Bilateral Free Trade Agreements in South Asia: Typologies, Rationale, Characteristics, and Impact

Abstract

As elsewhere in Asia and the world in South Asia too, BFTAs have proliferated at a pace faster than the regional /multilateral trading arrangements. While the slow pace of multilateral trade negotiations under the WTO Doha Round is a factor, the RTAs in South Asia too have not been found to have progressed much. While the relative ease of negotiating under bilateral arrangements and benefiting from first mover advantage in each other’s markets has no doubt been an important element in formation of BFTAs, this has been further underscored no less by political and strategic factors. An attempt has been made in this paper to examine South Asian Bilateral Trade Agreements in terms of scope, coverage, status and their impact on bilateral trade. The study shows how preferential tariff liberalisation is losing its relevance in the context of tariff reforms in concession-offering countries. The tariff rates on a number of consumer goods and raw materials have been brought down on a multilateral basis, not only as a part of a country’s tariff reforms, but, also to meet the challenge of hike in global commodity prices. This is eroding the benefits from preferential margin being received by concession-receiving countries. These factors point to the need for promoting trade liberalisation in products in which South Asian countries have real comparative advantage. However, such an approach would require that the CSs demonstrate political will to open up, more substantially, their bilateral trade by drastically reducing their sensitive lists following India’s initiative in this regard for LDCs. This calls for enhanced trade facilitation for the flow of not only goods, but also services and investment.