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    Moribund SAFTA and trade policy options for South Asia

    190586_76139_2012_Dhaka.pdf (287.9Kb)
    Access Status
    Open access
    Authors
    Islam, A.
    Salim, Ruhul
    Date
    2012
    Type
    Conference Paper
    
    Metadata
    Show full item record
    Citation
    Islam, Amirul and Salim, Ruhul. 2012. Moribund SAFTA and trade policy options for South Asia, in Buiyan, M. (ed), Proceedings of 7th Asian Business Research Conference: Research for Difference, Dec 21-22 2012. Dhaka, Bangladesh: World Business Institute.
    Source Title
    Proceedings of 7th Asian business research conference
    Source Conference
    Asian Business Research Conference
    Additional URLs
    http://www.wbiconpro.com/205-Amirul.pdf
    ISBN
    9781922069160
    URI
    http://hdl.handle.net/20.500.11937/9178
    Collection
    • Curtin Research Publications
    Abstract

    In response to meager intra-regional trade flow South Asian countries formed their regional trade bloc SAFTA (South Asian Free Trade Area) in 2004 and made operational from 2006.Defying the rhetoric of the leaders and expectation of the masses, this bloc could not make any progress until now. Using panel data over the past thirty years from the seven member states and a random effect methodology that controls for endogenous predictors, the study shows that when gravity related and other variables are controlled for SAFTA turns out to be dysfunctional. The reasons for such failure can be attributed to the thin preferential margins on only a few number of tariff lines whose benefits are evaporated once complying with the rules of origin issue and complicated administrative procedure are taken into account. Moreover appearances of new generations of traded products (e.g. computing and telecommunications equipment) that are sourced from outside the region and changes of demand structure in favor of these commodities have made South Asian trade more outward oriented. Since the “free” trade bloc is not working in South, the paper concludes that alternative trade policy options like unilateral liberalization and seeking for multiple preferential agreements can buttress trade linked growth of the region.

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