Enhancing Intra-Regional Trade in SAARC

SAARC has so far not succeeded to make use of regional cooperation and integration especially in terms of unleashing potential of intra-regional trade to spur regional economic growth, employment and poverty reduction. The cost of non-cooperation among the member countries of SAARC result in consumer welfare losses and higher intensity of trade diversion. South Asia’s actual volume of trade has constantly been falling short of its potential by huge margin. Over 70% of the regions trade potential remains unexploited due higher intensity of extra-regional trade volumes. Enhancing intra-regional trade with more liberal trade regimes and enhanced trade facilitation may reduce the trade costs, and lead toward a more rational regional development. The South Asian countries are yet to unleash their untapped potential and take themselves to new heights. One of most important aspect of achieving it is regional economic cooperation. With intense geographical proximity and identical production structure the member countries have the prospect of attaining new sets of economic benefits from the intra-regional trade. SAFTA has the potential to intensify, merchandise trade between the South Asian countries, and pave the way for market expansion and may create trade opportunities. However the region has the least regional trade intensification in terms of merchandise trade; and majority of the trade in region take place out of the region. This study discusses trends and patterns in the intra-regional trade, identifies the competitive goods to be traded in the region. Trade performances of the member nations of SAARC are discussed in depth while reviewing and discussing trade volumes, tariffs, trade structure and dynamics of top ten competitive commodities in each of the economy of South Asian region. The study analyzed 67 prospective tariff lines to enhance regional trade in the region that ranges from agricultural goods, raw material to machines and capital goods. Mere improving trade facilitation and increasing awareness of traders in the region current trade of USD 9 billion in these 67 tariff lines could be enhanced to USD 14 .7 billion and the volume of intra-regional trade may be increased to USD 30 billion. Out of these top 67 prospective tariff lines 24 tariff lines are in the Sensitive list of the member countries and are deliberately kept out of the scope of South Asian Free Trade Agreement as part of their protectionist trade regimes. As per (UNESCAP, 2017) 67% of the intra-regional potential remains untapped. Higher tariff, poor infrastructure and lack of b2b interactions and proper information and knowledge results in high cost of doing intra-regional trade and compels business to scarify benefits of geographic proximity and regional free trade benefits