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Innocent Bystanders

Implications of an EU–India Free Trade Agreement for Excluded Countries

image of Innocent Bystanders
The European Union, under its ‘Global Europe’ initiative, has since 2006 been pursuing trade agreements with its major global trading partners. An EU–India Free Trade Agreement is currently under negotiation; if successfully concluded it is likely to have knock-on effects on other countries’ trade with both India and the EU, the trade of the ‘innocent bystanders’ excluded from the agreement.



The authors consider the implications of the EU–India Free Trade Agreement for various groups of other countries, including the ACP countries and those in South Asia, the latter group being most strongly impacted. The analysis considers not only trade in goods but also trade in services, and focuses not only on quantities but also on the prices at which trade is conducted.



The authors then consider how excluded countries might respond to the Free Trade Agreement, both at an individual level and at a systemic level.

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Terms of trade effects

The discussion so far has followed the well-worn track of trying to estimate the way in which the EU–India FTA will affect the volume of trade flows between the partners and other countries and to allocate the latter between trade diversion and trade re-orientation. 51 This last chapter turns to the less frequently studied issues discussed in Part I based on the stream of analysis stemming from Winters (1997) through to Chang and Winters (2002) and Chang and Schiff (2004). It concerns the effect of the FTA on the terms of trade of excluded countries. Recall that while the changes in the terms of trade are driven by the changes in trade volumes of the sort we have been analysing so far, their potential effects on the terms of trade are related to the levels of trade.

English

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