Trade Commplementarity Index Case Study

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1. Trade Complementarity Index

The trade complementarity (TC) index provides significant information on opportunities for intraregional trade. It shows how well the structures of a country’s imports and exports match. It also has the feature that its values for countries considering the formation of a re-gional trade agreement can be compared with others that have formed or tried to form similar arrangements.

Where xij is the share of good i in global exports of country j and mik is the share of good i in all imports of country k. The index is zero when no goods are exported by one country or imported by the other and 100 when the export and import shares exactly match.

Let the good be i. Let country k be India and country j
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It has maintained a value 50 on an average. Since TCI, shows how much a country’s imports and exports match it can be said that since the value for TCI for India and China is not very high, both these countries are not very strong matches for each other’s’ imports and exports.

Table 7: India-China TCI from 2010-14

YEAR TCI(India’s Im-ports & China’s Exports) TCI(China’s Im-ports & India’s Exports) TOTAL TCI

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Trade Intensity Index

The trade intensity index is the ratio of the two export shares. The numerator shows the share of the destination of interest in the exports of the region under study. The denominator indi-cates the share of the destination of interest in the exports of the world as a whole. It isn't linked by any “size” bias, so it helps to compare the statistic across regions and also over time when exports are growing significantly. It takes value between 0 and + ∞.

Values greater than 1 show an “intense” trade relationship. On the basis of their importance in world trade, the TII is used to determine whether the value of trade between two countries is greater or smaller than would be expected. It is the share of one country’s exports going to a partner divided by the share of world exports going to the partner.

It is calculated as follows:
Where xij and xwj are the values of country i’s exports and of world exports to country j and where Xit and Xwt are country i’s total exports and total world exports respectively. An in-dex of more (less) than one indicates a bilateral trade flow that is larger (smaller) than ex-pected, given the partner country’s importance in world

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