Preferential Trading In South Asia

The authors examine the economic case for the South Asia Free Trade Area (SAFTA) Agreement signed on January 6, 2004 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives. They start with a detailed analysis of the preferential trading arrangements in South Asia to look at the region's experience to date and to draw lessons. Specifically, they examine the most effective free trade area in existence-the India-Sri Lanka Free Trade Area-and evaluate the developments under the South Asian Preferential Trade Area (SAPTA). The authors conclude that, considered in isolation, the economic case for SAFTA is weak. When compared with the rest of the world, the region is tiny both in terms of economic size as measured by GDP (and per capita incomes) and the share in world trade. It is argued that these facts make it unlikely that trade diversion would be dominant as a result of SAFTA. This point is reinforced by the presence of high levels of protection in the region and the tendency of the member countries to establish highly restrictive "sectoral exceptions and sensitive lists" and stringent "rules of origin." The authors argue that the SAFTA makes sense only in the context of a much broader strategy of creating a larger preferential trade area in the region that specifically would encompass China and the member nations of the Association of South East Asian Nations. In turn, the case for the latter is strategic: the pursuit of regionalism in the Americas and Europe has created increasing discrimination against Asian exports to those regions, which must inevitably affect the region's terms of trade adversely. An Asian bloc could be a potential instrument of changing incentives for the trade blocs in the Americas and Europe and forcing multilateral freeing of trade. Assuming that the SAFTA Agreement is here to stay, the authors suggest steps to ensure that the Agreement can be made more effective in promoting intra-regional trade, while minimizing the likely trade-diversion costs and maximizing the potential benefits.

The author further demonstrates through additional statistical measures--including revealed comparative advantage indices, trade concentration, and trade competition profiles--that the trade structures that have evolved among the South Asian Countries may not facilitate a rapid increase in intra-regional trade. But there is evidence that previous unilateral trade liberalization efforts in the South Asian countries have already had a positive impact in boosting both intra- and extra-regional trade. Continuing the process of unilateral liberalization, in parallel with regional integration, would aid the South Asian countries to continue to diversify their still narrow export bases and potentially evolve new comparative advantages and complementarities that could facilitate the successful implementation of SAFTA"--Abstract.

This book analyses the South Asian preferential trade agreements with reference to the WTO jurisprudence. It offers a comprehensive analysis of the factors undermining economic integration in South Asia and recommends possible ways for confronting them.

South Asia, With Its Large Population, Has Emerged As An Important Player In The Wto And The Current Negotiations Under The Doha Round. Nevertheless, The Countries In The Region Face A Formidable Challenge In Analyzing And Synthesizing Proposals And Submissions Made By Other Wto Members. This Book Is Useful For Academics, Policy Makers, Civil Society Activists, Undergraduate Students Of Development Economics And Anyone With An Interest In The Wto Vis-A-Vis South Asia.

In 1995 the seven South Asian countries-Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka-initiated a multilateral framework for regionwide integration under the South Asian Preferential Trade Agreement (SAPTA). In a recent initiative, members agreed that SAPTA would begin the transformation into a South Asian Free Trade Area (SAFTA) by the beginning of 2006, with full implementation completed between 2009 and 2013. The impetus toward regional preferential trading arrangements and greater regional economic integration raises many important issues, both for the South Asian region as a whole and for the individual countries. The author uses the natural trading partners hypothesis as the empirical criterion to assess the potential success of a South Asian trading bloc. Using various definitions of the natural trading partner hypothesis-based on trade volume, geographic proximity, and the complementarity approaches-the author demonstrates that the South Asian countries can be characterized only moderately as natural trading partners. This characterization is, however, largely a consequence of previous impediments to trade among regional members. The author further demonstrates through additional statistical measures-including revealed comparative advantage indices, trade concentration, and trade competition profiles-that the trade structures that have evolved among the South Asian Countries may not facilitate a rapid increase in intra-regional trade. But there is evidence that previous unilateral trade liberalization efforts in the South Asian countries have already had a positive impact in boosting both intra- and extra-regional trade. Continuing the process of unilateral liberalization, in parallel with regional integration, would aid the South Asian countries to continue to diversify their still narrow export bases and potentially evolve new comparative advantages and complementarities that could facilitate the successful implementation of SAFTA.

Papers presented at a workshop held by the Indian Council for Research on International Economic Relations, New Delhi, in March 2006.

Preferential Trade Arrangements (PTAs) are proliferating exponentially. A considerable portion of global trade now takes place on preferential terms. In a similar vein, eight member countries (Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka) of the South Asian Association for Regional Cooperation (SAARC) have recently concluded the Agreement on South Asian Free Trade Area (SAFTA) and the SAARC Agreement on Trade in Services (SATIS). The progress of sub-regional trade cooperation in South Asia to date appears to be rather lacklustre. This thesis analyses the state of intra-SAARC trade cooperation from its inception; examines whether sub-regional free trade is beneficial for them in economic terms; tests the WTO compliance of the sub-regional PTAs under the auspices of the SAARC; identifies some major hindrances to further advancement of these sub-regional PTAs; and suggests possible ways to overcome or minimise these impediments in order to render the SAFTA and SATIS structurally operational, economically beneficial and legally subsumable in the WTO disciplines. -- This thesis critically analyses the text and context of the PTAs concluded under the auspices of the SAARC. It draws on the experience of comparable plurilateral PTAs in other parts of the globe to identify ways of strengthening the SAFTA and SATIS. The PTAs are international treaties and six of the eight contracting parties of the SAFTA are members of the World Trade Organization (WTO). Therefore, it is their legal obligation to ensure that their PTAs comply with the relevant rules of the WTO. This thesis critically examines the WTO rules on PTAs and assesses to what extent the PTAs under the auspices of the SAARC comply with those rules. It recommends a number of amendments to the PTAs concluded under the auspices of the SAARC that would engender greater inter-connectedness among the SAARC economies. No comprehensive analysis of the PTAs can overlook the wider debate regarding the motivations for PTAs, their strengths, weaknesses and impact on the multilateral trading system. This thesis presents a politico-economic critique of these issues in the context of South Asian PTAs with a view to rendering them complimentary to the WTO multilateral trade liberalisation regime. -- As with many other international trade agreements, the SAARC PTAs manifest legal, economic, political and historical undertones and overtones which cannot be captured in a black letter legal study. These diverse issues have necessitated that this thesis adopts an inter-disciplinary approach with a distinct focus on legal rules and norms. It aspires to make a contribution to the greater economic integration among SAARC members. There are surmountable politico-economic constraints to be overcome in achieving greater trade-induced economic integration of SAARC members' economies, largely attributable to certain policies and mindsets that can be addressed through sustained political commitment and economic collaboration in the pursuit of establishing a more functional free trading area in South Asia. The findings of the thesis should also have appeal to the sub-regional PTAs among developing countries and least developed countries (LDCs) in other parts of the world.