Employing FAHP to de-codify the determinants of trade agreements: a case of the EU-India trade talks
Abstract
This paper employs an interdisciplinary approach that combines economics with Fuzzy Analytic Hierarchy Process (FAHP) approach to de-codify the anatomy of free trade agreements (FTA) determinants focusing, in particular, on the case of EU-India FTA. The novelty of this paper is the systematic empirical analysis of the FTA determinants using FAHP. More than a hundred businesses and trade practitioners were interviewed in the EU and India to understand the lack of momentum in FTA talks. Our findings indicate that economic and political criteria are predominant FTA determinants, with market access potential (economic) as important factors driving the EU-India FTA talks. Given that results suggest similar perceptions of both the EU and India interview-ees to FTA determinants it is likely that the EU and India could find common ground and resume the languishing FTA negotiations.
Keyword : free trade agreement, negotiations, fuzzy AHP, fuzzy numbers
How to Cite
Khorana, S., Cho, J., Lee, J., & Disegna, M. (2018). Employing FAHP to de-codify the determinants of trade agreements: a case of the EU-India trade talks. Technological and Economic Development of Economy, 24(6), 2397-2415. https://doi.org/10.3846/tede.2018.6618
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Baldwin, R., & Jaimovich, D. (2012). A free trade agreements contagious?. Journal of International Economics, 88(1), 1-16. https://doi.org/10.1016/j.jinteco.2012.03.009
Balin, A., & Baraçli, H. (2017). A fuzzy multi-criteria decision making methodology based upon the interval Type-2 fuzzy sets for evaluating renewable energy alternatives in Turkey. Technological and Economic Development of Economy, 23(5), 742-763. https://doi.org/10.3846/20294913.2015.1056276
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Buckley, J. J. (1985). Fuzzy hierarchy analysis. Fuzzy Sets and Systems, 17(3), 233-247. https://doi.org/10.1016/0165-0114(85)90090-9
Chang, D. Y. (1992). Extent analysis and synthetic decision. Optimization Techniques and Applications, 1(1), 352-360.
Cho, J., & Lee, J. (2013). Development of a new technology product evaluation model for assessing commercialization opportunities using Delphi method and fuzzy AHP approach. Expert Systems with Applications, 40(4), 5314-5330. https://doi.org/10.1016/j.eswa.2013.03.038
D’Urso, P., Disegna, M., Massari, R., & Osti, L. (2016). Fuzzy segmentation of postmodern tourists. Tourism Management, 55, 297-308.
DeRemer, D. (2013). The evolution of international subsidy rules (ECOLE Discussion Paper 2013/118). ECOLE International Association for Research and Teaching. Retrieved from https://pdfs.semanticscholar.org/90f0/05c4419000a08a0765284455c701701f9838.pdf
Ecer, F. (2018). An integrated Fuzzy AHP and ARAS model to evaluate mobile banking services. Technological and Economic Development of Economy, 24(2), 670–695. https://doi.org/10.3846/20294913.2016.1255275
Hoffman, T., & Kim, S. Y. (2010, April 30 – May 1). Designing reciprocity: The politics of dispute settlement mechanisms in Asia’s PTAs (Paper prepared for The Politics of Trade Agreements: Theory, Measurement and Empirical Applications at the Niehaus Center for Globalization & Governance). Princeton University.
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Im, K., & Cho, H. (2013). A systemic approach for developing a new business model using morphological analysis and integrated fuzzy approach. Expert System with Applications, 40(11), 4463-4477. https://doi.org/10.1016/j.eswa.2013.01.042
Kahraman, C., Suder, A., & Bekar, E. T. (2016). Fuzzy multiattribute consumer choice among health insurance options. Technological and Economic Development of Economy, 22(1), 1-20. https://doi.org/10.3846/20294913.2014.984252
Kawai, M., & Wignaraja, G. (2009, August). Asian FTAs: Trends and challenges (ADBI Working Paper Series No. 144).
Khorana, S., & Garcia, M. (2014). Procurement liberalization diffusion in EU agreements: Signalling stewardship?. Journal of World Trade, 48(3), 481-500.
Khorana, S., & Garcia, M. (2013). EU-India free trade agreement: One step forward, one back. Journal of Common Market Studies, 41(3), 274-300.
Khorana, S., Kerr, W. A., & Mishra, N. (2014). Transforming Vietnam: A quest for improved efficiency and transparency in Central Government Procurement. Policy and Politics, 42(1), 109-129. https://doi.org/10.1332/030557312X655611
Khorana, S., Yeung, M. T., Kerr, W. A., & Perdikis, N. (2012). The battle over the EU’S proposed humanitarian trade preferences for Pakistan: A case study in multifaceted protectionism. Journal of World Trade, 46(1), 33-59.
Krejčí, J., Pavlačka, O., & Talašová, J. (2017). A fuzzy extension of Analytic Hierarchy Process based on the constrained fuzzy arithmetic. Fuzzy Optimisation Decision Making, 16(1), 89-110. https://doi.org/10.1007/s10700-016-9241-0
Limão, N. (2007). Are preferential trade agreements with non-trade objectives a stumbling block for multilateral liberalization?. The Review of Economic Studies, 74(3), 821-855. https://doi.org/10.1111/j.1467-937X.2007.00456.x
Limão, N., & Maggi, G. (2013). Uncertainty and trade agreements (NBER Working Papers 18703). National Bureau of Economic Research.
Limão, N., & Tovar, P. (2011). Policy choice: Theory and evidence from commitment via international trade agreements. Journal of International Economics, 85(2), 186-205. https://doi.org/10.1016/j.jinteco.2011.06.002
Liu, X., & Ornelas, E (2014). Free trade agreements and the consolidation of democracy. American Economic Journal: Macroeconomics, 6(2), 29-70. https://doi.org/10.1257/mac.6.2.29
Maggi, G. (2014). International Trade Agreements. In G. Gopinath, E. Helpman & K. Rogo (Eds.), The Handbook of international economics (Chapter 6, vol. 4). Amsterdam, NL: Elsevier. https://doi.org/10.1016/B978-0-444-54314-1.00006-9
Maggi, G., & Rodriguez-Clare, A. (2007). A Political-Economy Theory of Trade Agreements. American Economic Review, 97(4), 1374-1406. https://doi.org/10.1257/aer.97.4.1374
Maggi, G., & Staiger, R. W. (2011). Optimal design of trade agreements in the presence of renegotiation. American Economic Journal, 7(1), 109-143.
Mansfield, E. D., & Milner, H. V. (2010). Regime type, veto points, and preferential trading arrangements. Stanford Journal of International Law, 46(2), 219-242.
Meyer, T. (2010). Power, exit costs, and renegotiation in international law. Harvard International Law Journal, 51(2), 379-425.
OECD. (2005). Transparency and third party participation in investor-state dispute settlement procedures (Working Paper 2005/01). Retrieved from https://www.oecd.org/daf/inv/investment-policy/WP-2005_1.pdf
Plummer, M. (2007). Best practices in regional trading agreements: An application to Asia. The World Economy, 30(12), 1771-1796. https://doi.org/10.1111/j.1467-9701.2007.01061.x
Ravenhill, J. (2003). The new bilateralism in the Asia Pacific. Third World Quarterly, 24(2), 299-317. https://doi.org/10.1080/0143659032000074600
Ren, J., & Lützen, M. (2017). Selection of sustainable alternative energy source for shipping: Multi- criteria decision making under incomplete information. Renewable and Sustainable Energy Reviews, 74, 1003-1019. https://doi.org/10.1016/j.rser.2017.03.057
Trachtman, J. (2011). Development aspects of a trans-pacific partnership. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1953943 https://doi.org/10.2139/ssrn.1953943
Villareal, M. A., & Fergusson, I. A. (2015). The North American Free Trade Agreement (NAFTA). Washington, DC: Congressional Research Service.
Wei, S., & Frankel, J. (1996). Can regional blocs be a stepping stone to global free trade? A political economy analysis?. International Review of Economics and Finance, 5(4), 339-347. https://doi.org/10.1016/S1059-0560(96)90021-0
Woolcock, S. (2013). Economic diplomacy. In P. Kerr & G. Wiseman (Eds.), Diplomacy in a globalizing world: Theories and practices. OUP USA, New York, USA. https://doi.org/10.1093/oxfordhb/9780199588862.013.0022
Wouters, J., Goddeeris, I., Natens, B., & Coirtuz, F. (2013). Some critical issues in EU-India free trade agreement negotiations. European Law Journal, 20(6), 848-869. https://doi.org/10.1111/eulj.12109
World Trade Organization. (2011). Annual report 2011. Retrieved from https://www.wto.org/english/res_e/booksp_e/anrep_e/anrep11_e.pdf
World Trade Organization. (2016). The WTO preferential trade agreements database. Geneva.
Aghdaie, M. H. (2017). Data mining group decision-making with FAHP: An application in supplier evaluation and segmentation. In Fuzzy Analytic Hierarchy Process (pp. 99-124). Chapman and Hall/CRC.
Aghdaie, M. H., Zolfani, S. H., & Zavadskas, E. K. (2013). Market segment evaluation and selection based on application of fuzzy AHP and COPRAS-G methods. Journal of Business Economics and Management, 14(1), 213-233. https://doi.org/10.3846/16111699.2012.721392
Antras, P., & Staiger, R. W. (2012). Offshoring and the role of trade agreements. American Economic Review, 102(7), 3140-3183. https://doi.org/10.1257/aer.102.7.3140
Baetens, F. (2013). Preferential trade and investment agreements and the trade investment divide: Is the whole more than the sum of its parts?. In R. Hofmann, S. Schill, & C. Tams (Eds.), The Rise of preferential trade and investment agreements: bridging the gap? Baden-Baden: Nomos. https://doi.org/10.5771/9783845250533-91
Bagwell, K., & Staiger, R. W. (2011). What do trade negotiators negotiate about? Empirical evidence from the world trade organization. American Economic Review, 101(4), 1238-1273. https://doi.org/10.1257/aer.101.4.1238
Baier, S. L., & Bergstrand, J. H. (2004). Economic determinants of free trade agreements. Journal of International Economics, 64(1), 29-63. https://doi.org/10.1016/S0022-1996(03)00079-5
Baldwin, R., & Jaimovich, D. (2012). A free trade agreements contagious?. Journal of International Economics, 88(1), 1-16. https://doi.org/10.1016/j.jinteco.2012.03.009
Balin, A., & Baraçli, H. (2017). A fuzzy multi-criteria decision making methodology based upon the interval Type-2 fuzzy sets for evaluating renewable energy alternatives in Turkey. Technological and Economic Development of Economy, 23(5), 742-763. https://doi.org/10.3846/20294913.2015.1056276
Bown, C. P., & Hoekman, B. M. (2007). Developing countries and enforcement of trade agreements: Why dispute settlement is not enough (Policy Research Working Paper No. 4450). World Bank, Washington, DC.
Buckley, J. J. (1985). Fuzzy hierarchy analysis. Fuzzy Sets and Systems, 17(3), 233-247. https://doi.org/10.1016/0165-0114(85)90090-9
Chang, D. Y. (1992). Extent analysis and synthetic decision. Optimization Techniques and Applications, 1(1), 352-360.
Cho, J., & Lee, J. (2013). Development of a new technology product evaluation model for assessing commercialization opportunities using Delphi method and fuzzy AHP approach. Expert Systems with Applications, 40(4), 5314-5330. https://doi.org/10.1016/j.eswa.2013.03.038
D’Urso, P., Disegna, M., Massari, R., & Osti, L. (2016). Fuzzy segmentation of postmodern tourists. Tourism Management, 55, 297-308.
DeRemer, D. (2013). The evolution of international subsidy rules (ECOLE Discussion Paper 2013/118). ECOLE International Association for Research and Teaching. Retrieved from https://pdfs.semanticscholar.org/90f0/05c4419000a08a0765284455c701701f9838.pdf
Ecer, F. (2018). An integrated Fuzzy AHP and ARAS model to evaluate mobile banking services. Technological and Economic Development of Economy, 24(2), 670–695. https://doi.org/10.3846/20294913.2016.1255275
Hoffman, T., & Kim, S. Y. (2010, April 30 – May 1). Designing reciprocity: The politics of dispute settlement mechanisms in Asia’s PTAs (Paper prepared for The Politics of Trade Agreements: Theory, Measurement and Empirical Applications at the Niehaus Center for Globalization & Governance). Princeton University.
Horn, H., Petros, C., & Mavroidis, S. A. (2010). Beyond the WTO? An anatomy of EU and US preferential trade agreements. World Economy, 33(11), 1565-1588. https://doi.org/10.1111/j.1467-9701.2010.01273.x
Im, K., & Cho, H. (2013). A systemic approach for developing a new business model using morphological analysis and integrated fuzzy approach. Expert System with Applications, 40(11), 4463-4477. https://doi.org/10.1016/j.eswa.2013.01.042
Kahraman, C., Suder, A., & Bekar, E. T. (2016). Fuzzy multiattribute consumer choice among health insurance options. Technological and Economic Development of Economy, 22(1), 1-20. https://doi.org/10.3846/20294913.2014.984252
Kawai, M., & Wignaraja, G. (2009, August). Asian FTAs: Trends and challenges (ADBI Working Paper Series No. 144).
Khorana, S., & Garcia, M. (2014). Procurement liberalization diffusion in EU agreements: Signalling stewardship?. Journal of World Trade, 48(3), 481-500.
Khorana, S., & Garcia, M. (2013). EU-India free trade agreement: One step forward, one back. Journal of Common Market Studies, 41(3), 274-300.
Khorana, S., Kerr, W. A., & Mishra, N. (2014). Transforming Vietnam: A quest for improved efficiency and transparency in Central Government Procurement. Policy and Politics, 42(1), 109-129. https://doi.org/10.1332/030557312X655611
Khorana, S., Yeung, M. T., Kerr, W. A., & Perdikis, N. (2012). The battle over the EU’S proposed humanitarian trade preferences for Pakistan: A case study in multifaceted protectionism. Journal of World Trade, 46(1), 33-59.
Krejčí, J., Pavlačka, O., & Talašová, J. (2017). A fuzzy extension of Analytic Hierarchy Process based on the constrained fuzzy arithmetic. Fuzzy Optimisation Decision Making, 16(1), 89-110. https://doi.org/10.1007/s10700-016-9241-0
Limão, N. (2007). Are preferential trade agreements with non-trade objectives a stumbling block for multilateral liberalization?. The Review of Economic Studies, 74(3), 821-855. https://doi.org/10.1111/j.1467-937X.2007.00456.x
Limão, N., & Maggi, G. (2013). Uncertainty and trade agreements (NBER Working Papers 18703). National Bureau of Economic Research.
Limão, N., & Tovar, P. (2011). Policy choice: Theory and evidence from commitment via international trade agreements. Journal of International Economics, 85(2), 186-205. https://doi.org/10.1016/j.jinteco.2011.06.002
Liu, X., & Ornelas, E (2014). Free trade agreements and the consolidation of democracy. American Economic Journal: Macroeconomics, 6(2), 29-70. https://doi.org/10.1257/mac.6.2.29
Maggi, G. (2014). International Trade Agreements. In G. Gopinath, E. Helpman & K. Rogo (Eds.), The Handbook of international economics (Chapter 6, vol. 4). Amsterdam, NL: Elsevier. https://doi.org/10.1016/B978-0-444-54314-1.00006-9
Maggi, G., & Rodriguez-Clare, A. (2007). A Political-Economy Theory of Trade Agreements. American Economic Review, 97(4), 1374-1406. https://doi.org/10.1257/aer.97.4.1374
Maggi, G., & Staiger, R. W. (2011). Optimal design of trade agreements in the presence of renegotiation. American Economic Journal, 7(1), 109-143.
Mansfield, E. D., & Milner, H. V. (2010). Regime type, veto points, and preferential trading arrangements. Stanford Journal of International Law, 46(2), 219-242.
Meyer, T. (2010). Power, exit costs, and renegotiation in international law. Harvard International Law Journal, 51(2), 379-425.
OECD. (2005). Transparency and third party participation in investor-state dispute settlement procedures (Working Paper 2005/01). Retrieved from https://www.oecd.org/daf/inv/investment-policy/WP-2005_1.pdf
Plummer, M. (2007). Best practices in regional trading agreements: An application to Asia. The World Economy, 30(12), 1771-1796. https://doi.org/10.1111/j.1467-9701.2007.01061.x
Ravenhill, J. (2003). The new bilateralism in the Asia Pacific. Third World Quarterly, 24(2), 299-317. https://doi.org/10.1080/0143659032000074600
Ren, J., & Lützen, M. (2017). Selection of sustainable alternative energy source for shipping: Multi- criteria decision making under incomplete information. Renewable and Sustainable Energy Reviews, 74, 1003-1019. https://doi.org/10.1016/j.rser.2017.03.057
Trachtman, J. (2011). Development aspects of a trans-pacific partnership. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1953943 https://doi.org/10.2139/ssrn.1953943
Villareal, M. A., & Fergusson, I. A. (2015). The North American Free Trade Agreement (NAFTA). Washington, DC: Congressional Research Service.
Wei, S., & Frankel, J. (1996). Can regional blocs be a stepping stone to global free trade? A political economy analysis?. International Review of Economics and Finance, 5(4), 339-347. https://doi.org/10.1016/S1059-0560(96)90021-0
Woolcock, S. (2013). Economic diplomacy. In P. Kerr & G. Wiseman (Eds.), Diplomacy in a globalizing world: Theories and practices. OUP USA, New York, USA. https://doi.org/10.1093/oxfordhb/9780199588862.013.0022
Wouters, J., Goddeeris, I., Natens, B., & Coirtuz, F. (2013). Some critical issues in EU-India free trade agreement negotiations. European Law Journal, 20(6), 848-869. https://doi.org/10.1111/eulj.12109
World Trade Organization. (2011). Annual report 2011. Retrieved from https://www.wto.org/english/res_e/booksp_e/anrep_e/anrep11_e.pdf
World Trade Organization. (2016). The WTO preferential trade agreements database. Geneva.