Abstract:
The present study analyses the impact of recently signed ASEANIndia
preferential trade agreement (AIPTA) on plantation commodities -
coffee, tea and pepper. The likely increase of imports into India is
simulated using the SMART model (developed jointly by UNCTAD
and World Bank) and gravity model. The analysis shows that the
agreement may cause a significant increase in India’s imports of
plantation commodities from the ASEAN countries. The increase in
imports is mostly driven by trade creation rather than trade diversion.
Trade creation improves welfare as the new imports replace the highcost
domestic production. The proposed tariff reduction may lead to
some loss of tariff revenue to the government. However, the gains in
consumer surplus (due to the fall in domestic price and the consequent
reduction in dead-weight loss) outweigh the loss in tariff revenue leading
to net welfare gain. Simulations based on the SMART and gravity models
yield broadly similar results regarding the magnitude of total increase
in imports. During the years to come, the plantation sector will have to
realign the production structure according to the changing price signals.
It is important to devise appropriate adjustment assistance schemes for
planters as well as for plantation workers who might be displaced
