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How Desirable is the South Asian Free Trade Area? A Quantitative Economic Assessment


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  • Jayatilleke S. Bandara
  • Wusheng Yu


The proliferation of preferential trading agreements (PTAs) in different regions of the world has been a significant development over the last two decades. South Asian countries have been slowly moving towards a South Asia Free Trade Area (SAFTA) in recent years. The desirability of SAFTA has been questioned by some observers recently. Will SAFTA create gains for its members or not? Is it better for South Asian countries to promote non-discriminatory trade liberalisation rather than SAFTA? The main objective of this paper is to address the above questions, especially the desirability of SAFTA, using a global computable general equilibrium (CGE) model. From the existing empirical and theoretical studies, we have identified three viewpoints on the desirability (or viability) of SAFTA: pessimistic, optimistic, and moderate. The results from two policy scenarios (unilateral liberalisation and SAFTA) confirm the pessimistic view by showing that unilateral liberalisation would benefit South Asian countries much more than preferential liberalisation (SAFTA). In fact, under preferential liberalisation, small countries in the region would gain little or even lose. The present political climate in South Asia also seems to support the pessimistic view. Copyright Blackwell Publishing Ltd 2003.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 26 (2003)
Issue (Month): 9 (09)
Pages: 1293-1323

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Handle: RePEc:bla:worlde:v:26:y:2003:i:9:p:1293-1323

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Cited by:
  1. Anonymous, 2012. "Journal of International Agricultural Trade and Development, Volume 8, Issue 2," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 8(2).
  2. Baysan, Tercan & Panagariya, Arvind & Pitigala, Nihal, 2006. "Preferential trading in South Asia," Policy Research Working Paper Series 3813, The World Bank.
  3. Jayatilleke S. Bandara & Wusheng Yu, 2007. "Agricultural trade liberalization in the Asia-Pacific region with specific reference to preferential trade agreements - scenario and impact analysis," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 131-162 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  4. Wignaraja, Ganeshan & Morgan, Peter & Plummer, Michael & Zhai, Fan, 2014. "Economic Implications of Deeper South Asian-Southeast Asian Integration: A CGE Approach," ADBI Working Papers, Asian Development Bank Institute 494, Asian Development Bank Institute.
  5. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
  6. Kabir, ASM, 2007. "Sanguinity and aspiration toward South Asian Regional integration: a case study of the South Asian Free Trade Area (SAFTA) Agreement," MPRA Paper 3871, University Library of Munich, Germany.
  7. A. Ganesh Kumar & Gordhan Kumar Saini, 2007. "Economic co-operation in South Asia: The Dilemma of SAFTA and beyond," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2007-017, Indira Gandhi Institute of Development Research, Mumbai, India.


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