Research Reports REC


Regional Trade Openness Index, Income Disparity and Poverty – An Experiment with Indian Data
This study aims to examine how much ‘open’ Indian states are with respect to international trade and then assesses to characterise three related aspects: (1) trade openness and incidence, depth and severity of poverty at the state level (rural and urban); trade openness and income inequality at the state level (rural and urban); (2) trade openness and industrial employment across industry types (workers and employees); and (3) trade openness and regional disparity. It should be noted that this study focuses primarily on finding the inter-linkage between trade openness at the state level and its implications for poverty.
pp 69, #0807, Rs 200/US$20, ISBN: 978-81-8257-102-0
Modules on Trade and Regulatory Issues
Module-11: SAFTA and EPAs-A Brief Background and their Current Status
R S Ratna
This module addresses some debatable issues with reference to development dimensions of RTAs (regional trade agreements) from the view of trade policy formulators and business community. A part of this module deals with challenging issues of informal border trade including their adverse welfare effects and potential gains of bringing them under formal arrangements. It talks about issues of EPAs (Economic Partnership Agreements between European Union and Africa, Caribbean and the Pacific Countries) negotiations. It concludes that from a development perspective, the WTO (World Trade Organisation) remains the best available forum to discipline the use of trade-distorting policies. It argues that RTAs can complement the WTO’s efforts by cooperating on behind the border policies.

Module-10: Critical Reading of Some Empirical Works
Selim Raihan

This module critically examines some empirical works. They are: a) ‘The End of Textile Quotas: A Case Study of the Impact on Bangladesh’ where simulation exercise by using the GTAP model (scenario building by Global Trade Analysis Project) was done; b) ‘LDCs Duty-Free Quota-Free Access to Developed countries’ Markets: Implications for the Bangladesh Economy’ where GTAP simulations and CGE modelling were used; c) ‘SAFTA: Leaving in a World of Regional Trade Agreements’ where results are built on gravity equation approach and simulation exercise; and d) ‘Economic Partnership Agreements: Assessing Potential Implications from Some Alternative Scenarios’ where GTAP model was used.

Module-8: Basic Concepts on Regional Trading Agreements
Suprita Jayaram
This module explains the basic concepts of RTAs (regional trade agreements) and key areas to understand the dynamics involved in RTAs. A preliminary introduction to RTAs highlights two popular views on RTAs as well as various types of RTAs. It deals with multilateral trade agreements under the WTO (World Trade Organisation) vis-à-vis RTAs. It discusses the development of North-South RTAs in comparison to South-South RTAs. It also studies the impact of these RTAs on both member countries and non-member countries of the WTO. From the point of policy making, it addresses the question: whether RTAs promote conflict or build peace with special reference to South Asian and Sub-Saharan contexts.
Five Analytical Papers on SAFTA
SAFTA and the Bangladesh Economy – Assessments of Potential Implications
Selim Raihan
This paper examines the implications of SAFTA (South Asian Free Trade Agreement) for the Bangladesh economy. It provides an evolution of Bangladesh’s trade with its neighbouring countries. It also examines the S&DT (Special & Differential Treatment) provisions for LDCs (least developed countries) under the SAFTA. It shows that there are conflicting arguments on the success of SAFTA. The economic analysis here suggests that the possibility of a large trade diversion against Bangladesh under the full implementation of the existing SAFTA is high. It concludes with policy options for making SAFTA an effective vehicle of trade-led growth for Bangladesh.
SAFTA and Implications for Pakistan
Safdar A. Sohail
This paper is a case study of Pakistan to study the impact of SAFTA (South Asian Free Trade Agreement) on the economy of Pakistan with the help of available data, relevant analysis and interaction with principal stakeholders. It specially focussed on the nature of Pakistan’s links with its neighbours, highlighting indicative trade potential, etc. It also presents Pakistani perspectives on the larger issues involved in the debate between regionalism and multilateralism and have recommendations on issues of critical importance for the success of SAFTA as an effective tool for trade-led development in Pakistan and South Asia.

Making SAFTA a Success – The Role of India
R S Ratna and Geetu Sidhu
In the backdrop of failure of SAPTA (South Asian Preferential Trade Agreement) to achieve desired results of enhancing the trade and investment linkages amongst the SAARC (South Asian Association for Regional Cooperation) nations, this paper examines the functions of SAFTA (South Asian Free Trade Agreement) of bringing down the tariffs to zero for converting South Asia into a high trade region. It addresses issues like meaningful market access to its members under SAFTA, lessons to be learnt from SAPTA (South Asian Preferential Trade Agreement) and the role required to play by the governments in this context. It provides an insight of how meaningful the SAFTA is and what role can India, as the largest economy in the region, play in making SAFTA a success.

India-Sri Lanka FTA – Lessons for SAFTA
Dushni Weerakoon and Jayanthi Thennakoon

This paper reviews the evolution and current status of the economic ties between India and Sri Lanka. It discusses trends in trade in goods and investment in the broad economic, policy and political context, with emphasis on the policy liberalisation process and moves towards regional integration. It examines the nature and impact of regional initiatives under SAARC (South Asian Association for Regional Cooperation) such as SAPTA (South Asian Preferential Trade Agreement) and SAFTA (South Asian Free Trade Agreement), and bilateral agreements in particular India-Sri Lanka Free Trade Agreement (ISFTA). It argues that both India and Sri Lanka are benefiting more from ISFTA (India-Sri Lanka Free Trade Agreement) than from SAFTA. It provides important lessons for the SAFTA process to build on existing economic integration links in the region.

Aparna Sawhney and Rajiv Kumar
This paper analyses the significance of SAFTA (South Asian Free Trade Agreement) in the light of enthusiasm for greater integration among the eight SAARC (South Asian Association for Regional Cooperation) members including Afghanistan. It studies the scope of enhancing intra-regional trade in South Asia by looking at its current trade pattern and thus, the paper essentially examines the prospect of SAFTA in the face of the myriad bilateral, sub-regional and multilateral trade arrangements. It concludes with policy recommendations for furthering regional integration in the development process of South Asia with primary focus on economic development, growth, and poverty reduction and keeping political issues to the background.


Qualitative Analysis of a Potential Free Trade Agreement between the European Union and India

    This study on the potential implications of a free trade agreement between the EU and India is composed of four principal elements. These are:

  • An analysis of trade and production structures in India and the EU: Implications for non-tariff barriers, services and regulatory parts of an FTA;
  • Projected FDI and economic growth in India;
  • Trade policies in India regarding non-tariff barriers, services and regulatory issues; nature of the main obstacles to trade and the implications for the scope and content of an FTA; and
  • Implications of deep integration under an FTA between India and the EU, in terms of both potential legislation and implementation issues within India’s administrative system.

With respect to each of these elements, there is a detailed Annex, which provides the substantive analysis and discussion.


Enhancing Collective Export Competitiveness on Textiles and Clothing
The importance of trade in textiles and clothing cannot be over-emphasised. Clothing is a labour-intensive activity, with a strong gender dimension. The sector is, therefore, particularly important for the creation of employment opportunities in developing countries. The paper tries to underline the importance of enhancing collective export competitiveness of South Asian countries. It makes a strong case for enhancing collective competitiveness through cooperation rather than competition.

The study also recommends the necessity of having an effective institutional arrangement for making such cooperation meaningful and successful. Over and above, the cooperation on textiles and clothing could be a good beginning to fulfil our long-term objective of enhanced cooperation on economic, trade and investment under the auspices of South Asia Free Trade Agreement (SAFTA).
pp 56, #0428, Rs.100/US$25, ISBN: 81-8257-045-X

Agreement on SAFTA: Is It Win-Win for All SAARC Countries?
A major breakthrough was made in January 2004 when during the 12th SAARC Summit, held at Islamabad, a framework agreement on South Asian Free Trade Area (SAFTA) was signed. One of the major objectives of this study is to sensitise various stakeholders (state as well as non-state actors) on the need for better regional cooperation, as it has been proved that such co-operation gives huge peace dividends. It provides a good account of existing trade between SAARC countries and highlights lessons learnt from the efforts so far made for better intra-regional trade within South Asia. It also discusses possible implications of SAFTA on South Asian countries.
pp 37, #0424, Rs.100/US$25, ISBN 81-8257-042-5

FDI in South Asia – Do incentives work? A survey of the literature
This paper has looked at the understudied issues of foreign direct investment (FDI) policies in South Asia, particularly from the point of view of the effectiveness of performance requirements imposed by host countries and the costs of accompanying incentives. The survey of theoretical literature on performance requirements indicates that a case can be made for imposing such requirements in South Asia, particularly from the welfare point of view. As regards the costs of incentives, which a country offers to foreign firms, so far only a few studies have tried to quantify them. These incentives are normally given as quid pro quo with performance requirements. But, in the bargain, it has been found that these incentives tend to be particularly costly over a period of time.
pp 43, #0403, Rs.100/US$25, ISBN 81-8257-037-9