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South Asian Free Trade Agreement: Prospects of Shallow Regional Integration

Dilip K. Das

CSGR Working Paper 218/07 

February 2007

 

Abstract:

This paper essentially focuses on the belated regionalization attempts of the South Asian economies and myriad of problems that are coming in their way to forming a smoothly functioning free trade area and regional integration agreement. Notwithstanding their efforts, progress so far has been tardy. Although South Asian economies took several liberalization measures during the 1990-2005 period, this group of economies was the most highly protected group in the global economy in 2005. It lagged behind in opening its domestic economy to global competition as well as in attracting FDI. Furthermore, evidence of trade complementarity in South Asian economies is mixed so far, which made creation of an FTA a weak proposition. However, this paper recommends that despite lack of success, South Asian economies should continue their endeavors to regionalize. At present, these economies are at a low level of per capita income and economic development. As they move up their respective growth trajectories, they are likely to develop complementaries. If these economies continue to grapple with their current hurdles to regionalization, in the medium-term South Asian economies stand to gain in welfare terms even if they succeed in shallow regional integration. Keywords: Globalisation, free trade, SAFTA, South Asia, economic integration Contents:
  1. Introduction
  2. Liberalizing Protectionist Regimes
  3. Consequences of Reforms and Restructuring
  4. More than Incomplete Reform Programs
5.  Intra-Trade and Regional Integration Initiatives  6.  India’s Unique Position 7.  Mixed Evidence of Complementarity 8.  Assessing the Economic Case for SAFTA  9.  Estimates of Benefits from Quantitative Studies 9.1 Evidence from Gravity Model 9.2 Evidence from CGE Models 10. So Why SAFTA? 11. Summary and Conclusions Contact Details: Centre for the Study of Globalisation and Regionalisation (CSGR) University of Warwick CV4 7AL Coventry (UK) dilip.das@sympatico.ca