Report

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QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
cost analysis (BCA) for four projects has been
undertaken.
Results with Respect to Competitiveness and
Complementarity
The RCA indices are estimated for an average of two
time periods, i.e. 1991–93 and 2004–06 for four major
trading economies of SAFTA, viz., Bangladesh, India,
Pakistan and Sri Lanka at SITC five-digit level. The
competitive product basket for all the four countries,
i.e. where a country is more competitive (RCA>1) with
respect to other three has been arrived at for the two
time periods. The results show that the competitive
basket has changed substantially over time. The number
of products that each country has a competitive edge
in the region has increased over time. This indicates
the possibility of increased intra-regional trade. The
shift of these economies from agriculture to
manufacturing and from manufacturing to services in
some has led to higher trade potential.
An argument which has often been put forward
against SAFTA being economically viable to its member
countries is that there exists low complementarity
between the member countries. In other words, what
is exported by one country may not be imported by
the other country. Studies found the value of
complementarity index low for SAARC region.
However, using three year averages for the period 1991–
93 and 2003–05, complementarity indices has been
estimated for the four major trading partners with
respect to the region as a whole. The results show that
the complementarity index has improved considerably
over time for Bangladesh, India and Sri Lanka. This
implies that for these countries, the products that they
export are to a greater extent now being imported by
the region as a whole. The only country where the
complementarity index has declined is Pakistan. The
improved complementarity indices indicate strong
possibilities of higher intra-regional trade with SAFTA.
To examine the products which may be traded
within the region, intra-industry trade indices have been
estimated using Grubel Lloyd index. Intra-industry
trade has been found to have increased drastically in
sectors like agriculture raw materials, chemicals and
textiles. Within textiles, we find that the intra-industry
trade has increased in some of the sub-sectors of textiles
among the four major trading partners of the region.
This indicates that even within textiles, countries
specialise in products at different stages of production
or in differentiated products. The possibility of
establishing supply chains within the region exists in
some sectors.
The results of the economic analysis therefore
strongly suggest that there exists enormous potential
for intra-regional trade among the SAFTA economies.
The study further estimates the extent of additional
market access each country may gain and the total intraregional
trade that may result from SAFTA.
Results with Respect to Effective Additional
Market Access due to SAFTA
To gauge the benefits of a regional trade agreement it
is essential to identify the EAMA that it creates for its
members. There is a catena of unilateral, bilateral,
regional and sub-global level tariff concessions which
operate among the SAFTA economies. These include
concessions related to the Bangkok Agreement, global
system of trade preferences among developing countries
(GSTP), least developed countries (LDC), the Indo-
Bhutan, Indo-Nepal and Indo-Lanka Pakistan-Lanka
bilateral free trade areas (FTAs). Several more
agreements like the Bangladesh-Pakistan FTA and
BIMSTEC are at various stages of negotiation. Given
the history of multiplicity of agreements in concessions
among South Asian countries, all concessions have to
be considered to determine the benefits that SAFTA
offers over and above these.
In this context, the study attempts to capture
EAMA that is created as a result of SAFTA for its
various members Table 1 (a)–(c). Two aspects determine
the EAMA. The first is the sensitive list decided upon
and the second is the identification of those nonsensitive
products for which concessions are effectively
provided. SAFTA adopts a negative list approach to
tariff liberalisation. This implies that countries will
liberalise tariffs in all products, except those specified
in the negative lists (that have been negotiated and
agreed upon by all members).
The EAMA is determined through the following
three measures:
• The proportion of global value of imports of non-
South Asia’, along with Afghanistan, Bhutan Maldives, and Nepal (ABMN), and hence results could not be discretely attributed
to Pakistan. In the present GTAP model ABMN are a single agreegation.