SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications

Raihan, Selim (2012): SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications.

Abstract

This paper has examined the implications of SAFTA for the South Asian countries. In doing so it has reviewed the pattern of intra-regional trade in South Asia. The paper has reviewed a number of studies which conducted qualitative and quantitative assessments of SAFTA. Using the global general equilibrium model the paper has also explored the welfare implications of tariff liberalisation under SAFTA and increased trade facilitation in South Asia. The simulation results suggest that the gains from trade facilitation in South Asia are much higher than the gains from mere reduction in tariff in goods. Therefore, in order to make SAFTA effective, trade liberalization is a necessary condition, but not a sufficient one. Utmost priority should be given to developing trade infrastructure facilities (hardware) and trade facilitation (software).

• Item Type: MPRA Paper
• Language: English
• Keywords: SAFTA; Regional Integration; Market Access; Trade Facilitation
• 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

Ahmed, S., S. Kelegama, and E. Ghani (2010). Promoting Economic Cooperation in South Asia: Beyond SAFTA. Sage Publications, New Delhi.

Bandara, J. S. and Yu, W. (2003). “How Desirable is the South Asian Free Trade Area? A Quantitative Economic Assessment.” In Greenaway, DS. (ed.) World Economy: Global Trade Policy 2003 , Oxford, U.K.: Blackwell Publishing

Baysan, T., Panagariya, A and Pitigala, N. (2006). “Preferential Trading In South Asia”, World Bank Policy Research Working Paper 3813, January 2006

Bhagwati, J., and Panagariya, A. (1996). “The Theory of Preferential Trade Agreements: Historical Evolution and Current Trends.” American Economic Review. 86(2): 82-87.

Coulibaly, S. (2004). “On the Assessment of Trade Creation and Trade Diversion Effects of Developing RTAs,” Paper Presented at the Annual Meeting 2005 of the Swiss Society of Economics and Statistics on Resource Economics, Technology, and Sustainable Development. (available at http://www.wif.ethz.ch/resec/sgvs/078.pdf)

CUTS, (2012), “Cost of Economic Non-Cooperation to Consumers in South Asia”, Working Paper, Consumer Utility Trust Society, Jaipur, India.

CUTS, (1996). “Cost of Non-Cooperation to Consumers in the SAARC Countries: An Illustrative Study”, Working Paper, Consumer Utility Trust Society, Jaipur, India.

Das, S. and Pohit, S. (2006), "Quantifying the Transport, Regulatory and Other Costs of Indian Overland Exports to Bangladesh,” The World Economy, Vol. 29, No. 9, 1227-1242.

De, P. and Raihan, S. (2011), “Unlocking India–Bangladesh Trade Potential: Emerging Issues and the Way Forward”, paper prepared for the World Bank.

DeRosa, D. A. and Govindan, K. (1995). “Agriculture, Trade, and Regionalism in South Asia.” Food, Agriculture, and the Environment Discussion Paper 7, Washington, D.C.: International Food Policy Research Institute.

Dimaranan, B.V. and R.A. McDougall. Global Trade, Assistance, and Production: The GTAP 5 Data Base, Center for Global Trade Analysis, Purdue University. 2002. Feridhanusetyawan, T. 2005. Preferential Trade Agreements in the Asia-Pacific Region. International Monetary Fund Working Paper 05149. Washington, DC: International Monetary Fund.

GEP, (1998). “The Report of the SAARC Group of Eminent Persons”, SAARC Secretariat, Kathmandu.

Govindan, K. (1994). “A South Asian Preferential Trading Arrangement: Implications for Agricultural Trade and Economic Welfare.” Mimeo, Washington D.C.: World Bank.

Harrison, W.J. and K.R. Pearson (1996), ‘Computing Solutions for Large General Equilibrium Models Using GEMPACK’, Computational Economics, Vol 9, pp 87-127.

Hassan, M.K. (2001). “Is SAARC a Viable Economic Block? Evidence from gravity model”, Journal of Asian Economics, Volume 12, No. 2, pp.263-290.

Hertel, T.W. (1997). Global Trade Analysis: Modeling and Applications. Cambridge University Press, Cambridge.

Hirantha, S.W. (2004). “From SAPTA to SAFTA: Gravity Analysis of South Asian Free Trade” Paper presented at the European Trade Study Group (ETSG) 2004 Programme, September, Nottingham.

Krugman, P. (1991) “Increasing Returns and Economic Geography”, The Journal of Political Economy, Vol. 99, Issue 3, pp. 483 - 499

Limão, N. and A. J. Venables (2001) “Infrastructure, Geographical Disadvantage, Transport Cost, and Trade”, World Bank Economic Review, Vol. 15, No. 3, pp. 451-479

Pigato, M., Farah, C., Itakura, K., Jun, K., Martin, W., Murrell, K. and Srinivasan, T.G. (1997). “South Asia’s Integration into the World Economy.” Washington, D.C.: World Bank.

Pohit, S. and Taneja, N. (2003), "India’s Informal Trade with Bangladesh: A Qualitative Assessment”, The World Economy, Vol.26, No. 8, pp. 1187-1214

Pursell, G. (2004). “An India-Bangladesh Free Trade Agreement? – Some Potential Economic Costs and Benefits”, Washington. DC, The World Bank (mimeo).

Rahman, M. M. (2003). “A Panel Data of Bangladesh’s Trade: The Gravity Model Approach”, Paper presented at the European Trade Study Group (ETSG) 2003 Programme. September. Madrid.

Rahman, M., Shadat, W., and Das, N.C. (2006). “Trade Potential in SAFTA: An Application of Augmented Gravity Model”, Centre for Policy Dialogue, Occasional Paper 61.

Raihan, S. (2011), “Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation”, paper prepared for the Asian Development Bank, Manila

Raihan, S. and Razzaque, A. (2007). “Regional Trading Arrangements (RTAs) in South Asia: Implications for the Bangladesh Economy”, in Raihan, S. and Razzaque, A.(eds.) WTO and Regional Trading Arrangement: Quantitative Assessment of Potential Implications for Bangladesh. Pathak Samabesh, Dhaka.

Razzaque, M.A. (2005), “‘Sustaining RMG Export Growth after MFA Phase-out: An Analysis of Relevant Issues with Reference to Trade and human Development”, paper prepared for the UNDP, Bangladesh.

RIS, (1999). “SAARC Survey of Development and Cooperation 1998/99”, Research and Information System for Non-Aligned and Other Developing Countries, New Delhi

RIS, (2004). “South Asia Development and Cooperation Report 2004”, Research and Information System for Non-Aligned and Other Developing Countries”, New Delhi.

Rodríguez-Delgado, J.D. (2007). “SAFTA: Living in a World of Regional Trade Agreements”, IMF Working Paper, 07/23.

SACEPS (2002), SACEPS Task Force Report on South Asian Investment Cooperation, SACEPS, Dhaka, Bangladesh.

Sengupta, N., and Banik, A. (1997). “Regional trade and investment: case of SAARC.” Economic and Political Weekly 32 (November 15-21): pp.2930-2931.

Srinivasan, T.N. and Canonero, G. (1995). “Preferential Trading Arrangements in South Asia: Theory, Empirics and Policy.” New Haven: Yale University. Unpublished manuscript.

Subramanian, U. and J. Arnold (2001) Forging Subregional Links in Transportation and Logistics in South Asia, World Bank, Washington, D.C.

Taneja, N., Sarvananthan, M., Karmacharya, B.K. and Pohit, S. (2004), "India’s Informal Trade with Sri Lanka and Nepal: An Estimation,” South Asia Economic Journal, vol.5, no.1, Jan.-June, pp. 27-54.

Taneja, N., Sarvanathan. M. and Pohit, S. (2003). “India-Sri Lanka Trade: Transacting Environments in Formal and Informal Trading.” Economic and Political Weekly, July 19, pp.3095-98.

Tumbarello, P. (2006). “Are Regional Trade Agreements in Asia Stumbling or Building Blocks? Some Implications for the Mekong Countries”, Paper prepared for the seminar on Accelerating Development in the Mekong Region—the Role of Economic Integration, Siem Reap, Cambodia, June 26-27, 2006. (available at http://www.imf.org/external/ np/seminars/eng/ 2006/mekong/pt.pdf)

Whalley, J. (1996). “Why Do Countries Seek Regional Trade Agreements?,” NBER Working Paper No. 5552.

World Bank (2006). India-Bangladesh Bilateral Trade and Potential Free Trade Agreement: Bangladesh Development Series, Paper No: 13, World Bank Bangladesh Office, Dhaka.