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Recent tensions with China have led to renewed talk in India about using the ‘Quad’ alliance to counter the neighbour. Quad, which comprises India, Japan, Australia and the US, is mainly thought of in military terms. What if it were to become a trade partnership? Simulations by academics show it could bring about significant gains for India’s economy and exports.

Mohammad M. Rahman, Chanwahn Kim and Prabir De simulate free trade agreements where different combinations of countries around the Indian and Pacific Oceans, such as the Quad, stop imposing import duties and quotas on each other’s goods. Each combination of countries is subjected to two free trade scenarios. In one, they only scrap import duties, and in the other, they also cut trade costs by 25%, by, for example, speeding up movement of goods by reducing bureaucratic red tape at borders and ports.

In a Quad trade agreement where bilateral tariffs are scrapped, India’s real GDP could increase by 0.2% or $2.7 billion a year, while exports could rise by 2.5% or $5.7 billion. Sectors where India’s exports are competitive such as clothing, textiles and light manufacturing would gain the most.

In the second scenario, where the Quad does away with tariffs and lowers trade costs by 25%, India’s real GDP could increase nearly 2% or $23.5 billion a year. The fact that reducing trade costs expands the GDP gains from $2.7 billion in the first scenario to $23.5 billion in the second shows how much of a barrier these costs are.

The authors suggest that if ever a Quad trade agreement were to become a reality, a reduction in trade costs would go a long way towards fulfilling the economic potential of the alliance.

Also read:Indo-Pacific cooperation: what do trade simulations indicate?"

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