Trade agreements between developing countries: a case study of Pakistan - Sri Lanka free trade agreement

Ahmed, Saira and Ahmed, Vaqar and Sohail, Safdar (2010): Trade agreements between developing countries: a case study of Pakistan - Sri Lanka free trade agreement.

Abstract

This paper assesses the pre and post Free Trade Agreement (FTA) pattern in bilateral trade between Pakistan and Sri Lanka. Besides the usual direction of trade analysis we also use general and partial equilibrium approaches in order to evaluate the true potential of this FTA. Our results reveal an increase in welfare and efficiency for both countries. However export basket has not changed much since pre-FTA period. This calls for creating awareness about the FTA and putting in place a consultative mechanism with trade community that can identify the manner in which both countries can accrue maximum benefit from the free movement of tradable goods. Similar suggestions follow in our perception survey carried out for this study.

• Item Type: MPRA Paper
• Language: English
• Keywords: Free Trade Agreement; General Equilibrium
• Subjects: F - International Economics > F1 - Trade > F15 - Economic Integration; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation

References

Adam, G. F., B. Gangnes, and Y. Shachmurove (2004) Why Is China So Competitive? Measuring and Explaining China’s Competitiveness. SMU Economics and Statistics Working Paper Series 07-2004.

ADB. (2008). How to Design, Negotiate, and Implement a Free Trade Agreement in Asia. Manila: Asian Development Bank.

ADB. (2008). Quantification of Benefits from Economic Cooperation in South Asia. Manila: Asian Development Bank.

Bandara, J. S. and W. Yu (2003) ‘ How Desirable is the South Asian Free Trade Area? A Quantitative Economic Assessment’, in World Economy: Global Trade Policy 2003, edited by David Greenaway, Oxford, U.K., Blackwell Publishing.

Banik, N. (2006), “How Promising is SAFTA?” Asia-Pacific Trade and Investment Review, 2 (2), (ST/ESCAP/2436), November, United Nations

Batra, A. (2004), ‘India’s Global Trade Potential: The Gravity Model Approach’, Working Paper No. 151, Indian Council for Research on International Economic Relations, New Delhi.

Baysan, T., A. Panagariya and N. Pitigala (2006) Preferential trading in South Asia. World Bank Policy Research, working paper, 3813.

Berrittella, M. (2004) Methods For Decomposing Welfare Changes in the GTAP Model. Technical Note – GTAP Model: http://users.ictp.it/~eee/seminar/berrittella_23.03.04_nota.pdf

Buckley, P. J., Clegg, J., Forsans, N., & Reilly, K. T. (2007). A Simple and Flexible Dynamic approach to foreign investment growth: The Canada - United States relationship in the context of free trade. The World Economy .

Calvo-Pardo, H., Freund, C., & Ornelas, E. (2009). The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers. World Bank.

DeRosa, & Govindan, K. (1996). Agriculture, trade, and regionalism in South Asia. Journal of Asian economics , 7 (2), 293-315.

Dorosh, P., M.K. Niazi, H. Nazli (2006) A Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results," PIDE-Working Papers 2006:9.

Girma, S., Kneller, R., & Pisu, M. (2008). Trade Creation, Replacement, and Destruction inRegional Trade Agreements: Micro-level Evidence for the UK. Review of International Economics , 16 (1), 142-158.

Govindan, K. (1994). A South Asian preferential trading agreement: Implications for agricultural trade and economic welfare. Robert Mc Namara Fellowship. Washington, D.C.: World Bank.

Hertel, T., McDougall, R., & Walmsley, T. (2007). GTAP Model Version 6.2a. Purdue: Global Trade Analysis Project. Hirantha, S.W. (2003) Regional economic integration: South Asia, Mimeo, Department of Economics, Nagoya University, Japan.

Hirantha. S.W. (2004) From SAPTA to SAFTA: Gravity Analysis of South Asian Free Trade: University of Jayewardenepura, Sri Lanka.

Jeevika, W. (2008) Input Output Tables for Sri Lanka, Global Trade Analysis Project: https://www.gtap.agecon.purdue.edu/resources/download/4194.pdf

Kawai, M., & Wignaraja, G. (2009). Asian FTAs: Trends and Challenges. Asian Development Bank Institute. Kelegama, S., & Mukherji, I. (2007). India - Sri Lanka Bilateral Free Trade Agreement: Six Years Performance and Beyond. New Delhi: RIS.

Kemal, A.R., (2005). “SAFTA and Economic Cooperation”, web address: http://www.southasianmedia.net/conference/Regional_Conference/safta.htm. Laurenceson, J. (2003). Economic Integration between China and the ASEAN-5. ASEAN Economic Bulletin , 20 (2), 103-111.

Masood, A. (2009, December 14). PAK-SRI LANKA FREE TRADE AGREEMENT: A step forward in the right direction. The News, Pakistan .

Mastel, G. (2004). The Rise of the Free Trade Agreement. Challenge , 47 (3), 41–61.

MoC. (2008). JOINT PROGRAM FOR COMPREHENSIVE ECONOMIC AND TRADE COOPERATION. Joint study by Minstries of Commerce in China and Pakistan.

Mohanty, S. K. (2003) Regional Trade Liberalisation under SAPTA and India’s Trade Linkages with South Asia: An Empirical Assessment. RIS Discussion Paper no. 48/2003.

Newfarmer, Richard (2004) SAFTA: Promise and Pitfalls of Preferential Trade Arrangement.Background paper for Global Economic Prospects 2005, World Bank, Washington, D.C.

Pigato, M., Farah, C., Itakura, K., et al. (1997) South Asia’s Integration into the World Economy (Washington, DC, World Bank).

Raihan, S. (2008). SAFTA and Bangladesh Economy: Assessment of Potential Implications. South Asian Network on Economic Modeling.

Pitigala, N. (2005) What does regional trade in South Asia reveal about future trade integration? Some empirical evidence. World Bank Policy Research, working paper 3497.

Sengupta, N., and A. Banik (1997) Regional Trade and Investment: Case of SAARC.‖ Economic and Political Weekly 32 (November 15–21): 2930–1.

Srinivasan, T.N. (1994) 'Regional Trading Arrangements and Beyond: Exploring Some Options for South Asia Theory, Empirics, and Policy', Report no. IDP-142, South Asia Region, (Washington, D.C: The World Bank, 1994).

Srinivasan, T. N. and G. Cananero (1993) ‘Preferential Trading Arrangements in South Asia: Theory, Empirics and Policy’, Yale University, Unpublished.

Thrasher, R. D., & Gallagher, K. P. (2008). 21st Century Trade Agreements: Implications for Long-Run Development Policy. The PARDEE Papers, The Frederick S. Pardee Center for the Study of the Longer-Range Future, Boston University (2).

Tsang, V. W.-Y., & Au, K.-F. (2008). Regionalization of textile trade: Evidence from EU, NAFTA, AFTA and SAPTA. The International Trade Journal , XXII (4).

Weerahewa, J. (2009). Impact of Trade Facilitation Measures and Regional Trade Agreements on Food and Agricultural Trade in South Asia. Working Paper Series. Asia-Pacific Research and Training Network on Trade (69).

Weerahewa, J., & Meilke, K. (2007). India-China Trade Relationships: Implications for South Asian Countries. International Agricultural Trade Research Consortium (IATRC) summer meetings. Beijing.

Weerakoon, D., & Thennakoon, J. (2007). India-Sri Lanka FTA: Lessons for SAFTA. CUTS International.

Wilson, J., Mann, C., & Otsuki, T. (2005). Assessing the Potential Benefit of Trade Facilitation: A global Perspective. World Bank.

Wilson, J., Mann, C., & Otsuki, T. (2003). Trade facilitation and economic development: A new approach to quantifying the impact. The World Bank Economic Review , 17, 367-389.

WorldBank. (2008). South Asia: Growth and Regional Integration. World Bank.

Yeats, A.J. (1998) Just How Big is Global Production Sharing, World Bank Policy Research Working Paper 1871.