Table of contents list of acronyms
EXTENT OF TRADE COMPLEMENTARITY
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| 9.2. EXTENT OF TRADE COMPLEMENTARITY In order to examine the potential of trade between India and Pakistan we derive the Index of Trade Complementarity (ITC) between the two countries. This index is measured as follows = 1 − 0.5 − … … … … (1) where ITC ij =Trade Complementarity Index between countries i and j m hi = share of good h in total imports of country i x hj = share of good h in total exports of country j ITC ij is zero when no good exported by one country is imported by the other. It equals one when the one country’s imports correspond exactly to those of the other’s exports. Therefore, the higher the magnitude of ITC ij the greater the trade complementarity. We first derive the index between Pakistan’s imports and Indian exports of automotive products at the 4 digit level of HS code. The calculations are presented in Table 9.5. The index of trade complementarity is high at 0.836. Potential imports of Pakistan from India include the following 8701 Tractors 8702 Buses 8703 Cars 8704 Trucks and Vans 8708 Autoparts and Accessories 8711 Motorcycles Therefore, all major imports of Pakistan could potentially be obtained from India. This is, of course, subject to opening of trade and, second, the extent of competitiveness of Indian products in the domestic market of automotive products in Pakistan. |