South Asian Free Trade Agreement Research Articles

Dynamics of Trade Specialization and Performance of SAFTA: A Case Study of Afghanistan

The idea that regional integration is the podium of economic growth dates back a long time. Even now, a plethora of literature confirms a strong and positive link between regional integration and economic growth. However, most of these studies are focused on developed countries. Indeed, literature from developing countries is scant, and that from underdeveloped and landlocked countries like Afghanistan is almost non-existent. In the context of South Asian Free Trade Agreement, this article endeavours to innovatively scrutinize the trends in exports, imports and trade at different industry levels in the trade specialization of Afghanistan. At the harmonized standard 6-digit level of product classification, the study has employed the Lafay Index approach. The study finds that Afghanistan has a greater affinity for resource-intensive manufacturing products and non-fuel primary commodities. The study suggests that Afghanistan should confront issues such as its trade deficit, its dependency on agricultural products for export and the underutilization of its natural resources. The results show that Afghanistan still has a competitive disadvantage over South Asian Association for Regional Cooperation (SAARC) members at different industry levels. The study recommends dealing with problems including technology diffusion, product diversity and quality sophistication at various industrial levels, which restrict a higher degree of trade specialization.JEL Codes: F1, F10, F14

Food security in South Asia under climate change and economic policies

PurposeThe first purpose of this study is to examine the impacts of climate-caused cereal productivity changes on food security, welfare and GDP in South Asian countries. The second purpose is to assess the agricultural subsidies and South Asia Free Trade Agreement (SAFTA) as policy responses to climate change.Design/methodology/approachThe present study uses the computable general equilibrium (CGE) framework and econometric approach in an integrated manner to examine the economic impacts of climate-caused cereal productivity changes in South Asian countries. An econometric model is used to identify the impact of climate change on cereal yields and CGE approach is used to assess the future effect of climate change through simulations. In this course, the econometric findings are applied to Multiregional Global Trade Analysis Project 10 and then the model is calibrated for future projection.FindingsThe results indicate that there is a decrease in cereals production because of climate change and eventually it increases the prices of cereals, decreases the local consumption and GDP and, as a result, causes a loss in welfare. Subsidies and SAFTA have been found to have no substantial impact on increasing food security in South Asia.Originality/valueThe present study uses the concept of food demand for all cereals in an integrated way and focuses on the fiscal and trade policy responses to climate change.

Post-SAFTA NTMs for Agricultural Trade: Revelations from the India–South Asia Approach

Commitment of South Asian Free Trade Agreement (SAFTA) from South Asian Preferential Trading Agreement (SAPTA) for trade liberalisation was one of the hopes in South Asia. This article highlights untapped trade potential in agro-trade between India and its trading partners in South Asia through Trade Potential Index (TPI). This article evaluates post-SAFTA effects of non-tariff measures (NTMs) on agro-products (HS 6-digit level) over the period 2004–2016. After 2004, many agro-products of South Asia have suffered trade restrictions which create challenges over SAFTA implementation. This article inquires whether NTMs in post-SAFTA has been trade creating or trade inhibiting in agro-trade for member countries as per the earlier commitments. Research methodology for this study includes qualitative and quantitative approach. Qualitative approach examines agri-trade constraints faced between India and rest seven South Asian countries and vice versa. Quantitative analysis explores prevailing trade barriers in selected agro-products during 2002–2016 applying Regional Trade Barrier Index and NTM Coverage Ratio. Results establish the presence of agri-trade barriers from South Asian countries against India as well as India’s barriers against rest seven countries of South Asia. Study concludes that agri-trade restrictions prevail in South Asia despite SAFTA which shows the slow process of trade liberalisation. JEL Codes: F13, F14, Q17

Pakistan’s Global Trade Potential: A Gravity Model Approach

The international trade of Pakistan is highly concentrated on a few goods and markets. This study investigates macroeconomic behaviour of trade flow and explores potential trade markets for Pakistan using an augmented gravity model on a large panel of 47 cross-sections from 1980 to 2013. The result of standard gravity variables shows consistent findings with statistically significant t-statistics, whereas augmented variables reveal that relative price has a positive impact with lower price elasticity. The result of binary variables shows that Pakistan’s trade is more with countries having the same language, whereas lower trade is observed with bordering countries. The result of South Asian Free Trade Agreement (SAFTA) revealed ineffectiveness of regional integration on the creation of trade for Pakistan, whereas, bilateral free trade agreements (BFTAs) have created considerable trade. The finding of trade potential revealed exhausted potential with major trading partners and there is a need for greater trade diversification from exhausted to potential countries. It has higher untapped potential with Nepal, Iraq, India, Philippines and Jordan, respectively, in Asia, whereas European countries have the highest potential. The results concluded that Pakistan can diversify its trade from exhausted to potential countries through individual BFTAs and multilateral free trade agreements. South Asian countries should address their disputes and revisit SAFTA aiming to improve regional trade and growth.

Trade Impacts of South Asian Free Trade Agreements in Sri Lanka

This article aims to examine the trade effects of the South Asian Free Trade Agreement (SAFTA) with a focus on Sri Lanka, by applying a gravity trade model. The study targets the following three FTAs: the SAFTA, the India–Sri Lanka Free Trade Agreement (ISFTA), and the Pakistan–Sri Lanka Free Trade Agreement (PSFTA). The outcomes of the gravity trade model estimation suggested that the trade creation effects were identified in the ISFTA, while those were not verified in the SAFTA and that the PSFTA had the trade creation effects only on the Sri Lankan imports. Those results seem to reflect the differentials in the preferential tariff rates. In particular, ISFTA could have the predominant positive effects on Sri Lankan trade flows due to its lowest preferential tariff rates, and thus the SAFTA effect might be crowded out at the current stage of Sri Lankan trade. JEL: F13, F14, O53

Analysis of South Asian Free Trade Agreement: Focus on Food Safety

The South Asian Free Trade Agreement, at time of inception, encompassed some of the world's least liberalized economies. These economies were well positioned to experience gains from a multilateral agreement. In this paper, we critically analyze the structure, effectiveness and impact of the agreement in terms of not only trade, but also food safety and other issues of interest specific to the participating countries in the context of the agreement. The results of the analysis suggest underperformance in terms of both trade and food safety. To better understand some of the regional specific challenges present in the food safety environment in the region, the paper also examines the status of the Indian carabeef industry.https://doi.org/10.21423/jrs-v06n02p018 (DOI assigned 1/24/2019)

Impact of Safta on Capital Market Integration of South Asia: Evidence from Cointegration Analysis

Abstract Regional Trade agreements (RTAs) are increasing worldwide because of associated economic benefits such as increased cross border investment and trade, development and integration markets. This paper investigates how South Asian Free Trade Agreement (SAFTA) impact on the integration of South Asian capital markets. Weekly data of capital market indices of three countries (India, Pakistan and Sri Lanka) have been analyzed for overall (1998-2017) and two sub periods, 1998-2006 (Pre SAFTA) and 2009-2017 (Post SAFTA). Correlation coefficients, Unit root tests and Johansen and Juselius (JJ) Cointegration technique has been applied to access the integration between the markets. The main findings suggest that integration between the South Asian capital markets has been increased in Post-SAFTA period. The evidence that SAFTA pact results in increased integration of regional capital markets has important implications for investors and policymakers.

TRADE POLICIES OF SOUTH ASIAN ASSOCIATION OF REGIONAL COOPERATION COUNTRIES (RESEARCH PAPER)

The Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka these all countries South Asian Association of Regional Cooperation (SAARC) countries denoted to as “Contracting States”. Commitment of South Asia Preferential Tarde Agreement among SAARC countries in 1995 and South Asian Free Trade Agreement (SAFTA) in 2005 to promote the regional cooperation for getting benefit on the base of many rules and regulation creating equality, remove the barriers on trade between all SAARC countries. When remove barriers on trade then sustainable growth through trade in economy of all SAARC countries.

Role of Trade in Promoting Entrepreneurship Development between North East India and South East Asia

Entrepreneurship plays a vital role for economic growth and development of a nation or a region within the nation. Out of many important benefits of entrepreneurship development, generation of employment opportunities for job seekers is one of the most important issues. India‟s North Eastern Region (NER) is unique in terms of growth opportunities as it has the potential to develop into India‟s economic power house being a vibrant source of energy, oil, natural gas, coal, and limestone, besides being endowed with its largest perennial water system in the river Brahmaputra and its tributaries. Aptly considered as „The Gateway‟ to its South East Asian neigh bours, India‟s North East can emerge as a strategic base for foreign and domestic investors to tap into the South East Asian region, which is getting integrated through the operationalization of the South Asian Free Trade Agreement (SAFTA) and the Agreement on Trade in Services. At the initiative of the present Government at the center, the slogan of “Make in India” has gained immense popularity with a more vibrant “Act East Policy” now taking over the formerly „Look East Policy‟. The NER's unlimited tourism opportunities, unique performing arts, and varied cuisine and handicrafts provides the ideal setting for its development as a hub for dealing in trade and commerce with India‟s eastern neighbours and boosting entrepreneurship. Development of NER will not only enhance the economy ofIndia but also will foster bilateral integration amongst the East and South East Asian neighbours. This paper therefore is an attempt to understand in what way will trade between the North East India and South East Asian regions can boost entrepreneurship and generate self employment.

India’s Trade Potential and Free Trade Agreements: A Stochastic Frontier Gravity Approach

This paper analyses the role of Free Trade Agreements in determining export and import efficiency levels in India using stochastic frontier version of gravity model. We estimate the impact of selected FTAs of India (its bilateral FTAs, FTA with ASEAN and South Asian FTA) and regulatory quality on the efficiency of exports and imports over the period of 2000–2014. The results indicate that India’s bilateral FTAs and its FTA with the ASEAN group help in improving the export and import efficiency respectively. However, the South Asian Free Trade Agreement is statistically insignificant for India’s export and import efficiency. The results also highlight importance of trading partners’ regulatory quality for enhancing the India’s trade efficiency and note that the impacts of regulatory quality are non-monotonic.

South Asian Countries in Regional Integration Perspective: A Critical Review

This article focuses on regional integration among the eight South Asian countries i.e. Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. This study attempts to undertake an in-depth assessment of the potential of South Asian Free Trade Agreement (SAFTA) in South Asian Association for Regional Cooperation (SAARC) countries. The study is based on secondary data collected from different reliable sources. SAFTA can be a strong source of economic development and it can also enhance socio-economic opportunities throughout the region. Larger and economically stronger countries can achieve better bargaining power on trade negotiations by utilizing existing competitive advantages and regional expertise of the region as a unit. This approach can also help less developed countries to develop their economies and also can ensure the best possible use of the existing resources.Journal of Business and Technology (Dhaka) Vol.9(2) 2014; 43-59

Gravity Model by Panel Data Approach

This article has examined the determinants of export and import flows of countries in the South Asia through estimations for a country panel data of eight countries during the period 1985–2011 using a gravity model. The estimated result suggests that gross domestic product (GDP) and population among other factors can explain export and import flows. Perhaps the most important finding of the study is that South Asia Free Trade Agreement (SAFTA) has produced trade creation among its members. Finally, the study found that geographic distance might be impeding trade, and tariff has negative effect on the trade. The study also found that the nature of trade is intra-industry among the member countries of South Asian Association for Regional Cooperation (SAARC).

Issues of Exporting Rice from Pakistan to India in the context of South Asian Free Trade Agreement (SAFTA)

This research investigates the issues of Textile exporters in the context of PAK-India trade relation. Data were collected from 100 exporters by using simple random technique. Data were analyzed by using SPSS-20 version;a structural questionnaire was developed for the reliability and validity of the data. It was revealed that thetariffbarrier might below due to several rounds of GATT and WTO. It was further revealed majorbarriers but cultur alone, the currency exchange rate and information albarriertend to be the major barriers to export.The Legal and Politic albarriers,Languages and Customs, demand of the product, working structure/schedule of the targeting country,business environment are not regarded as barriers to export

How effective is the Free Trade Agreement in South Asia? An empirical investigation

We investigate the efficacy of preferential trade liberalization in changing the observed trade pattern among the South Asian countries that have entered into the South Asian Free Trade Agreement (SAFTA). Although in its nascent stage, some data are now available to provide an ex-post evaluation of the performance of this bloc. Using these data, we find no empirical evidence of trade creation among SAFTA members, which is not surprising given that tariff concessions in SAFTA are small and are offset by complicated rules of origin procedure. However, a substantial and statistically significant increase in exports from SAFTA members to the rest of the world is found. Several panel strategies are used to check the sensitivity of the results against the assumptions of the estimation strategies. As some key coefficient estimates are found to differ across estimation methods, policymakers in South Asia need to use care in relying on the results from empirical studies, including our own, in formulating their trade policies.

Reducing poverty and income inequality in Sri Lanka: does trade liberalisation help?

The impacts of trade liberalisation in South Asia on poverty and income inequality in Sri Lanka are examined in this paper using a multi-country computable general equilibrium model. A non-parametric extended representative household-agent approach employing micro-household survey data is used to estimate the income inequality and poverty effects. Two trade liberalisation policy simulations are investigated: (1) the formation of a South Asian Free Trade Agreement and (2) unilateral trade liberalisation in South Asia. The results indicate that overall income inequality and income inequality among different household groups in the urban, rural and estate sectors in Sri Lanka would fall under both trade liberalisation policies. Foster, Greer and Thorbecke indices reveal that poverty would also decline in all three sectors. In both instances, unilateral trade liberalisation delivers the greatest reductions.

Do free trade agreements promote intra-industry trade? The case of India and its FTAs

The paper examines the role of free trade agreements (FTAs) in promoting intra–industry trade (IIT) between India and its selected FTAs - Association of South East Asian Nations (ASEAN), South Asian Free Trade Agreement (SAFTA) and Sri Lanka. IIT is evident for India's trade with Sri Lanka and Singapore whereas the same is low for other countries. Even the observed IIT is mostly in the form of vertical IIT (VIIT). The results based on fixed effects model using gravity equation shows that the FTAs have a significant impact in promoting IIT. This can be attributed to the high levels of VIIT observed after trade agreements are signed. The negative and significant GDP difference confirms the hypothesis of an inverse relationship between the level of IIT and the differences in development of the trading economies. If countries within an FTA are with different levels of development, then the resultant trade would mainly exhibit an inter–industry structure thus indicating possibilities of greater resource adjustment costs.

The Prospects for Indo-Pakistan Trade

This article analyzes the volume and pattern of India–Pakistan trade given the extent of trade complementarity between the two countries and, in the presence of a restricted positive list of imports from India, the tariff regime and nontariff barriers in the two countries. The study also assesses the impact on bilateral trade of granting most-favored nation status to India, the removal of some of the impediments to trade, and the implementation of the final phase of import tariff reduction under the South Asian Free Trade Agreement. Finally, the article highlights emerging opportunities and possible threats to the process of trade normalization between the two countries.

Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model

As part of its growth strategy, Bangladesh instituted a trade liberalization process in the early 1990s which gained momentum in later years. Trade grew from 24.4 to 45% of GDP between 1980–81 and 2007–08, an indicator of increased liberalization as well as the growing importance of the external sector in Bangladesh. Apart from its unilateral liberalization, Bangladesh participates in three different regional trade agreements (RTAs): the South Asian Free Trade Agreement (SAFTA), the Asia Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation Free Trade Area (BIMSTEC FTA). In addition, Bangladesh signed preferential trade agreements (PTAs) with the member countries of the Developing 8 (D8). Because of the growing importance of RTAs, this study investigates their contribution to the export flows from Bangladesh using the gravity model that has become the primary tool for estimating the trade effects of regional integration. Regression results of bilateral exports for 40 countries from 1992–2009 indicate two crucial aspects. Firstly, all the RTAs consistently maintained statistically significant negative signs, except the BIMSTEC FTA and SAFTA, which showed insignificantly positive and insignificantly negative effects respectively. Secondly, the intensity of negative effects and the level of significance have shown a declining trend as the status of those blocs has changed from political or economic cooperation agreements to preferential agreements and from preferential agreements to free trade agreements. Thus, the intensity of tariff liberalization and the degree of sectoral coverage seem to be the important determinants of the RTAs’ performance. Therefore, experts expect that full-fledged implementation of FTA provisions and the elimination of all tariff and non-tariff barriers might result in a higher degree of integration.

Welfare Effects in Regional Block Trade: A Case Study of Exporting Dried Dates from Khairpur Mirs

This research investigates the welfare effect of economic costs and benefits of Pak-India trade with exportingdried dates. The first scenario is when normal trading relation with India will be restored. It means that bothcountries will give the MFN status to each other. in the second scenario, the SAFA will be operative and therewill be free trade between India and Pakistan and both countries will remora all tariffs and custom duties fromeach other's imports. After employing the simplified static analysis framework, the analysis based on simulationsreveals that current demand for Khairpur dates will expand after the FTA and consumer surplus will increase.The drop in the domestic prices of dates will increase the production of many down stream industries, which willhave pleasant multiplier effects on the economy. Overview of dates industry and results of economic analysisindicate that Pakistan will get benefit from the FTA by getting the cheaper labor for which will increase theircompetitiveness, and to reduce the costs of trade diversion in some commodities, the government should reduceMFN tariffs on industrial dates before implementing the FTA a key rule of multilateral trade system is thereduction in trade barriers should be applied, on a most-favored nation basis (MFN), to all WTO members. Theonly exception to the MFN principle built into the GATT legal framework is the provision for reciprocal freetrade within customs unions and free trade areas (GATT article XXIV) objectives of the present study is toanalyze qualitatively and quantify the potential economic cost and benefits of prospective trade between Indiaand Pakistan to consumers, producers and government of the two countries for export of dried date under thefollowing two scenarios, i.e, when normal trading relations between Pakistan and India will be restored andwhen there will be a free trade between Pakistan and India in the presence of South Asian Free Trade Agreement(SAFTA). Following the analytical framework discussed by PO managerial (20001), we employ the simplifiedstatic analysis for individual industries to instigate the welfare gains or losses.

SAFTA as An Instrument of Rejuvenating Indo-Pak Trade Relations

The history of Indo-Pak economic relations has perhaps been one of the most controversial and sensitive issue that has held the centrestage of South Asian politics. During 1997-2004, Pakistan�s actual imports from India were 4.8 per cent and India�s actual imports from Pakistan were 6.4 per cent only of the respective potential imports, on an average per annum. The establishment of SAARC (South Asian Association for Regional Cooperation) in December 1985 has also played an important role in boosting the intra-trade ties between India and Pakistan. The agreement of South Asian Free Trade Agreement (SAFTA), effective from 1 January 2006 has also further improved trade between the two countries. SAFTA is a step forward in the right direction for fostering regional economic integration. But a major limitation of SAFTA is its narrow coverage. Different countries have kept a significant part of their imports out of the purview of the Tariff Liberalization Programme (TLP) by putting them on the sensitive or negative list. Apparently, 58.5 per cent of India�s exports to SAARC countries are subject to sensitive list (Pakistan 34%). Pakistan�s imports from India are still governed by a positive list as Pakistan has not provided Most Favoured Nation (MFN) status to India. Therefore, there is urgent need for extending the coverage of the Agreement to substantially all trade in the region, as per the WTO requirement. This paper looks deep into the problems and potentials of trade between India and Pakistan. The article analyzes how SAFTA has in fact given a fillip to a better understanding between the two countries; how the latter has contributed to the furthering of the two countries� relations notwithstanding the fact that the bilateral disputes are out of the purview of the SAARC agenda. The article also focuses on how the inclusion of bilateral problems would derail the SAARC process.