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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

Abstract

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.

Suggested Citation

  • Jayatilleke S. Bandara & Wusheng Yu, 2003. "How Desirable is the South Asian Free Trade Area? A Quantitative Economic Assessment," The World Economy, Wiley Blackwell, vol. 26(9), pages 1293-1323, September.
  • Handle: RePEc:bla:worlde:v:26:y:2003:i:9:p:1293-1323
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    Citations

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    Cited by:

    1. 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,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).
    2. John Gilbert & Nilanjan Banik, 2012. "Socio-economic impacts of regional transport infrastructure in South Asia," Chapters,in: Infrastructure for Asian Connectivity, chapter 5, pages 139-163 Edward Elgar Publishing.
    3. Peter Morgan & Michael G. Plummer & Ganeshan Wignaraja & Fan Zhai, 2015. "Economic Implications of Deeper South Asian–Southeast Asian Integration: A CGE Approach," Asian Economic Papers, MIT Press, vol. 14(3), pages 63-81, Fall.
    4. d'Artis Kancs, 2010. "Structural Estimation of Variety Gains from Trade Integration in Asia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 270-288.
    5. Dushni Weerakoon, 2010. "The Political Economy of Trade Integration in South Asia: The Role of India," The World Economy, Wiley Blackwell, vol. 33(7), pages 916-927, July.
    6. Anonymous, 2012. "Journal of International Agricultural Trade and Development, Volume 08, Issue 2," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 8(2).
    7. Francois Joseph F & Wignaraja Ganeshan, 2008. "Economic Implications of Asian Integration," Global Economy Journal, De Gruyter, vol. 8(3), pages 1-48, September.
    8. 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.
    9. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
    10. Sumudu Perera & Mahinda Siriwardana & Stuart Mounter, 2014. "Should agriculture be exempt from trade policy reforms in South Asia?," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 21(1), pages 67-106, June.
    11. Rajiv Kumar, 2011. "SAARC: Changing Realities, Opportunities and Challenges," Chapters,in: Regional Integration, Economic Development and Global Governance, chapter 1 Edward Elgar Publishing.
    12. 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.
    13. Baysan, Tercan & Panagariya, Arvind & Pitigala, Nihal, 2006. "Preferential trading in South Asia," Policy Research Working Paper Series 3813, The World Bank.

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