Factors Determining Utilization of Free Trade Agreements by Indian Textile and Clothing Companies: A Conceptual Framework Model

Abstract

The study focusses on the determinants to the use of trade agreements by Indian textile and clothing companies. A primary sample survey of 310 export companies was conducted in major clusters. Subsequently a conceptual framework model was developed to understand the various determinants influencing the use of trade agreements by the textile and clothing export firms in India. The study identified 8 dimensions of impediments, 4 determinants of costs, 5 benefits and 11 enablers to the use of trade agreements. A binary regression modelling was performed on the data set to identify the critical factors, which determine the usage of trade agreements using SPSS 16. The results obtained showed that the probability of usage of trade agreements decreased with documentation costs, cost associated with time to obtain preferential certificate, non-tariff barriers in partner countries and lack of knowledge. The probability of usage was positively significant for gaining new buyers under the agreements, government outreach, support from public sector bodies and ease in issuance of certificates. This study will provide a foundation to understand the determinants of usage of trade agreements in future. We conclude that a more SME centric approach will help in making trade agreements more inclusive.