Trade within South Asia: Unrealistic Expectations

Abstract

This article analyses the causes of low intra-regional trade connections within South Asia, which have remained disappointing despite the long-awaited launch of the South Asian Free Trade Area (SAFTA) on 6 January 2004 in Islamabad. Analysis of World Bank data and other relevant sources for the period 1995–2018 shows that trade among SAFTA members has not increased as significantly as had been hoped. The statistical analysis undertaken confirms what was suspected by many observers, as it shows that the SAFTA countries are not actually natural trading partners. Rather they are often competitors, seeking to export the same product groups. Since this makes the prospects of future substantial increase in mutual trade unlikely, the article concludes with some reflections about how to strengthen regional trade support mechanisms.

A panel cointegration analysis of linkages between international trade and tourism: case of India and South Asian Association for Regional Cooperation (SAARC) countries

“…Even with the Preferential Trade Agreement in 1993 and Free Trade Agreement in 2006, the average intra region trade in the last two decades among the members constitutes about 4.5% of the total trade of the region with exports hovering around 7% (Regmi et al 2017 ). This abysmal level of trade among SAARC members is generally attributed to sharing comparative advantage in similar products which effectively makes them competitors (Akram 2020 ). Social and political factors are also pointed out as possible reasons for not achieving trade-related expectations (Akram 2020 ).…”

“…This abysmal level of trade among SAARC members is generally attributed to sharing comparative advantage in similar products which effectively makes them competitors (Akram 2020 ). Social and political factors are also pointed out as possible reasons for not achieving trade-related expectations (Akram 2020 ). An Exim bank study however suggests fewer trade restrictions among the association countries may help realize the true trade potential of these countries.…”

A study on the belt and road initiative’s trade and its influencing factors: Evidence of China-South Asia’s panel data

“…By using World Bank data and other relevant sources for the period 1995-2018, he finds that the South Asian Free Trade Area (SAFTA) countries are not actually natural trading partners. Rather they are often competitors, seeking to export the same product groups [28]. applies trade intensity index of four largest South Asian countries (India, Bangladesh, Pakistan, and Sri Lanka) to estimate the short-run and long-run trade co-integration in autoregressive multilateral framework.…”

Do Trade Agreements Enhance Bilateral Trade? Focus on India and Sri Lanka

“…As is evident, bilateral trade is an important element behind the development of contiguous countries, and this applies to India and Sri Lanka, two important countries from South Asia and the Indian subcontinent [1,2]. They have had a relationship for more than 2500 years, and their linguistic, cultural, and social linkages and bonds are centuries old.…”

“…According to World Bank data [3], these two developing countries are home to more than 18% of the world's population, which constitutes 2.49 percent of the total land surface area of the world and represents 3.19 percent of the world's GDP at the current US dollar [4,5], but their bilateral trade has been hovering around 0.75 percent of their total trade with the world since 1995. There has been a consensus among scholars like Akram [1,6], Joshi [7], Julian and Ahmed [8], Inikori [9], Khan [10], and Zahonogo [11] that trade is an important aspect influencing the economic progress of a nation, and that taking recourse to international trade indubitably brings about absolute gains for the partners involved. This becomes more relevant when they badly need deeper involvement in several areas of economic development, including a vibrant atmosphere for small and medium enterprises and environmental sustainability [12][13][14]; entrepreneurial spirit, as it brings about economic development [15][16][17][18][19]; entrepreneurial traits and assets that have a role in shaping globalization [20]; international joint ventures [21]; and innovation systems [22,23].…”