Trade Policy Reforms in South Asia

Abstract

M EMBERS of the South Asian Association for Regional Co-operation (SAARC — India, Pakistan, Bangladesh, Sri Lanka, Maldives, Nepal and Bhutan) have in recent years worked hard to reform their trade regimes. In the past, SAARC countries (except Sri Lanka) were among the least open of the world’s economies. The South Asian economies have performed less well in economic terms than their Eastern neighbours. Restrictive trade policies have often been cited as one factor explaining this poor performance. Now, however, both unilateral and preferential trade liberalisation policies have been initiated and implemented by these countries. In this respect, the 1990s represent a period of genuine and successful trade reform, a sharp contrast with the previous four decades. This paper reviews the achievements. New developments in the region raise some important questions. How did this region begin the change towards more liberal trade regimes? Why was reform delayed until the 1980s and 1990s? What were the main forces driving these changes? To what extent have these changes been successful? We seek to provide some answers. This paper provides an overview of recent trade policy changes in South Asia. To answer the above questions, the focus is restricted to unilateral trade liberalisation, ignoring regional integration and liberalisation. Section 2 sets the scene by outlining some of the region’s basic socio-economic characteristics. Section 3 documents briefly the key forces that in the 1980s and the 1990s prompted changes in these trade regimes. Section 4 outlines these changes and plots their progress, while Section 5 assesses the effects of the shifts in policy. The final section then draws some conclusions.