007). The external wealth of nations mark ii: Revised and extended estimates of foreign assets and liabilities, , Journal of International Economics, 73, Leite, C. and Weidmann, J. (1999). Does mother nature corrupt? Natural resources, corruption and economic growth, IMF Working Paper, 99/85. Levchenko, A. A. (2011). International trade and institutional change, NBER Working Paper Series, (17675). López-Córdova, J. E. and Meissner, C. M. (2008). The impact of international trade on democracy: A longrun perspective, World Politics, 60(4), Mauro, P. (1995). Corruption and growth, The Quarterly Journal of Economics, 110(3), Murphy, K. M., Shleifer, A. and Vishny, R. W. (1993). Why is rent-seeking so costly to growth?, The American Economic Review, 83(2), Norris, P. (2009). Democracy time series data set release 3.0, Technical report, John F. Kennedy School of Government. Portes, R. and Rey, H. (2005). The determinants of cross-border equity flows, Journal of International Economics, 65, Rock, M. T. (2009). Corruption and democracy, Journal of Development Studies, 45(1), Solt, F. (2012). Standardizing the world income inequality database. Social Science Quarterly, forthcoming. Stock, J. H. and Yogo, M. (2005). Testing for weak instruments in linear IV regressions, in D. W. K. Andrews and J. H. Stock, eds, Identification and Inference for Econometric Models, Essays in Honor of Thomas Rothenberg, Cambridge University Press. Svensson, J. (2005). Eight questions about corruption, Journal of Economic Perspectives, 19(3),

13 Foreign Direct Investment, Exports and Economic Activity of India: A Long term Empirical Analysis Dr. R. Jayaraj* and Dr. Hiranmoy Dept. of Economics and International Business, College of Management and Economics, University of Petroleum & Energy Studies * Over the past few decades, the emerging market countries especially India have become the most favoured destinations for FDI and investor confidence in these countries has soared and exports have grown much faster than GDP. India s economic reforms of 1991 had generated strong attention in foreign investors and made India as one of the favourite destinations for world FDI flows. In different studies, several factors appear to have contributed to growth phenomenon including FDI. However, as of yet there have not been many attempt to investigate the long run impact of FDI, real export on real economic activity (real GDP) for India. This paper aims to analyse long run relationship among FDI, exports and economic activity in India. And this empirical study has applied VAR technique to examine the long run effect of FDI inflow and real exports on real economic activity (Real GDP), the impact of real GDP growth as the common factor that drives growth on other variables such as exports and FDI and to assess the effect of foreign direct investment (FDI) in a host country s export performance (UNCTAD, 2002), since exports have been for a long time viewed as FDI promotes exports of host countries by augmenting domestic capital for exports, transfer of technology, higher productivity and new products for exports and facilitating access to new and large foreign markets (Chakraborty and Basu, 1997). It is proved widely that exports has positive impact on real GDP but not FDI. Conversely, cheaper price of exported goods due to the low input cost and large number of consumers in domestic market attract foreign investors in these countries. This study was done using annual data for 40 observations from 1970 to Several econometric tools are used in 13

14 this study such as Unit Root tests, Lag length criteria, Co-integration tests, Granger Causality and VAR (Vector Auto-regression). The findings of the study reveal that there is a long-run relationship among GDP, exports and FDI. But as per the results of VAR model, FDI did not have a significant impact on GDP of India but, interestingly exports had a positive significant influence on GDP. It is found that the GDP positively influenced by its own activity and exports. This study suggests the policy makers to adopt stable and sensible measures to encourage inward FDI especially in retail because it may have negative impact also. Labour reform measures, improving infrastructure, non-discriminatory regulatory environment and incentive based policies that are suggested to attract FDI. Consequently, these policies and strategies that will lead to have better infrastructure, human resources, good governance, business environment and overall economic growth. Keywords: FDI, GDP, Exports, Cointegration, VAR, India JEL Classification Code: F10, F14, F21, F43 References Balasubramanyam, V.N., M. Salisu, and D. Sapsford. (1996). FDI and Growth in EP and IS countries, The Economic Journal, 106, Blalock, Garrick, and Paul J. Gertler. (2008), Welfare Gains from Foreign Direct Investment through Technology Transfer to Local Supplier, Journal of International Economics, 74(2): Blomström, M., and A. Kokko (1998). Multinational Corporations and Spillovers, Journal of Economic Surveys, 12: Borenstein, Eduardo, J. D. Gregorio, and J. W. Lee (1998). How does Foreign Direct Investment Affect Economic growth?, Journal of International Economics, 45, Charles A. and Y. C. Wong, (2002), Trends in Global and Regional FDI Flows, (Manuscript, International Monetary Fund) and IMF Website (wwww.imf.org). Choe, J. I. (2003). Do Foreign Direct Investment and Gross Domestic Investment Promote Economic Growth?, Review of Development Economics, 7(1): De Mello (1999). Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data, Oxford Economic Papers, 51, Department of Industrial Policy & Promotion ministry of Commerce and Industry, Government of India,

15 Frimpong, J. M., Oteng-Abayie, E. F. (2006). Bivariate Causality Analysis between FDI Inflows and Economic Growth in Ghana, Proceedings, 3rd African Finance Journal Conference, Research in Development Finance for Africa, 12th 13th July, 2006, Ghana. Girma and Wakelin (2001). Regional Underdevelopment: Is FDI the Solution? A Semi-parametric analysis, University of Nottingham Research Paper Series, 2001/11. Görg, Holger & Greenaway, David (2003). Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?, IZA Discussion Papers 944, Institute for the Study of Labor (IZA). Hsiao, F. S. T. and Hsiao, M. C. W. (2006). FDI, export and GDP in East and Southeast Asia: Panel data versus time-series causality analysis, Journal of Asian Economies, 17, Javorcik, Beata S. & Saggi, Kamal & Spatareanu, Mariana, (2004). Does it matter where you come from? vertical spillovers from foreign direct investment and the nationality of investors, Policy Research Working Paper Series, 3449, The World Bank. Kishore S. (2000). Liberalisation and Productivity Growth, in S. B. Dahyia (ed.), The Current State of Business Discipline, 2: Spellbound Publishers. Krugman, P. (2000). Fire-Sale FDI: In Capital Flows and the Emerging Economies, edited by Sebastian Edwards. Chicago: The University of Chicago Press. Larimo J. and Tahir R. (2004). Understanding of the location strategies of the European firms in Asian countries, Journal of American Academy of Business, Cambridge 5:1-2, Liu, X. and C. Wang (2002). Does foreign direct investment facilitate technological progress? Evidence from Chinese industries, Research Policy, 32, Ozturk, I. (2007). Foreign Direct Investment Growht Nexus: A Review of The Recent Literature, International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, 4(2): Ram, R., and K. H. Zhang (2002). Foreign Direct Investment and Economic Growth: Evidence from Cross- Country Data for the 1990, Economic Development and Cultural Change, 51(1): Roy J. and P. Banerjee (2007), Attracting Investments from the Indian Diaspora: The Way Forward, CII Publication. Singh, Lakhwinder (2007). India s Economic Growth and the Role of Foreign Direct Investment, MPRA Paper 6427, University Library of Munich, Germany. Sridhar, V., and V. Prashad (2007). Wal-Mart with Indian Characteristics, Connecticut Law Review, 39 (4): Srinivas S. (2008), International Technology Transfer to India an Impedimenta & Impetuous, W.P. No (www. iimahd.ernet.in). Weinhold, D. and E. J. Reis (2001). Model evaluation and causality testing in short panels: The case of infrastructure provision and population growth in the Brazilian Amazon, Journal of Regional Science, 41(4): Xiao, Wei (2008). Increasing Returns and the Design of Interest Rate Rules, Macroeconomic Dynamics, Cambridge University Press, 12(01):

16 Mastering a Two-edged Sword: Lessons from the Practice and WTO Litigation on Safeguards Julien Chaisse a, Debashis Chakraborty b, and Animesh Kumar c a Chinese University of Hong Kong b Indian Institute of Foreign Trade c The objective of the WTO agreement is to promote international trade among member countries in a mutually beneficial manner. However, the agreement also allows members to restrict import under certain special circumstances, e.g., in case of a sudden surge in imports, adoption of unfair trade practices by a trading partner etc. In that context, trade remedial measures such as Anti-Dumping Agreement (ADA), Agreement on Subsidies and Countervailing Measures (ASCM) and the Agreement on Safeguards (ASG) play extremely crucial roles in ensuring free and fair trade. These provisions may be politically necessary in order to undertake liberalisation in the first place but can also lead to protectionist policies. This two-edged sword constantly runs the risk of being abused, as producers seek excessive relief by taking recourse to such measures. While misuse of ADA or ASCM has often received the focus of the scholars, ASG is a relatively less researched area. Over the period, application of safeguard (SG) measures has evolved as a vital component of the trading policy space of WTO members, especially the developing countries. It is observed that during March April 2012, 234 instances of safeguard initiations have been reported, while 118 final measures were imposed over this period. While the number is lesser vis-a-vis the comparable AD and SCM cases, it is often argued that SG actions can also be considerably trade distorting if applied in an unjustifiable manner. While the literature on the ASG is quite rich, the analysis on the related disputes, especially in terms of misuse of the ASG provisions is a relatively less researched area. This paper intends to explore which of the existing ASG provisions are vulnerable to potential misuse. The present study contributes to the literature by analyzing the SGrelated complaints lodged at the WTO dispute settlement body over the years. Since the 16

17 beginning of 2012, more than 20 measures have been notified to the WTO demonstrating the acuity of the problem. The paper notes that the problems associated with the SG mechanism may lead to a new wave of protectionism in coming days demonstrating how much it is difficult to control the use of a two-edged sword such as SG. The current analysis identifies the areas for further reform in the ASG in light of the results noted from the analysis of the SG-disputes. It concludes that the international trade law needs to strike a careful balance and define conditions for taking recourse to SG measures in sufficiently precise terms. References Baldwin, Robert E. and Jeffrey W. Steagall (1994). An Analysis of ITC Decision in Antidumping, Countervailing Duty and Safeguard Cases, WeltwirtschaftlichesArchiv,130: Baracat, Elias and Julio J. Nogues (2005). WTO Safeguards and Trade Liberalization: Lessons from the Argentine Footwear Case, World Bank Working Paper No. 3614, Washington DC. Bown, Chad P. and Rachel McCulloch (2004). The WTO Agreement on Safeguards: An Empirical Analysis of Discriminatory Impact, in Michael G. Plummer (ed.), Empirical Methods in International Trade. Cheltenham UK: Edward Elgar, 2004, pp Bronckers, Marco (2010). Nondiscrimination in the World Trade Organization Safeguard Agreement: A European Perspective in K. W. Bagwell, G. A. Bermann and P. C. Mavroidis (eds.), Law and Economics of Contingent Protection in International Trade, Cambridge University Press, New York, pp Chaisse, Julien and Debashis Chakraborty (2007). Implementing WTO Rules through Negotiations and Sanction: The Role of Trade Policy Review Mechanism and Dispute Settlement System, The University of Pennsylvania Journal of International Economic Law, 28(1): Chakraborty, D., Chaisse, J. And Kumar. A. (2011). Doha Round Negotiations on Subsidy and Countervailing Measures: Potential Implications on Trade Flows in Fishery Sector, Asian Journal of WTO & International Health Law and Policy, 6(1): , Chakraborty, Debashis, Raju, K.D. and Chaisse, J. (2008). Anti-Dumping Measures in the Context of Global Competition, in J. Chaisse and T. Balmelli (Eds.), Essays on the Future of the World Trade Organization, Volume 1, pp , Editions InteruniversitairesSuisses, Geneva. Chen, Lihuand Yun Gu (2001). China s Safeguard Measures Under the New WTO Framework, Fordham International Law Journal, 25(5): Finger, J. Michael (1998). GATT Experience with Safeguards: Making Economic and Political Sense out of the Possibilities that the GATT Allows to Restrict Imports, Policy Research Working Paper 2000, Washington, DC: World Bank. Grimmett, Jeanne J. (2011). Chinese Tire Imports: Section 421 Safeguards and the World Trade Organization (WTO), CRS Report for Congress, Washington DC: Congressional Research Service. 17

18 Kruger, Paul, Willemien Denner and JB Cronje (2009). Comparing Safeguard Measures in Regional and Bilateral Agreements, ICTSD Programme on Agricultural Trade and Sustainable Development, Issue Paper No. 22, Geneva: International Centre for Trade and Sustainable Development. LEE Y.-S., Destabilization of the Discipline on Safeguards? Inherent Problems with the Continuing Application of Article XIX after the Settlement of the Agreement on Safeguards, JWT 2001(6), Lissel, Elenor (2011). Regional Safeguard Measures: An Incentive to sign Regional Trade Agreements without taking into consideration the special needs for Developing Countries, dissertation entitled Developing countries and emergency safeguard measures in world trade law, Lund University. Lodha, Ritu (2005). US Steel Safeguard Dispute: Forged Protection brought to Light, CUTS Trade Law Brief No. 3, Jaipur. Palmeter D., Safeguard, Anti-dumping, and Countervailing Duty Disputes in the Transatlantic Partnership: How to Control Contingency Protection More Effectively, in: PETERSMANN E.-U. / POLLACK M.A. (eds.), Transatlantic Economic Disputes: The EU, the US, and the WTO, 2003, 141. Raychaudhuri, Tilottama (2010). The Unforeseen Developments Clause in Safeguards under the WTO: Confusions in Compliance, Estey Centre Journal of International Law and Trade Policy, 11(1): Read, R. (2005). The Political Economy of Trade Protection: The Determinants and Welfare Impact of the 2002 US Emergency Steel Safeguard Measures, Lancaster University Management School Working Paper No. 13, Lancaster. Wolfe, Robert (2009). The special safeguard fiasco in the WTO: The perils of inadequate analysis and negotiation, Grouped EconomieMondiale Working Paper, Paris. World Trade Organisation (2011). Report (2011) of the Committee on Safeguards to the Council for Trade in Goods, Document No.G/L/972. World Trade Organisation (2012). Minutes of the Regular Meeting held on 27 April 2012, Committee on Safeguards, Document No. G/SG/M/41. 18

19 India s Healthcare Sector under GATS: Inquiry into Backward and Forward Linkages Kaushik Lahiri * and Sarmila * Surendra Nath College, Kolkata University of Calcutta There is no denying of the fact that healthcare sector of India has evolved over the years and has attained new heights under the influence of globalization and GATS (General Agreement on Trade in Services). With the opening up of service sector trade under the purview of GATS subsequent to the WTO, India has extended trade to the health services sector to find an advantageous position in terms of global connectivity with comparative advantage in areas of IT-enabled services as well as health related services. With the advancement in science and technology, revolutionary inroad of information and communication technology based services, availability of skilled technicians and medical and paramedical workforce along with enhanced support services through telemedicine and mobile health services has elevated the Indian healthcare system to global standards. The demand side witnessed growth with the rise of aware and relatively affluent class resulting in a change in composition of demand for healthcare services which is expected to have impact on the organization of the sector from provider s perspective. The focus is on the changing profile of the healthcare industry in India with the GATS negotiation bringing into further changes in the composition of both supply and demand pattern by allowing different forms of trade which are directly and indirectly linked with health services. Coupled with technological advances and global connectivity, domestic policies seem to encourage increased private sector participation in this sector. India witnessed the growth of large corporate healthcare and allied service providers in the recent past. Thus, both backward and forward linkages of Health and medical services have undergone significant change. While the forward linkage is expected to create more demand for 19

20 better healthcare services in the domestic market from the affording class and induce growth of the health insurance sector, the backward linkage effects would create possibilities of growth in clinical trials, pharmaceutical industry, telemedicine, teleradiology and other health related outsourcing services. While the health sector in India was being primarily developed for the deserving population as a source of merit good, the recent gain in efficiency in this sector has come mostly through the channels of market mode meant for the affording population. Progress towards more technology oriented public services would create internal drain of resources, both financial and intellectual, within the sector, with possibility of leakage from deserving to the affording population and changes in organizational set up of providers profile. Moreover, with expansion of the healthcare market it is also leading towards gradual conversion of a merit good [defined out of equity consideration] into a market good [defined out of efficiency consideration] which calls for a more comprehensive regulatory vigilance. Since health care differs from other commodities in aspects of saving life and boosting quality of life, it is a complex system that also involves information asymmetries that generally affects the consumers (patients). Under this situation, influx of technology has also created more opportunities for unethical practices resulted in creation of induced demand in the healthcare market. Unreasonable use of equipments, use or introduction of new medical technologies without assessment of their safety and efficacy are in wide practice as found in literature and reports. In general, the large volume of out-of-pocket expenses incurred by the patient parties in the private care market has increased the opportunity of the providers (agents) to extort profit by recommending services beyond the optimum level. Hence need for greater vigilance on the part of the regulator has become the call of the day. Key words: GATS, WTO, Input-Output Models, Health General, Analysis of Healthcare Markets JEL Classification Code: F13, C67, I10, I11 20

21 References Aron, R. (2009). Globalized Healthcare: Driven by Technology, Vol. 2, No. 1, Fall / Winter 2009, John Hopkins / Carey Business School, available at accessed on Banerjee S. & Nag N. (1998). India s Health Sector: Regional Disparities in Provisioning, Utilization and Achievement, in Regional Dimensions of the Indian Economy, edited by Chatterjee, B and Sur, H, Allied Publishers, India (1998). Chanda R. (2010). Constraints to Foreign Direct Investment in Indian Hospitals, Journal of International Commerce, Economics and Policy, 1 (2010), , World Scientific Publishing Company Chenery, B. and Watanabe, T. (1958). International Comparisons of the Structure of Production, Econometrica, 26(4), Deloitte (2009). Survey of Health Care Consumers: Key Findings, Strategic Implications, Deloitte Center for Health Solutions, available at df, accessed on Dholakia R H, Agarwalla A, Bazaz A B & Agarwal P (2009). Trends in Technical Progress in India An Analysis of Input-Output Tables from 1968 to 2003, W.P. No , Indian Institute of Management, Ahmedabad, India available at accessed on Gautam V ( 2008). Healthcare Tourism Opportunities for India, Export-Import Bank of India, Quest Publications, Mumbai, India High Level Expert Group Report on Universal Health Coverage for India (2011), submitted to the Planning Commission of India available at IBEF, Healthcare, various years, available at accessed on IBEF Healthcare, 2009, available at accessed on IPS (2006), International Passenger Survey 2003, Final Report, Incredible India, Ministry of Tourism, Government of India ISRO (Indian Space Research Organisation), Telemedicine: Healing Touch through Space Enabling Speciality Healthcare to the Rural and Remote Population of India, available at accessed on ISRO (Indian Space Research Organisation), available at accessed on KFF (2007), How changes in medical technology affect health care cost, The Henry J. Kaiser Family Foundation, available at accessed on Lahiri, K. (2012a). FDI in India s Healthcare Sector: an Assessment, forthcoming, Kalyani University Journal of Economics, 1(1) Lahiri, K. (2012b). Globalization and Trade in Services: The Changing Profile of India s Healthcare Sector, accepted for presentation in the Third National Seminar on Annual Survey of Industries, CSO, Government of India 21

22 Mathur, A. (2004). Design of Healthcare Trade: Role of Information Technology, Economics and Political Weekly, 39(20), Mudur G (2004), Inadequate regulations undermine India s healthcare, BMJ, January 17, 2004, 328 (7432):124 available at Ministry of Health and Family Welfare, GOI (2011), Annual Report to the People on Health, December 2011, New Delhi PWC ( Pricewaterhouse Coopers) (2007). Healthcare in India: Emerging Market Report, available at report-hc-in-india.pdf accessed on Smith, R. D. (2004). Foreign Direct Investment and Trade in Health Services: Review of Literature, Social Science & Medicine, 59 (2004) , Elsevier, available at Turner, L. (2007). First World Health Care at Third World Prices: Globalization, Bioethics and Medical Tourism, Bioethics, 2, , London School of Economics and Political Science, England Smith R D, Chanda R, Tancharoensathien V (2009), Trade in Health-related Services, Lancet, 373( 9663), , 14 Feb, 2009, WHO (2010a), Global Status Report on Noncommunicable Diseases, ISBN (PDF), Italy, available at accessed on WHO (2010b), World Health Statistics 2010, available at accessed on Yip W and Mahal A (2008). The HealthCare Systems of China And India: Performance and Future Challenges, HEALTH AFFAIRS, 27, Number, July/August

23 Doha Sectoral Negotiations: A Study on Healthcare Sector in India Rajat Verma 1, Murali Kallummal 2, and Poornima Varma 3 1 Guest Lecturer, Gargi College, University of Delhi 2 Associate Professor Centre for WTO Studies Indian Institute of Foreign Trade, New delhi 3 Assistant professor Department of Policy Studies TERI University, New delhi During the fourth ministerial meeting of WTO, which has launched in Qatar, Doha in 2001, the members agreed to initiate negotiations on all non-agricultural products. Sectorla initiatives for elimination or harmonization of tariffs, on products of export interest to developing countries, constituted one of the major components of these Non- Agricultural Market Access (NAMA) negotiations. Out of various sectors, healthcare sector assumes a special significance for India. Therefore, the present study attempts to analyse the need for negotiations (if any) for India in the sector of healthcare products. The analysis has been carried out by comparing India s competitiveness with the other major players in this sector. They are the US, Singapore, Switzerland and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, which have proposed 25 product categories (i.e. 25 products in the HS 4-digit nomenclature) in this sector for free trade. Therefore, these countries are called as the proponents of this sector. The present study has made use of the calculations of growth rates and Revealed Comparative Advantage (RCA) to analyse the trade potential for India. Both compound and annual rate of growths show that India ranks second when compared to the proponents with an average annual rate of growth of around 20%. The RCA values have been computed both at aggregated level (comparing average RCA across countries) and disaggregated level (comparing total number of products whose RCA>1 across countries). Further to remove the extremities caused by average RCA (as average are affected by extremes), we calculated median values of RCA >1 for USA, India and Switzerland. Average RCA showed a declining trend for India and a value close to 1 23

24 hence implying that India is not very competitive in the proposed healthcare products. On the contrary, disaggregated analysis of RCA showed a much clearer picture. Here, the declining trend from was not monotonic as seen before. Also, the median values of RCA>1 showed that India gives tough competition to other proponents. This is because its median value (of 6.657) was largest, for the year 2008, when compared with the US and Switzerland. Thus showing that the degree of competitiveness for the product having RCA>1, is highest when compared to the proponents, even though the number of products for which India enjoys comparative advantage is less. Thus the analysis based on RCA and the comparison of Indian scenario with respect to the proponents in this sector revealed that India has comparative advantage and the potential to emerge as one of the key players in this sector. However, this opportunity has to be reaped judiciously by the Indian policy makers through an enhanced participation in the sectoral negotiations. The possibilities to enhance the potential of some sectors - such as organic chemicals, vehicles used in providing medical care and pharmaceutical products such as antibiotics and other medicines needs to be further explored as these are the sectors that showed highest amounts of RCA in the analysis. Finally, there is a need for looking into the trade implications of remanufactured goods, as they fall in the ambit of the proposed products. References ASSOCHAM (2009). Financial Health of Indian Healthcare Industry, ASSOCHAM. Banerjee, Ronojoy. (2011). US, EU want WTO tariffs for remanufactured goods, Financial Express. Viewed on 12 th September, 2012 at Batra, Amita and Khan, Zeba. (2005). Revealed Comparative Advantage: An Analysis for India and China, ICRIER, New Delhi. Centre for WTO Studies (CWS) (2009). Frequently Asked Questions: Non Agricultural Access, CWS, New Delhi. Chanda, R. and A. Mukherjee. (2008). India-EU Relations in Health Services: Issue and Concerns in an India-EU Trade and Investment Agreement, ICRIER, New Delhi. Knowledge@Wharton (2012). Comparison Vs Cost: Improving the Prognosis for India s Healthcare Sector, Viewed on 9 th October

25 Hilary, J. (2005). The Doha Deindustrialisation Agenda: Non-Agricultural Market Access Negotiations at the WTO, War on Want, London. IBEF (2010). Cost Comparison of Medical Services Procedure Cost (US$), Viewed on 14 th June 2010, ICTSD (2010). WTO Industrial Goods Talks Inch Forward on NTBs, Viewed on 12 th September 2012 at India Law Offices n.d., Indian Healthcare Sector, Viewed on 9 th June 2010, at Lee, Christine. (2007). Medical Tourism, an innovative opportunity for entrepreneurs, Journal of Asia Entrepreneurship and Sustainability. Mikik, M. & Gilbert, J. (2007). Trade statistic in policymaking, United Nations publication, Thailand. Prasad, C. B., Venkata Krishna n.d., Medical Tourism Industry Advantage India, Conference on Global Competition & Competitiveness of Indian Corporate. Pietrasik, T. (2009). Lessons from a frugal innovator, Economic Times. Price Waterhouse Coopers (PWC) (2007). Healthcare in India: Emerging Market Report 2007, PWC Sharma, D. n. d., Just a dose of Healthcare Statistics, Viewed on 9 th June 2010, at Tharu, R. (2010). Union Budget : Impact on Healthcare, Viewed on 10 th June 2010, at Unnikrishnan, C. H. (2010). Healthcare sector upset over neglect in Budget, Viewed on 10 th June 2010, at Utkulu, Utku and Seyme, Dilek (2004). Revealed Comparative Advantage and Competitiveness: Evidence for Turkey vis-à-vis the EU/15, Viewed on 21 st December 2010, at WTO (2008). Fourth Revision of Draft Modalities For Non-Agricultural Market Access, TN/MA/W/103/Rev.3 WTO n.d., Doha Development Agenda, Viewed on 10 th March, 2010, 25

26 Emigration Policies in India: Implications for Migration to the EU Pralok Gupta Assistant Professor Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi Emigration from India has expanded over the years not only in terms of number of people emigrated but also the ways people have adopted to emigrate to overseas countries, including irregular migration. The Indian emigrants (other than the white collar workers) are fairly vulnerable to exploitation as they are generally ignorant of relevant laws and procedures followed in India as well as in overseas countries. The high cost of emigration as well as the policy of localization by the host countries further reduces the emigrational benefits to such workers. Therefore, emigration policies of Indian Government become very important not only in deciding the quantum of emigrants but also the destination countries for such emigration. As far as emigration destinations for Indians are concerned, the European Union (EU) is increasingly becoming popular for many of the Indian emigrants in recent times. The UK is the leading country inviting the largest number of Indian emigrants following by Italy, Sweden, Germany, Denmark and Netherlands. However, many of the other EU countries have invited only a small number of Indian emigrants even in recent times. An analysis of immigrants by their occupation categories reveals that majority of these emigrants are either skilled workers, seasonal workers or are involved in other remunerative activities. Whereas for UK, immigration was mostly in highly skilled workers category and other remunerated activities in 2009, for Italy, apart from other remunerated activities, seasonal workers category is also important. Researchers is not a very important category for any of the EU countries. The observed trend also suggests that the attraction of the EU as emigration destination for Indians is both for skilled professions or white collar jobs and low skilled/unskilled 26

27 jobs. However, the inbound policies and programs in the EU countries are designed mostly to attract skilled professionals from India. Low skilled workers emigrating from India to the EU seem to be a neglected lot as far as policy orientations in these countries are concerned. In this context, the emigration policies and resultant focus of the Indian government becomes very important to facilitate emigration from India to the EU. However, over the years, most of the emigration policies in India had focused on migration to the Gulf countries. The EU countries have not become a focus area for emigration policies so far in spite of a growing trend of Indians migrating to the EU countries. This policy negligence has resulted into two outcomes. First, it has reduced the size of the pie that could have migrated to the EU countries in search of better job opportunities. Second, in the absence of information and policy guidelines, Indians in the EU countries, especially low skilled workers, have become more vulnerable to exploitation. A welcome step is that bilateral social security agreements are being negotiated and signed by the Indian Government with various EU countries to protect the interest of expatriate workers and the companies on a reciprocal basis. However, these agreements are more helpful for skilled workers as their recruitment and employment is properly documented whereas the low skilled workers still remain vulnerable for exploitation. Therefore, it becomes important that the Government of India makes EU specific policies as it had made in the case of Gulf countries and the policies should also take into consideration the welfare and integration of low skilled workers in these countries. Key words: Emigration Policies, European Union (EU), White collar workers, Low skilled workers JEL Classification Code: F22, F66 References Davis, K. (1951). Population of India and Pakistan, Princeton University Press, Princeton, New Jersey 27