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.



The effects of preferential trading arrangements (PTA) on excluded countries

Welfare not quantities

This chapter briefly introduces the conceptual framework we use for thinking about the effects of preferential trading arrangements (PTAs) on excluded countries. It is much more explicit than most treatments about what really determines economic welfare – prices, incomes and profits, rather than just economic activity (production and sales) per se8. It does not suggest the irrelevance of the traditional calculations of the effect of FTAs on excluded countries’ welfare, but certainly advocates supplementing them.


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