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

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  • Bandara, Jayatilleke S.
  • Yu, Wusheng

Abstract

The proliferation of preferential trading agreements (PTAs) in different regions of the world has been a significant development over the last two decades or so. South Asian countries are slowly moving towards a South Asia Free Trade Area (SAFTA) in recent years. The desirability of SAFTA has been questioned by some observers recently. Do necessary conditions exist for a successful PTA in South Asia? Will SAFTA create gains for its members or not? Is it better for South Asian countries to promote non-discriminatory trade liberalisation rather than promote SAFTA? Does SAFTA encourage unilateral trade liberalisation in the South Asian region? The main objective of this paper is to address some of the above questions, especially the desirability of SAFTA, using trade data and 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. Our discussion of the necessary conditions for forming a SAFTA, and the present political climate in South Asia seem to support the pessimistic view. Results from two policy scenarios (unilateral liberalisation and preferential liberalisation) confirm the pessimistic view by showing that unilateral liberalisation would benefit South Asia countries much more than preferential liberalisation. In fact, under preferential liberalisation, small countries in the region would gain little or even lose.

Suggested Citation

  • Bandara, Jayatilleke S. & Yu, Wusheng, 2003. "How Desirable is the South Asian Free Trade Area? A Quantitative Assessment," Conference papers 331169, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331169
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    References listed on IDEAS

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    2. Coleman, Jonathan R. & Payne, Warren S., 2003. "Factors Affecting Trade in Mexican Imports of Poultry Meat from the United States," Working Paper ID Series 15884, United States International Trade Commission, Office of Industries.
    3. Wohlgenant, Michael K. & Haidacher, Richard C., 1989. "Retail to farm linkage for a complete demand system of food commodities," Technical Bulletins 312312, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. Saurabh Kumar Bharti & Syeedun Nisa, 2023. "Evaluation of the Impact of Regional Trade Agreements on Indian Exports," Journal of Asian Economic Integration, , vol. 5(1), pages 51-63, April.
    2. Ur-Rashid, Hamid Haroon & Khan, Muhammad Aamir, 2024. "Standards and non-tariff barriers in trade – A case study of South Asia," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 427-437.

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