chapter  9
26 Pages

India’s Trade in Services with Select FTA and Non-FTA Partners: An Analysis of Comparative Advantage

ByNabeel A. Mancheri

There has been a growing body of literature that examines effects of free trade agreements (FTAs) on domestic and world economy. The post-war debate started with Jacob Viner’s seminal work on free trade agreements, in his famous 1950 book. In one of the classic demonstrations of the theory of the second best, Jacob Viner (1950) showed that a move to free trade between two countries that maintained their respective external tariffs towards the rest of the world could leave them worse off. The core arguments for free trade are as compelling today as they were when Adam Smith set them out over two centuries ago. The rich documented literature on FTAs can be broadly divided into two aspects. The profound view comes from those who disagree on this kind of arrangement, basically supporting the WTOled multilateralism. The second group predicts the increasing welfare gains for the countries involved later leading to broader liberalisation of all countries. The subject of free trade areas remains controversial even among pro-free trade economists.