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South Asia: Does Preferential Trade Liberalization Make Sense?

Author

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  • Arvind Panagariya

    (University of Maryland)

Abstract
This paper systematically analyses the issue of trade liberalisation in the South Asia region and offers a qualitative assessment of alternative approaches. I compare two broad approaches to trade liberalisation: non‐discriminatory and preferential. The former approach can be pursued on a unilateral basis by each country in the region, on a concerted basis by the countries in the region, or multilateral basis under the auspices of the WTO. The latter approach can take the form of criss‐crossing bilateral free trade areas between various countries in the region or a region‐wide free trade area. The view I take in the paper is that the move towards preferential trading is a mistake, at least from the viewpoint of India. India continues to have very high trade barriers so that the scope for trade diversion and the losses accompanying it are likely to be considerable. Business lobbies being relatively powerful in most of the countries in the region, they are likely to exploit the rules of origin and sectoral exceptions in these arrangements in ways that will maximise trade diversion and minimise trade creation. Inasmuch as the rules of origin give bureaucrats power, employment and opportunities to share in the rents created by tariff preferences, they too will become active parties to the diversionary tactics of business lobbies. Therefore, the member countries are better advised to proceed along non‐discriminatory lines in achieving further liberalisation.
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Suggested Citation

  • Arvind Panagariya, 2003. "South Asia: Does Preferential Trade Liberalization Make Sense?," International Trade 0309011, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0309011
    Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; figures: included/request from author/draw your own
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Shafiullah & Ravinthirakumaran Navaratnam, 2016. "Do Bangladesh and Sri Lanka Enjoy Export-Led Growth? A Comparison of Two Small South Asian Economies," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(1), pages 114-132, March.
    2. Nilanjan Banik & John Gilbert, 2010. "Regional Integration and Trade Costs in South Asia," Chapters, in: Douglas H. Brooks & Susan F. Stone (ed.), Trade Facilitation and Regional Cooperation in Asia, chapter 4, Edward Elgar Publishing.
    3. M. G. C. N. Madadeniya & S. Sivarajasingham, 2018. "Which Is Better For Economic Growth In Sri Lanka, Trade With Saarc Or Trade With Asean?," Journal of Smart Economic Growth, , vol. 3(3), pages 95-116, December.
    4. Pradeep S Mehta & Pranav Kumar, 2004. "RTAs and South Asia: Options in the Wake of Cancun Fiasco," ASARC Working Papers 2004-11, The Australian National University, Australia South Asia Research Centre.
    5. Elbehri, Aziz & Hertel, Thomas, 2006. "A Comparative Analysis of the EU-Morocco FTA vs. Multilateral Liberalization," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 496-525.
    6. Dushni Weerakoon & Jayanthi Thennakoon, 2008. "The South Asian Free Trade Agreement," Journal of South Asian Development, , vol. 3(1), pages 135-149, June.
    7. Sharma, Anupa & Grant, Jason & Boys, Kathryn, 2015. "Truly Preferential Treatment? Reconsidering the Generalized System of (Trade) Preferences," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205890, Agricultural and Applied Economics Association.
    8. Dushni Weerakoon, 2010. "The Political Economy of Trade Integration in South Asia: The Role of India," The World Economy, Wiley Blackwell, vol. 33(7), pages 916-927, July.
    9. Anupa Sharma & Jason Grant & Kathryn Boys, 2021. "Truly Preferential Treatment? Reconsidering the Generalised System of (Trade) Preferences with Competing Suppliers," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(2), pages 500-524, June.
    10. Kumar, Rajiv & Singh, Manjeeta, 2009. "India’s Role in South Asia Trade and Investment Integration," Working Papers on Regional Economic Integration 32, Asian Development Bank.
    11. Ghulam Mustafa, 2023. "The Dynamic Relationship Between Financial Development, Economic Growth, Foreign Direct Investment and Trade Openness: Evidence from South Asian Countries," Millennial Asia, , vol. 14(3), pages 406-433, September.
    12. Ahmed, S. Amer & Walmsley, Terrie L., 2006. "The Liberalization of Temporary Migration: India’s Story," Conference papers 331512, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. World Bank, 2010. "Food Price Increases in South Asia : National Responses and Regional Dimensions," World Bank Publications - Reports 2885, The World Bank Group.
    14. Jose Daniel Rodríguez-Delgado, 2007. "Safta: Living in a World of Regional Trade Agreements," IMF Working Papers 2007/023, International Monetary Fund.
    15. Oliver Morrissey & Chris Jones, 2008. "Missed Opportunities: The WTO Trade Policy Review for the East African Community," The World Economy, Wiley Blackwell, vol. 31(11), pages 1409-1432, November.
    16. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
    17. G.D.N.M Godagampala, 2018. "Impact Of Investments In Human Capital Determinants On Economic Growth: Time Series Analysis Based On Sri Lanka," Journal of Smart Economic Growth, , vol. 3(3), pages 85-93, December.
    18. Baysan, Tercan & Panagariya, Arvind & Pitigala, Nihal, 2006. "Preferential trading in South Asia," Policy Research Working Paper Series 3813, The World Bank.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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