Deepening India’s Engagement with
African LDCs
A simulation analysis of alternative scenarios for an
enhanced and expanded trade preference scheme
Rajesh Chadha
Senior Fellow
March 10, 2014
Outline of Presentation
Backdrop
• Objectives
• Present Scenario
• Simulation Analysis
• Concluding Remarks
Backdrop
• The Hong Kong WTO Ministerial (2005)
• Developed countries to extend Duty-Free Quota-Free
(DFQF) to LDCs
• Developing countries expected to do so according to
their capacity
• India became the first developing country – Duty Free
Tariff Preference Scheme for LDCs (DFTPI-LDC) in
2008
• Expectation was to boost exports and GDP of LDCs
• This study looks at African LDCs (AFLDCs)
Outline of Presentation
• Backdrop
Objectives
• Present Scenario
• Simulation Analysis
• Concluding Remarks
Objective of the study
To analyse the potential and the actual impact of India’s
preferential import regime on the exports and welfare of
Africa’s Least Developed Countries (LDCs).
Approach:
• Study the structural change in AFLDCs’ exports to India
since 2005
• Estimate the potential benefits for AFLDCs using a
computable general equilibrium (CGE) model of the world
economy.
Real GDP Growth (%)
Average
Average
2002-08 2009 2010 2011 2012 2009-2012
Forecast
2013
LDCs
7.5
5.0
5.6
4.5
5.3
5.1
5.7
AFLDCs
7.5
4.2
4.9
4.4
4.8
4.6
5.6
Developing
7.6
2.7
7.6
6.4
5.1
5.5
5.3
Advanced
2.5
-3.5
3.0
1.6
1.2
0.6
1.2
WORLD
4.7
-0.6
5.2
4.0
3.2
3.0
3.3
Source: The LDCs Report 2013, UNCTAD
India's imports from AFLDCs
(million USD)
Year
Oil
Non-oil
Total
2007
1,696
805
2,501
2008
1,939
1,329
3,268
2009
3,660
1,262
4,922
2010
5,300
1,175
6,475
2011
5,989
1,979
7,969
2012
8,713
2,590
11,302
Source: Calculations based on WITS online database.
Share of imports from AFLDCs in
imports from Africa (%)
Year
Oil
Non-oil
Total
2007
16.4
10.4
13.8
2008
14.0
10.9
12.5
2009
30.2
14.6
23.7
2010
26.5
10.8
21.0
2011
25.5
12.5
20.3
2012
31.9
16.4
26.3
Share of imports from AFLDCs in
imports from all LDCs (%)
Year
Oil
Non-oil
Total
2007
54.0
29.1
42.3
2008
74.3
35.7
51.6
2009
77.5
36.7
60.3
2010
71.6
32.2
58.6
2011
89.4
40.4
68.7
2012
92.7
47.1
75.9
India’s import in major categories
from AFLDCs (million USD)
Category
Petroleum Oils
Vegetable Products
Base Metals & Articles Thereof
Mineral Products
Chemical Products
Textiles & Textile Articles
Pearls, Precious Or Semi-Precious Stones,
Metals
Others
Total Imports
2008
1,939
439
182
292
175
101
2012
8,713
824
555
465
346
130
30
105
3,264
126
143
11,302
Source: Calculations based on WITS online database (6-digit tariff lines mapped to GTAP)
India’s DFTP Scheme for LDCs
(2008-2012)
• Duty Free items: On about 85 per cent of India’s total tariff
lines, applied customs duty have been removed over a period of
5 years with 20 per cent reduction each year.
• Positive List: In addition to the 85 per cent duty free tariff lines,
preferential market access as per Margin of Preference (MOP) is
available on about 9 per cent tariff lines (458 items). The MOP
ranges from 10 per cent to 100 per cent on different items and is
available on the applied rate of duty as on the date of imports.
• Exclusion List: contains only 6 per cent of total tariff lines
(326 items) on which no tariff preference is available and
imports are allowed at MFN rates.
Outline of Presentation
• Backdrop
• Objectives
Present Scenario
• Simulation Analysis
• Concluding Remarks
Imports from Major AFLDCs
(Average for 2009-2011, '000 USD)
Countries
Angola
Senegal
Tanzania
Guinea
Benin
Guinea-Bissau
Zambia
Togo
Equatorial Guinea
Mozambique
Congo, Dem. Rep.
Total
Oil
4,718,380
94,195
38,474
89,104
42,905
4,983,058
Non-oil
27,673
267,056
259,526
88,141
179,136
133,400
110,087
99,661
294
84,284
8,985
1,467,049
Source: Calculations based on WITS online database (total value in declining order)
Total
4,746,053
267,056
259,526
182,336
179,136
171,874
110,087
99,661
89,398
84,284
51,890
6,450,108
Shares of preferences across countries,
excluding oil (2009-2011, %)
Countries
Excluded
Positive
Duty Free
Total
Senegal
Tanzania
Benin
92.9
9.3
19.2
0.2
38.7
2.4
6.9
52.0
78.4
100.0
100.0
100.0
Guinea-Bissau
Zambia
Togo
1.9
13.5
59.3
0.1
0.4
5.0
98.1
86.1
35.6
100.0
100.0
100.0
Guinea
Mozambique
13.7
6.2
0.2
48.8
86.1
45.0
100.0
100.0
Malawi
Madagascar
3.2
31.4
95.8
52.9
1.0
15.8
100.0
100.0
Angola
95.9
0.0
4.1
100.0
Total (All AFLDCs)
32.5
15.9
51.7
100.0
6% lines
9% lines
85% lines
100.0
Source: Calculations based on WITS online database.
Outline of Presentation
• Backdrop
• Objectives
• Present Scenario
Simulation Analysis
• Concluding Remarks
General Equilibrium Modelling
Analysis
• The Global Trade Analysis Project (GTAP) model is
– Multi-region, multi-sector computable general
equilibrium (CGE) mode
– Analyses the trade flows across countries/ regions of the
world
– Each country/ region is divided into sectors of production
– Inter-linkages across sectors captured through inputoutput databases
GTAP Database
• GTAP version 8.1 database has 57 sectors of production
• 14 agriculture etc.; 5 minerals; 24 manufacturing; 14
services
• 134 countries / regions including 17 AFLDC countries /
regions
Policy Simulation
• Assess the potential gains to AFLDCs under two
scenarios:
I. Partial Liberalisation:
–
India liberalising its applied tariffs on positive and duty
free lists products (excluding services).
–
Restricting Exclusion List products.
II. Complete Liberalisation:
–
India liberalising its applied tariffs for all categories of
imports (excluding services).
Closure Rule
Modifications in the standard GTAP book closure to
capture the issue of employment in AFLDCs:
– Underemployment of unskilled labour in AFLDCs.
– Dropped the full-employment assumption for unskilled
labour.
– The real wage is fixed exogenously.
– Supply of unskilled labor is determined endogenously.
Outline of Presentation
• Backdrop
• Objectives
• Present Scenario
• Simulation Analysis
Concluding Remarks
Results
• The welfare change is positive for all AFLDCs under
partial liberalisation, increases further under complete
liberalisation.
– The major gaining countries/ regions: Benin, Rest of
West Africa and South Central Africa.
– The extent of increase in welfare gain under complete
liberalisation scenario may relate to how much share of
imports was under excluded list.
Results
Important examples:
• Senegal: 10% partial; 63% complete
– Additional 53%: phosphoric and polyphosphoric acid
which fell under the excluded list gets opened up for duty
free market access
• Madagascar: 51% partial; 99% complete
– Additional 48%: ferrous waste and scrap; refined copper
wire which fell under the excluded list gets opened up for
duty free market access
Results
• The total welfare of AFLDCs increase by:
– $1,008 million under partial liberalisation
– $1,201 million under complete liberalisation
• India loses welfare worth:
– $144 million under partial liberalisation
– $171 million under complete liberalisation
• World gains welfare worth:
– $469 million under partial liberalisation
– $561 million under complete liberalisation
Results
• The real GDP increases for all AFLDCs
– The major gainers under complete liberalisation: Benin,
Togo, Rest of West Africa followed by Guinea,
Madagascar and Uganda
• The exports to the world increase for all AFLDCs
except for Benin
• AFLDCs gain in terms of trade
Results
• The factors of production also gain.
– The returns to land increases in all AFLDCs.
– The returns to capital and skilled labour also increase
except for Madagascar, Mozambique, Rwanda and
Tanzania - production structure moves in favour of
land intensive goods.
Results
• India’s sectors of production get affected due to its
DFTP Scheme
– The output declines: paddy and rice; vegetables, fruits
and nuts; other crops; cattle, sheep and horses; forestry;
and crude oil.
• India’s exports of all sectors increase expect for gas.
Results
• Exports of major commodities increase when India
provides DFQF market access to AFLDCs.
• Exports of all the AFLDCs except Rwanda increase.
• The gains are expected to be higher if commodities
under the excluded list are also made duty free.
Mapping of Model Regions with
GTAP Region
Country/Region
India
Rest of West Africa
Benin
Burkina Faso
Guinea
Togo
Central Africa
South Central Africa
Senegal
Ethiopia
Madagascar
Malawi
Mozambique
Tanzania
Uganda
Zambia
Rwanda
Rest of East Africa
Code
India
RWAfrica
BEN
BFA
GIN
Togo
CentAfrica
SCAFRICA
SEN
ETH
MDG
MWI
MOZ
TZA
UGD
ZAM
RWA
RestEAfrica
GTAP Sectors
India
Rest of West Africa (XWF)
Benin
Burkina Faso
Guinea
Togo
Central Africa (XCF)
South Central Africa (XAC)
Senegal
Ethiopia
Madagascar
Malawi
Mozambique
Tanzania
Uganda
Zambia
Rwanda
Rest of Eastern Africa(XEC)
List of AFLDCs exporting top 50
HS 6-digit products to India
6 Digit HS
Code
Description
Countries
280920
Phosphoric acid and polyphosphoric acids
Senegal
720449
Ferrous waste and scrap nesi
Angola, Senegal, Guinea, Madagascar, Benin
251020
Natural calcium phosphates
Togo
760200
Aluminium, waste and scrap
Benin, Senegal, Angola, Tanzania, Togo
740400
Copper spent anodes; copper waste & scrap
Benin, Zambia, Angola, Tanzania, Liberia
740311
Refined copper cathodes and sections of cathodes
Zambia, Tanzania
090111
Coffee
Uganda, Guinea
720410
Cast iron waste and scrap
Tanzania, Benin, Angola, Mozambique
271019
Distillate and residual fuel oil (including blends)
Tanzania, Liberia, Mali
120740
Sesame seeds
Somalia, Ethiopia, Tanzania, Burkina Faso
271011
Light oil motor fuel
Liberia, Tanzania
120799
Oil seeds and oleaginous fruits
Benin, Ethiopia, Burkina Faso, Burundi
720429
Alloy steel (o/than stainless) waste and scrap
Togo, Benin, Sierra Leone, Senegal, Liberia
090240
Black tea
Malawi, Tanzania, Mozambique, Senegal
080132
Cashew nuts
Tanzania, Mozambique
720421
Stainless steel waste and scrap
Angola, Benin, Eritrea, Tanzania, Togo
130120
Gum Arabic
Ethiopia. Tanzania, Guinea, Mali, Togo
740811
Refined copper, wire
Zambia, Malawi, Tanzania, Madagascar
720441
Ferrous turnings, shavings, chips
Benin, Senegal, Togo
720430
Tinned iron or steel waste and scrap
Madagascar, Angola, Senegal, Guinea, Eq. Guinea
Thank You
Outline of Presentation
•
•
•
•
•
Backdrop
Objectives
Present Scenario
Simulation Analysis
Concluding Remarks
Outline of Presentation
•
•
•
•
•
Backdrop
Objectives
Present Scenario
Simulation Analysis
Concluding Remarks