Linking GVC with Trade Dynamics between India and the United Kingdom: A Sector-Level Analysis

Abstract

In the foreseeable future, the potential for deeper integration into the global value chain (GVC) between India and the UK lies within the establishment of a prospective free trade agreement (FTA). Such an agreement holds promise in facilitating market access, thereby fostering increased participation in the GVC for both countries. This study delves into nine specific sectors, carefully examining the factors that shape India's export flows to the UK within the framework of GVC. This research raises an important question: how will the trade dynamics evolve beyond tariff easing and trade liberalisation, emphasizing the development of robust value-added linkages between these sectors? The findings reveal the pivotal role of GVC participation in sectors like textiles, clothing, and base metals, increasing India's exports to the UK. Conversely, sectors like chemicals and pharmaceuticals thrive on factors such as intensive margin and research and development expenditure, augmenting export performance. These insights underscore the necessity for nuanced, sector specific approaches in crafting trade policies and conducting FTA negotiations, unravelling the intricacies of trade dynamics between India and the UK, and laying the groundwork for mutually beneficial economic cooperation in the future.

Keywords

• free trade agreements; gvc trade; foreign value added; r&d expenditure