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Article
Publication date: 11 September 2009

Faiz M. Shaikh

The purpose of this paper is to quantify and analyze the relative impact of agriculture Trade liberalization and South Asian Free Trade Agreement (SAFTA) over the global economic…

1436

Abstract

Purpose

The purpose of this paper is to quantify and analyze the relative impact of agriculture Trade liberalization and South Asian Free Trade Agreement (SAFTA) over the global economic welfare. The objectives are to analyze and quantify the potential economic cost and benefits of the prospective trade between India and Pakistan to consumers, producers and government of the two countries by analyzing the potential economic costs and benefits of Pak‐India trade in exporting various consumer goods.

Design/methodology/approach

The Global Trade Analysis Project (GTAP) database is the database for the GTAP model of the world economy, which is publicly available. The main data source for this model is “The GTAP 4 Data Base” which is easy to adapt to appropriate sectoral and regional aggregations that allow one to focus on specific policy questions. The regional databases in the model are derived from individual country input‐output (I/O) tables that provide information about the individual regional economies in the model. The bilateral trade data are primarily derived from the United Nations Commodity Trade database. The economic research service (ERS) of the United States Department of Agriculture supplies the missing information in the UN trade data.

Findings

The first scenario is when normal trading relations with India will be restored; it means that each country will give the most‐favored‐nations (MFN) status to the other. In the second scenario, the SAFTA will be operative, and there will be free trade between India and Pakistan, and both countries will remove all tariffs and custom duties from each other's imports. The GTAP model is used to analyze the possible impact of SAFTA on Pakistan in a multi‐country, multi‐sector applied general equilibrium framework.

Originality/value

The analysis based on simulations reveals that current demand for Pakistani consumer items will expand after the free trade agreement (FTA) and consumer surplus will increase. The export of consumer items may be conducted by two scenarios, i.e. when normal trading relations between Pakistan and India will be restored and when there will be a free trade between Pakistan and India in the presence of SAFTA. Results based on this research reveal that, on SAFTA grounds, there will be net export benefits in Pakistan's economy.

Details

Journal of International Trade Law and Policy, vol. 8 no. 3
Type: Research Article
ISSN: 1477-0024

Keywords

Article
Publication date: 7 January 2014

A.K.M. Nurul Hossain and Mohammad Abdul Munim Joarder

The authors considered three regional trading agreements (RTAs): European Union (EU-25), ASEAN Free Trade Area (AFTA), and South Asian Free Trade Area (SAFTA) to test the…

Abstract

Purpose

The authors considered three regional trading agreements (RTAs): European Union (EU-25), ASEAN Free Trade Area (AFTA), and South Asian Free Trade Area (SAFTA) to test the hypothesis that poor members within a RTA catch rich members and thereby follow the path of income convergence. Of particular interest is to test whether partial openness (i.e. formation of RTAs) or openness or political conditions are conducive to economic growth among the member countries of RTAs. The paper aims to discuss these issues.

Design/methodology/approach

The authors used pooled datasets from three different RTAs, namely the EU-25, the AFTA, and the SAFTA. Taking five years average for all variables, starting from 1961 to 1965 and extending to 2001-2005, the authors tested the hypothesis that the growth rate of per capita GDP is negatively related to the initial level of per capita GDP. Constructing a dynamic behavioral equation and forming the reduced form equation, the authors calculated the s-convergence, and both conditional and unconditional convergence.

Findings

The authors found that both the EU-25 and the AFTA exhibit s-convergence, and both conditional and unconditional convergence, while the reverse evidence was observed in the case of the SAFTA. However, the speed of convergence of the AFTA was found to be much higher than that of the EU-25.

Originality/value

Formation of RTA by countries should be considered as an essential condition to achieve sustained economic growth. In addition, political rights, trade openness, and more importantly benevolence of the member countries within the RTA must be shown to sustain economic growth and convergence; otherwise with the passage of time, divergence among the RTA members will be evident.

Details

Journal of Economic Studies, vol. 41 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 24 September 2010

John Gilbert and Reza Oladi

South Asia is one of the world's poorest regions. In this chapter we use a representative household model of South Asia to explore the potential impacts of regional trade…

Abstract

South Asia is one of the world's poorest regions. In this chapter we use a representative household model of South Asia to explore the potential impacts of regional trade liberalization under the auspices of SAFTA on both the distribution of economic gains across the countries of South Asia, and across various groups within South Asia. We also discuss the underlying theory of a potential extension to our approach.

Details

New Developments in Computable General Equilibrium Analysis for Trade Policy
Type: Book
ISBN: 978-0-85724-142-9

Keywords

Article
Publication date: 24 August 2018

Shaista Alam

The purpose of this study is to investigate the effect of trade integration on Pakistan’s export performance (value of exports, number of exporters and number of products per…

Abstract

Purpose

The purpose of this study is to investigate the effect of trade integration on Pakistan’s export performance (value of exports, number of exporters and number of products per exporter) during 2003 to 2010.

Design/methodology/approach

Data from the World Bank Exporters Dynamics Database are analysed using fixed effect panel data techniques.

Findings

The results suggest that trade integration with South Asian Free Trade Area (SAFTA), China and Iran play remarkable role in improving export value by 73, 29 and 55 per cent, respectively. It is found that on average more than 140 and 339 exporters increase after integration with SAFTA and China, respectively, and during the study period, 1,605 and 606 exporters entered into SAFTA and Chinese market, respectively. Moreover, 182 and 146 additional exporters entered in Malaysian and Iranian export market after integration, which is 19 and 98 per cent, respectively, of initial year’s number of exporters. In addition, Malaysia and Mauritius show positive and considerable effect on diversification of product variety.

Originality/value

This is an original empirical research. The contributions of the paper are many fold: this paper is first to analyse the effect of Pakistan’s trade integration established during 2000s decade; pioneer contribution of this study is to use the number of exporters and number of products, as well as the value of exports to measure the export performance of Pakistan; and this study uses positive and negative discrepancies in export value data, number of HS6 products exported as a proxy of product diversification, share of industrial exports in total exports and share of textile exports in industrial exports.

Details

International Journal of Development Issues, vol. 17 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

Open Access
Article
Publication date: 27 April 2022

Sun Yan and Shahzad Alvi

The 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…

3725

Abstract

Purpose

The 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/approach

The 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.

Findings

The 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/value

The 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.

Details

International Journal of Climate Change Strategies and Management, vol. 14 no. 3
Type: Research Article
ISSN: 1756-8692

Keywords

Article
Publication date: 31 May 2022

Rakesh Kumar

The paper presents the facts on the policy challenges and opportunities in the way forward of trade and economic co-operation in South Asia amid the coronavirus disease 2019…

Abstract

Purpose

The paper presents the facts on the policy challenges and opportunities in the way forward of trade and economic co-operation in South Asia amid the coronavirus disease 2019, which comes to be the least economically integrated region worldwide. Due to tense geopolitics in South Asia, trade is heavily biased toward extra-regional markets despite of existing regional trade agreements (TAs) in the region.

Design/methodology/approach

Having tested the stationarity of data with structural break, the paper uses intra-regional trade in addition to other domestic economic variables as exogenous regressors in autoregressive distributed lag multivariate framework, hence raising the quality of statistical inference.

Findings

This paper highlights that intra-regional trade significantly affects the economic welfare as measured by Gross Domestic Product per capita of the people from the region, hence raising the need for higher regional trade openness. If trade barriers are overcome, all the South Asian countries will gain through effective implementation of regional TAs.

Research limitations/implications

The study relies on the multivariate technique with regional trade share as the main exogenous variable. In addition, the regulatory and economic conditions of all countries are different which also tends to affect the mutual degree of trade relations.

Practical implications

Over the economic reasons, the manmade barriers owing to political differences are the root cause for the low intra-regional trade. Amid the pandemic, South Asian courtiers have the high time to leverage the bilateral trade for mutual benefits. India being the largest economy can play a decisive role in pushing forward the regional trade bloc – South Asian Association for Regional Cooperation (SAARC) – for achieving its objective through multilateral engagements in a wider perspective.

Originality/value

The present study makes pioneer efforts to examine the dynamic linkages between regional trade and economic growth. The results provide new insight into the dynamics of benefits driven by trade interdependency.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 25 September 2019

Rakesh Kumar

The purpose of this paper is to test the dynamic linkages among the stock markets of four South Asian countries (India, Pakistan, Bangladesh and Sri Lanka) in the backdrop of…

Abstract

Purpose

The purpose of this paper is to test the dynamic linkages among the stock markets of four South Asian countries (India, Pakistan, Bangladesh and Sri Lanka) in the backdrop of trade interdependency.

Design/methodology/approach

Listed indices are used to serve the proxy of stock markets of four countries for the period: January 2000–December 2018. The study uses the autoregressive distributed lag model and Granger causality techniques in multivariate frameworks while focusing on intraregional trade as an exogenous factor for testing the long- and short-run causality in the given data set, hence raising the quality of statistical inference.

Findings

The results highlight that India and Pakistan are net exporters to the South Asian region, while Bangladesh and Sri Lanka are net importers from the region. While testing the stock markets linkages, the expanded intraregional trade volumes (exports plus imports) have occurred with the significant cointegration of stock markets of India and Pakistan with the other stock markets in the long run. In the short run, the stock markets of India, Pakistan and Sri Lanka report bidirectional causality without having significant spillovers of intraregional trade on the stock prices.

Research limitations/implications

The study relies on the multivariate techniques with stock prices and regional trade share as the exogenous variables. Further the regulatory, political and economic conditions of sample countries are fundamentally different which in turn affect their degree of trade interdependency and integration between the stock markets.

Practical implications

Nonsignificant cointegration of the stock markets of Sri Lanka and Bangladesh highlights the possibility of portfolio diversification in the long run, while the significant bidirectional causalities between the stock markets highlight the lesser degree of portfolio diversifications in the short run.

Originality/value

Pioneer efforts are made to examine the dynamic linkages between the South Asian stock markets while focusing on regional trade interdependency. The results provide new insight in the dynamics of stock returns of South Asian stock markets in the backdrop of intraregional trade.

Details

International Journal of Emerging Markets, vol. 15 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 23 January 2024

Edirimuni Nadeesh Rangana de Silva

South Asia is a region urgently seeking development, although it has failed in regional integration. It is the second least integrated region regarding the number of Free Trade…

Abstract

Purpose

South Asia is a region urgently seeking development, although it has failed in regional integration. It is the second least integrated region regarding the number of Free Trade Agreements (FTAs) and can thus be recognised as a missing bloc in the global multilateral system. This study aims to focus on South Asian FTAs and explores the problems of the inter-relations and compatibility between the systemic and regional trade systems.

Design/methodology/approach

The study proposes a framework to benchmark the compatibility of South Asian FTAs with WTO rules. Primary data from 2000 to 2020, including descriptive analyses of reports, legal text of the FTAs, official documents and factual presentations, have been collected and analysed through thematic analysis using the proposed framework.

Findings

The study finds that, although South Asian FTAs meet most of the WTO requirements, they are not progressing toward facilitating and promoting trade. Data from 2000 to 2020 show us that South Asian FTAs have not significantly impacted trade between themselves. The study argues that, although South Asian FTAs fulfil some benchmarks, they show only a lukewarm interest in contributing to the international trading system as building blocs. It is therefore recommended that the case of South Asian trade liberalisation must be understood contextually and be given careful and exclusive attention by the WTO.

Originality/value

As such, this study is the first to claim that South Asian FTAs are not fully compatible with the WTO rules. They remain a missing regional bloc in the multilateral system, rather than a building bloc or a stumbling bloc, delaying the region’s opportunity to develop as a region and within the larger system.

Details

Journal of International Trade Law and Policy, vol. 23 no. 1
Type: Research Article
ISSN: 1477-0024

Keywords

Article
Publication date: 16 August 2013

Tsunehiro Otsuki, Keiichiro Honda and John S. Wilson

The purpose of this study is to discuss the progress and challenges of South Asia in trade liberalization and facilitation, and to quantitatively demonstrate the potential…

1555

Abstract

Purpose

The purpose of this study is to discuss the progress and challenges of South Asia in trade liberalization and facilitation, and to quantitatively demonstrate the potential benefits of trade facilitation in South Asia.

Design/methodology/approach

The quantitative study simulates the trade gains to the region based on the gravity model estimation for 101 world countries.

Findings

The gains to the region are estimated to be $31 billion in 2007 and $26 billion in 2010 if South Asia and the “rest of the world” raised levels of trade facilitation halfway to the world average. Of those trade gains, about 80 per cent (in 2007) and 67 per cent (in 2010) of the total gains to South Asia will be generated from South Asia's own efforts.

Originality/value

Thus this study demonstrates the importance of trade facilitation as an instrument for expansion of trade both within South Asia and with the rest of the world, as well as policy recommendations regarding the priority area for reform.

Details

South Asian Journal of Global Business Research, vol. 2 no. 2
Type: Research Article
ISSN: 2045-4457

Keywords

Article
Publication date: 15 June 2012

Mohammad Masudur Rahman and Chanwahn Kim

The purpose of this paper is to explore the trade and investment potential under the ambit of sub‐regional cooperation comprising the four contiguous countries of Bangladesh…

4354

Abstract

Purpose

The purpose of this paper is to explore the trade and investment potential under the ambit of sub‐regional cooperation comprising the four contiguous countries of Bangladesh, China, India and Myanmar (BCIM).

Design/methodology/approach

The study addressed both intra‐regional and intra‐industrial trade, applying a dynamic gravity model of bilateral trade flows by product group of BEC's 1‐digit product classification, to set a panel data for the period of 1992‐2009.

Findings

The analysis reveals that higher trade transaction costs and tariff between each pair of countries reduce the trade flow. One of the major findings of the paper is that a large part of BCIM's trade has remained unrealized and the trade transaction cost is one of the major trading barriers prohibiting the growth of BCIM intra‐regional trade. The paper concludes that liberalization of non‐policy barriers will spur BCIM's trade, particularly in a time of ongoing global economic and financial crisis.

Practical implications

The study reinforces that improvement in infrastructure that leads to less trade transportation costs should be a necessary step in order to realize BCIM's trade potential. The paper concludes that liberalization of non‐policy barriers will spur BCIM's trade and economic cooperation, particularly in time of ongoing global economic and financial crisis.

Originality/value

This paper is the first‐ever attempt to estimate the trade potential of BCIM countries using dynamic gravity model.

Details

Journal of International Trade Law and Policy, vol. 11 no. 2
Type: Research Article
ISSN: 1477-0024

Keywords

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