India’s Deep Integration with South Korea and Japan: A Trade Analysis

Abstract

India has negotiated comprehensive economic partnership agreements (CEPAs) with highly industrialized giants, Japan and South Korea, aiming to unlock significant trade potential. However, a crucial question remains: How significantly have these regional trade agreements advanced after a decade of enforcement, and what impact are they having on global economies? To address this, we conducted a detailed analysis at the aggregate and sectoral levels, comparing the India–Japan and India–Korea deep integrations by evaluating the trade creation and diversion effects. Our research uses a structural gravity model for a panel of 205 exporting countries between 1988 and 2021. At the aggregate level, the findings reveal a modestly greater increase in intra-regional trade due to the India–Japan CEPA and greater export diversion effects of the India–Korea CEPA. However, the effects of import diversion on the India–Japan CEPA remain indeterminate. At the sectoral level, India’s trade with Japan has an advantage in more sectors than Korea, though the extent varies. The findings emphasize that sector-specific measures will notably nudge the strategies of competing trade partners.