ANNOUNCEMENTS
Intra industry trade settles well in the new trade theories of monopolistic competition and economies of scale rather than the traditional models of factor endowment differences. The general assumption under trade theories about the formation of Free Trade Agreements (FTAs) is that an FTA is more likely to be formed when trade happens in similar commodities, that is, intra-industry trade (IIT). The benefits from FTA for firms engaging in intra industry trade outweigh the benefits that could be obtained through successful lobbying for protectionism. Past literature empirically estimates that intra industry trade precludes the formation of FTA. With limited studies conducted for the South-South (developing) nations particularly in context of India, the major objective of the present study is to examine the trends, structure and determinants of trade between India and its FTAs: Sri Lanka, ASEAN and SAFTA. The measures of Grubel-Lloyd IIT, Marginal IIT, Horizontal IIT and Vertical IIT indicate the trade patterns, while the panel regression substantiates our research question of whether an FTA paves way for an expansion in IIT. Our preliminary analysis showed that India had a high intra-industry trade with ASEAN, in particularly with countries like Singapore, Thailand, Malaysia and Philippines. However in the case of SAFTA, except Bhutan the intra industry trade between other member countries were quite negligible. The trade between India and Sri-Lanka mainly exhibited an inter industry structure with high level of vertical IIT. The regression results indicate a high impact of FTA on increasing IIT while the difference in the per capita GDP proved to be a not so significant variable in determining IIT levels.
