consumers and economic cooperation - cuts citee

Consumers and Economic CooperationCost of Economic Non-cooperation

to Consumers in South Asia

Consumers and Economic CooperationCost of Economic Non-cooperation

to Consumers in South Asia

Bipul ChatterjeeDeputy Executive Director, CUTS International

Joseph GeorgeResearch Associate, CUTS International

D-217, Bhaskar Marg, Bani ParkJaipur 302016, India

Tel: +91.141.2282821, Fax: +91.141.2282485Email: [email protected]

Web site: www.cuts-international.org

With the support of

©CUTS International, 2012

First published: June 2012

This paper has been produced with the financial assistance of TheAsia Foundation under the project entitled, �Cost of Economic Non-cooperation to Consumers in South Asia�. The views expressed hereare those of the commentators/authors and can therefore in no waybe taken to reflect the positions of CUTS International & The Asia

Foundation

ISBN: 978-81-8257-166-2

Printed in India by Jaipur Printers Private Limited, Jaipur

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Consumers and Economic CooperationCost of Economic Non-cooperation to Consumers in South Asia

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Contents

Abbreviations i

Foreword iii

Preface v

Acknowledgement ix

Executive Summary xiii

1. Impact of Trade Liberalisation on ConsumerWelfare in South Asia 1Introduction 1

Trade Liberalisation and Consumer Welfare:What Does Theory Say? 5

Regional Economic Cooperation in South Asia 11

South Asian Free Trade Agreement: A Review of Literature 17

Conclusions 30

2. Potential Impacts of SAFTA on Consumer Welfare:A Quantitative Assessment 32Introduction 32

Assessing Consumer Welfare Gains under SAFTA:Methodology and Product Selection 34

Results of Consumer Welfare Gains 37

Export Opportunities in Selected Products andTrade Potential 46

From Minimum to Maximum Gains 50

Extension of Analysis Beyond Sensitive Lists:Implications for Non-Tariff Reforms 53

Summary and Conclusions 59

3. Perceptions and Expectations about RegionalEconomic Cooperation in South Asia 61Introduction 61

Perception Survey: Method 62

Perceptions and Expectations of SAFTA 65

What Shapes Perceptions 67

Stakeholders� View on Future Steps 70

Conclusions 73

4. Conclusions 74

Priorities for Future Research 77

References 79

Endnotes 89

Annexure Tables 93

Questionnaire (Perception Survey) 136

List of Tables

1.1: Key Indicators of South Asia 14

1.2: Average Annual Growth of GDP, GDP Per Capita andExports and Imports of Goods and Services, 1990-2010 16

2.1: Summary of Results on Aggregate Consumer WelfareGains (analysis for products in the sensitive lists) 37

2.2: Summary of Results on Consumer WelfareGains for Bangladesh 39

2.3: Summary of Results on Consumer WelfareGains for India 41

2.4: Summary of Results on Consumer WelfareGains for Nepal 42

2.5: Summary of Results on Consumer WelfareGains for Pakistan 44

2.6: Summary of Results on Consumer WelfareGains for Sri Lanka 45

2.7: Summary of Results of Aggregate Consumer WelfareGains (analysis for products outside the sensitive lists) 54

2.8: Country-Wise Summary of Results of ConsumerWelfare Gains 56

List of Figures

2.1: Country-wise share in Aggregate Regional ConsumerWelfare Gains 38

2.2: Country-wise Origin of Consumer Welfare Gains(Bangladesh) 39

2.3: Product-Wise Origin of Consumer Welfare Gains(Bangladesh) 40

2.4: Country-wise Origin of Consumer Welfare Gains (India) 41

2.5: Product-wise Origin of Consumer Welfare Gains (India) 41

2.6: Country-wise Origin of Consumer Welfare Gains (Nepal) 42

2.7: Product-wise Origin of Consumer Welfare Gains (Nepal) 43

2.8: Country-wise Origin of Consumer Welfare Gains(Pakistan) 44

2.9: Product-wise Origin of Consumer Welfare Gains(Pakistan) 44

2.10: Country-wise Origin of Consumer Welfare Gains(Sri Lanka) 45

2.11: Product-wise Origin of Consumer Welfare Gains(Sri Lanka) 46

2.12: Product Category-wise Export Opportunities 48

2.13: Country-Wise Share in Aggregate Regional ConsumerWelfare Gains (Non-Sensitive List Products) 55

3.1: Country-wise share of responses 63

3.2: Group-wise share of responses 64

Abbreviations

ADB Asian Development Bank

BA Bangkok AgreementBFTAs Bilateral Free Trade AgreementsBIMSTEC Bangladesh, India, Myanmar, Sri Lanka

and Thailand Economic Cooperation

CGE Computable General Equilibrium

DFQF Duty Free Quota Free

EDI Electronic Data Interchange

FDI Foreign Direct InvestmentFTA Free Trade Agreement

GDP Gross Domestic ProductGTAP Global Trade Analysis Project

IOR-ARC Indian Ocean Rim Association forRegional Cooperation

ISFTA India Sri Lanka Free Trade AgreementIT Information Technology

LDCs Least Developed Countries

MFN Most-Favoured-NationMTAs Multilateral Agreements

NTBs Non-tariff BarriersNTT New Trade Theories

PTAs Preferential Trade Agreements

RoO Rules of OriginRoW Rest of the WorldRTAs Regional Trade Agreements

SAARC South Asian Association forRegional Cooperation

SAFTA SAARC Preferential trading ArrangementSAPTA South Asian Free Trade AreaSCOE SAFTA Committee of ExpertsSMC SAFTA Ministerial Council

T&C Textiles and ClothingTII Trade Intensity IndexTLP Tariff Liberalisation Programme

UNCOMTRADE UN Commodity TradeUNCTAD United Nations Conference on

Trade and Development

WTO World Trade Organisation

ii Consumers and Economic Cooperation

Foreword

I am happy to learn that CUTS International has undertaken astudy on the costs of economic non cooperation in South Asiashowing the benefits that South Asia could derive fromenhancing trade and other forms of economic cooperationwithin the sub-region.

South Asia faces major policy challenges in reducingpoverty, and is home to more than 20 percent of the world�spoor. All the countries of South Asia have recognised thatmutually beneficial cooperation is a powerful instrument tohelp us to achieve our economic goals, and that regionalcooperation determination has been expressed in the SouthAsia Free Trade Agreement, the implementation of which isprogressing.

It is, in this context, that the present study is valuable,looking also at the benefits of Trade in enhancing consumerwelfare. The study thus offers a powerful argument for furthertrade liberalisation and integration in South Asia.

I congratulate CUTS International, India and its partnerlike-minded organisations in other South Asian countries onthis timely initiative and hope that it will spur enhancedregional integration.

Shivshanker MenonNational Security Adviser

Prime Minister�s OfficeNew Delhi, India

Preface

In mid 90s we did a study on cost of non-cooperation toconsumers in South Asia. We found that our consumers wereunnecessarily paying a huge cost. It sets our agenda to challengethe conventional notion that �exports are good, imports arebad�.

Our aim is to ensure that consumer welfare agenda is firmlyplaced at the centre of a country�s trade policy. This project isa significant milestone in that direction.

We understand that a single-point agenda of exportexpansion is neither in conjunction with gains from trade, noris it practically feasible because it can lead to beggar-thy-neighbour.

Surprisingly, very little credit is given in the vast body oftrade literature to the notion of �growth through imports�.Those who are ignorant of this notion overlook the circularnature of basic income generation � the most basic fundamentalof macroeconomics. A major source of productive investmentis savings on the part of consumers. When prices ofconsumption items come down through competitive importsand other means they raise the real income of consumers andsome of it is ploughed back into the real economy throughmore consumption and investment.

An economy cannot sustain its growth unless saving-investment-growth cycle and consumption-production-growthcycle work in tandem.

vi Consumers and Economic Cooperation

It is true that as a result of trade liberalisation importcompeting sectors will experience a painful phase of transition.But their transition to efficient producers and/or gradual deathto take rebirth in other sectors is absolutely necessary for thevitality and sustainability of any aspiring economy. A majorchallenge before trade policy maker is to not lose sight of hugegains by way of long-run resource efficiency, superiorproduction possibility structure, institutionalisation ofpractices and systems which more and gradual exposure totrade can bring along with greater consumer satisfaction.

How do South Asian countries feature in respect to theirtrade liberalisation and concomitant consumer welfareenhancement efforts? The implementation of the South AsianFree Trade Agreement is progressing in a right direction. Itsagenda is also expanding to include services and investmentliberalisation.

In spite of this, there is hardly any discussion at the politicallevel about the benefits that enhanced intra-regional tradewould bring to consumers of our region. It is this vacuum thatthis study addresses. By employing a simple analyticalframework, it shows how much gain would accrue to ourconsumers if some imports, sourced from outside the region,are sourced from within the region.

Our estimated total gain to consumers is US$2bn per year.And this is a static gain. By effectively addressing non-tariffmeasures and other costs of doing trade, the dynamic gainwould be at least five times this amount.

Given that trade liberalisation efforts always get politicised,in this study we are not advocating for any blind increase inimports. We are also aware of the implication of ourrecommendations on government revenue, particularly inrelatively more poor countries of the region.

Based on the results of this study, we will step up ouradvocacy for enhanced regional integration of South Asia.

Being aware of political economy aspects of this work, wewill take forward the larger message that �Good Economicsis Good Politics�.

I thank The Asia Foundation for its support; not just forthis project but, more importantly, to this cause. We lookforward to strengthen our partnership. Last but not the leastI thank my colleagues who have made this study possible

May this study be widely read, may it generate more intereston this subject and may it ultimately lead to well informedpolicy choices free of cynicism.

Pradeep S MehtaSecretary General

CUTS International

Consumers and Economic Cooperation vii

Acknowledgement

The idea of this study germinated during a group discussionbetween CUTS staff and Nick Langton and Bruce J. Tolentinoof The Asia Foundation in November 2010.

We express our gratitude to The Asia Foundation forsupporting the implementation of this project. Special thanksare due to Nick Langton, Bruce J. Tolentino, Gareth Aicken,George Varughese, Saima Anwer, Shahid Fiaz, Syed Al-Muti,Veronique Salze-Lozach, Nina Merchant, Katherine Loh andMandakini D. Surie of The Asia Foundation for their deepinvolvement. We thank them and others at the Foundation forthoroughly reviewing our drafts as well as providing usefulsuggestions for their improvement.

The study benefited from unreserved assistance extendedby our partner organisations from other South Asian countries.Their valuable contributions including conducting theperception survey of stakeholders, organising regionalmeetings, facilitating media briefings and reviewing thetechnical content of the study are acknowledged. We expressour gratitude to them, particularly:� Syed Munir Khasru, Arbaaz Nayeem, Tahmid Zami, Zarif

Islam and Ayman Chowdhury of Institute for Policy,Advocacy and Governance, Dhaka, Bangladesh

� Poshraj Pandey, Ratnakar Adhikari, Chandan Sapkota,Paras Kharel and Neeraj Shrestha of South Asia Watch onTrade, Economics & Environment, Kathmandu, Nepal

� Abid Suleri, Qasim Shah, Vaqar Ahmed, Faisal Gorchaniand Sadia Yousafi of Sustainable Development PolicyInstitute, Islamabad, Pakistan

� Saman Kelegama, Dushni Weerakoon and AshaniAbayasekara of Institute of Policy Studies, Sri Lanka

Many experts have shared valuable suggestions for improvingthe value of this study. We thank all of them,

� Amitendu Palit, Institute of South Asian Studies, NationalUniversity of Singapore

� Amrit Lugun, SAARC Secretariat, Kathmandu� Edwin Laurent, Commonwealth Secretariat, London� M. A. Razzaque, Commonwealth Secretariat, London� M. A. Taslim, University of Dhaka, Bangladesh� Mustafizur Rahman, Centre for Policy Dialogue,

Bangladesh� Paras Kharel, South Asian Watch on Trade, Economics &

Environment, Nepal� Prabir De, Research and Information System for Developing

Countries, India� Rajan Sudesh Ratna, Directorate General of Foreign Trade,

Department of Commerce, Government of India� Rashid S. Kaukab, CUTS International, Geneva� Rupa Chanda, Indian Institute of Management, India� Saman Kelegama, Institute of Policy Studies, Sri Lanka� Saikat Sinha Roy, Jadavpur University, India� Shafqat Munir, Journalists for Democracy and Human

Rights, Pakistan� Vaqar Ahmed, Sustainable Development Policy Institute,

Pakistan

We also thank all participants of the Inception Meetingheld in Jaipur April, 2011; the Review Meeting held in Dhakain June, 2011; and the Dissemination Meeting held in

x Consumers and Economic Cooperation

Kathmandu in February, 2012. A draft version of our studywas presented at the 14th Sustainable Development Conferenceof the Sustainable Development Policy Institute, Islamabad inDecember 2011. We acknowledge valuable comments receivedfrom the participants of our session on this subject.

We acknowledge the meticulous efforts of our colleaguesat CUTS Centre for International Trade, Economics &Environment in implementing the project. Special thanks aredue to Archana Jatkar, Anutosh Biswas, Palak Chadha andReena Purohit. We thank Dhananjay Ghei, a student at theIndian Institute of Technology, who while undergoing hisinternship at our Centre, has meticulously worked with PalakChadha for data collection and related work. Thanks are alsodue to Ravi Tewari, Madhuri Vasnani and Mukesh Tyagi ofCUTS International for their assistance in editing and lay-outing of this publication, and to Arun Talwar, G. C. Jain andL. N. Sharma for their work in preparing financial reports ofthe project.

Many other names deserve special mention, but could notbe referred here for want of space. A large number ofstakeholders have participated in the perception survey andgave valuable suggestions for taking forward the agenda ofenhanced regional integration. We thank all of them.

Finally, any error that may have remained is solely ours.

Consumers and Economic Cooperation xi

Executive Summary

The ProjectWith support from The Asia Foundation and in partnership

with a group of like-minded organisations, CUTS Internationalimplemented a project entitled �Cost of Economic Non-Cooperation to Consumers in South Asia�.

The objective of the COENCOSA project is to assesspotential benefits to consumers from enhanced trade amongthe South Asian countries. The study covered five of the eightSouth Asian countries, viz. Bangladesh, India, Nepal, Pakistanand Sri Lanka.

Based on a meta-analysis of the existing literature oneconomic integration in South Asia, a qualitative analysis, anda survey of some key stakeholders on their perception onregional trade integration, the study estimated the gains thatwould accrue to consumers from enhanced intra-regionaltrade.

Key FindingsGains from trade fundamentally treat consumer welfare

gains inseparable from producer welfare gains, both beingequally important beneficial outcomes of trade liberalisationprocess. Furthermore, net positive consumer welfare gainsfollowing a more open and predictable international traderegime is considered as assured.

Literature on the functioning of trade agreementscategorically shows that reciprocity is the most elementary

principle of ideal trade agreements, wherein exchange ofimport concessions for export opportunities is a key. Despitethis understanding, imports are often viewed disapprovinglyowing to the challenges they may pose to domestic industries.This is observed in successive rounds of negotiations on theSouth Asian Free Trade Agreement (SAFTA).

A general reason identified for relative non-success ofSAFTA (as compared to other regional trade agreements indifferent parts of the world) is existence of a large number ofproducts with intra-regional trade potential under respectivesensitive lists by SAFTA member countries with the objectiveof resisting possible import surges. Consumer welfare onaccount of trade liberalisation is largely ignored.

The quantitative assessment of the COENCOSA studyshows a minimum consumer welfare gain of approximatelyUS$2bn a year by way of savings on aggregate consumerexpenditure on imported products in selected categories.

Potential consumer welfare accruing to each country isderived by taking the difference between the total importexpenditure in the selected products incurred by the countryunder consideration and likely import expenditure if thatcountry were to import the same products from SAFTAtrading partners at a lower price currently offered by them.

However, the estimated figure represents only theminimum gains which will increase exponentially if the long-run impacts of positive cycle of growth in intra-regional areconsidered. In other words, gains to consumers, as estimatedin this study, is a static gain as it is based on existing tariffstructure. It is a well-known fact that today tariff accountsfor about 15-20 percent of the cost of doing trade of acommodity.

Non-tariff measures including customs procedures andother procedural non-tariff measures account for more than80 percent of cost of doing trade. In South Asia, if non-tariff

xiv Consumers and Economic Cooperation

measures affecting the cost of doing trade are addressedproperly then gains to consumers from an enhanced intra-regional trade regime would be much than static gains. Furthergains can be achieved from gradual liberalisation of intra-regional trade in services and investment.

A survey of some key stakeholders on their perception aboutenhanced intra-regional trade reveals that lack of reference toconsumer welfare gains in the academic literature as well asin popular media has heavily influenced the perception of allcategories of respondents.

Generally, there exist very low expectations aboutconsumer welfare gains, owing to either ignorance about theissue or negligence as an unimportant issue. While amongproducers/exporters and their associations, consumer groupsand media ignorance about the issue is the main reason for

Consumers and Economic Cooperation xv

Consumer Welfare GainsCountry Number Current Aggregate Consumer

of Product Value Consumer WelfareLinesin Imports Welfare Gains

Sensitive of Gains as aLists Country (US$ Percentage

Qualified from million) of Currentfor Tariff Rest of the Value ofReduction World Imports

(US$ million)

Bangladesh 50 2781.33 398.56 14.33

India 161 1095.45 597.29 54.52

Nepal 73 1068.27 457.50 42.83

Pakistan 44 349.24 206.18 59.04

Sri Lanka 27 918.54 288.61 31.42

Total 355 6212.83 1948.15 31.36Source: Author�s calculations based on trade data 2009-10, Trade Map;International Trade Centre, Geneva & UN Comtrade Database.

low expectations, it is negligence among government officialsand academia.

Most respondents, irrespective of categories, believe thatintra-regional trade in South Asia is currently under-performing and its potential is highly under-rated. A strikingobservation is that representatives of consumer groups ingeneral are more unaware about consumer welfare gains froma more open and balanced international trade regime than mostother groups. This is because most of them have lessknowledge and little/no representation in trade policy makingprocess in their countries and hence, have minimal exposureto the subject.

Learning

Research� In order to generate more informed discussion for

mainstreaming consumer interests in trade policymakingprocess it is crucial to do detailed studies on the subject ofconsumer welfare gains from trade liberalisation byaddressing trade costs owing to tariff and non-tariff barriers

xvi Consumers and Economic Cooperation

Advocacy� Consumer concerns on trade policy matters should be

adequately represented at national, regional andinternational level

� Producer concerns such as safeguards to import sensitivesectors, non-tariff barriers including procedural barriersshould be taken into account for a balanced approach totrade liberalisation

� Publicise consumer welfare impact of enhanced intra-regional trade through popular media

� SAARC Secretariat should facilitate trade policy relateddialogues between national trade policy making bodies,industry associations and civil society organisations withthe objective of aligning consumers� interest, producers�interest and government�s concern about revenuegeneration

� SAARC Chamber of Commerce and Industry shouldconduct targeted consultations with industry associationsand consumer groups

Networking� Lack of awareness about consumer welfare gains and lack

of involvement of consumer organisations in trade policyissues are equally important causes of oversight of gainsfrom imports

� Build network of consumer organisations in the region todiscuss and spread awareness about consumer welfare gainsfrom trade liberalisation

Key Messages� One fifth of the world�s poor live in South Asia and they

are bearing the brunt of cost of economic non-cooperation� Intra-regional trade in South Asia has potential to enhance

consumer welfare gains

Consumers and Economic Cooperation xvii

� Influence of protectionism on imports marginalisesprospects of consumer welfare gains

� Trade policies and agreements have not highlightedconsumers� gains from trade liberalisation

� Lack of awareness about consumer welfare gains fromtrade liberalisation lowers stakeholders� expectations fromintra-regional trade

� Increased media and policy spaces on consumer welfaregains will change stakeholders� perceptions on the virtuesof enhanced and improved intra-regional trade

� Turn around is possible: Let us separate political issuesplaguing the region for better economic cooperation

xviii Consumers and Economic Cooperation

Chapter 1Impact of Trade

Liberalisation onConsumer Welfare in

South Asia

IntroductionThe volume and impact of international trade in the world

economy has grown phenomenally over the past few decades.The share of global trade in world GDP has gone up from 39percent in 1985 to 50 percent in 2010.1

To a large extent, this growth was made possible by anupsurge in the participation of developing countries in globaltrade, as they underwent a paradigm shift in their nationaleconomic policy outlook, embracing the now familiar conceptof �trade � an engine of growth�. This is vindicated by the factthat lower middle income countries experienced a sharperrise in trade to GDP ratio, from 32 to 56 percent during period1985-2010.2 Today, trade liberalisation has become a standardnorm throughout the developing world, albeit with varyingdegrees of levels and success.

Though numerous factors, including technology-ledreduction in transaction costs, development of production

2 Consumers and Economic Cooperation

networks, better transportation facilities, etc., have contributedto the expansion of trade in developing countries, new tradeagreements, and the role they have played in reducing tradebarriers, have been fundamental. The birth of the World TradeOrganisation (WTO) in 1995 is the single most important eventin this context.

With a strong current membership of 153 countries, theWTO popularised the importance of trade in economic growth,reinforced worldwide faith in multilateral trade negotiationsand created strong institutional support and legal instrumentsfor conducting trade negotiations based on the principles ofreciprocity and non-discrimination.

Multilateral trade liberalisation is generally considered thebest possible way for advancing the agenda of removing tradebarriers globally. It ensures market opportunities for the mostefficient and competitive producers in the world, as marketaccess to each member country are provided to all tradingpartners on a non-discriminatory basis.

However, in recent times, mediating the reciprocalexchange of trade concessions has been increasingly difficultat the multilateral level. It would be incorrect to single outone particular reason for this trend, but a closer look revealsthat a fundamentally incorrect approach towards tradeliberalisation � wherein countries look to expand their exportmarkets while preventing an increase in imports to theirdomestic markets - is one of the basic problems which oftenclouds economic reasoning.

Benefit from trade has two streams � gains to producersand gains to consumers � which are essentially inseparable.When it is said about trade that the best amongst producers ineach traded sector will capture the market by out-competinginefficient competitors and earn their right to sell, it necessarilyalso means that buyers get to choose from the best qualityproducts at the lowest possible prices. But, consumer welfare

Consumers and Economic Cooperation 3

effects of trade are often neglected, as consumers� savings dueto imports are not as visible as producers� export earnings.Moreover, import is often viewed with discontent, owing tothe challenge it may pose to the sustainability of domesticindustries.

Irrespective of the expectations and goals of participatingcountries and of the level at which it operates (multilateral,preferential/regional or bilateral), a trade agreement cannotoperate without reciprocal exchange of an import concessionfor an export opportunity. Trade agreements, by design, cannotserve a unilateral agenda of export promotion along withimport substitution. When signatories undermine theimportance of imports and view it only as a threat, tradenegotiations most likely face an impasse. This may be observedfrom the way many preferential trade agreements across theglobe function.

South Asian regional economic cooperation is spearheadedby the SAFTA. Despite this and other bilateral tradeagreements currently in operation in the region, South Asiaremains one of the least integrated regions in the world. Tradenegotiations under SAFTA have failed to influence growth inintra-regional trade in a significant way so far. The share ofintra-regional trade in total trade in the region has onlymarginally improved from 2.5 percent to 4.8 percent during1995 to 2010. Though political tensions in the region are oftenblamed for slow progress in negotiations, the propensity ofmember states to resist import risks can be found as an equallymajor cause for the limited success of SAFTA.3

It is generally recognised that SAFTA failed to achieve itsintended objective of enhancing intra-regional trade as a resultof limited product coverage.4 Though South Asian countriesshifted to more outward looking policies in the 1990s, reducingrestrictions on private sector involvement in business and trade,remnants from the previous economic policy approaches still


remain. Export promotion has replaced import substitutionas the central theme for most governments in the region, butthere are echoes of mercantilist attitude � increasing exports,while still attempting to restrict imports (World Bank, 2010).5

Protective tendency of the SAFTA member states is evidentfrom the large sensitive lists maintained by them containingproducts kept out of bounds of the Agreement�s TariffLiberalisation programme.

Concerns of unequal distribution of gains and unbalancednegotiating outcomes have also affected the interests in SAFTAfor its members. India being the largest economy by far, it hasalways been deemed that political involvement, particularlythat of India, has to be delicately balanced, so to not threatenthe negotiating positions of smaller members for the successof the Agreement (Weerakoon, 2010).

Failure to arrive at this delicate balance is often cited asanother reason for the slow rate of progress in regional trade.Longstanding border disputes and political discord,particularly Indo-Pak conflicts, have been accused of havingaffected economic relations as well.

While these factors have contributed to the weak regionalintegration of South Asia, one of the notable and oftenoverlooked results of economic non-cooperation amongcountries in the region are the high costs to consumers.

Enhanced regional trade would bring down prices of manykey commodities significantly by avoiding additional costs ofimports from outside the region. For instance, certainestimates show that Pakistan stands to save between US$400mnand US$900mn on its import bill if it allows imports fromIndia on several items replacing its present imports from othercountries at higher cost (Qamar, 2005).6

This study analyse the consumer welfare impacts of regionaltrade liberalisation in South Asia. It enquires into the resultsof previous studies on this topic as well as attempts a


quantitative assessment of potential consumer welfare gainsfrom enhanced intra-regional trade. The study also includesthe results from a perception survey which was conducted toascertain the opinions of key stakeholders in the region on therole and relative importance of consumer welfare in tradenegotiations under SAFTA.

Trade Liberalisation and Consumer Welfare: WhatDoes Theory Say?Consumer Welfare in International Trade Theory

Mercantilism, a pre-classical school of economic thoughtwhich had widespread influence in Europe during the period1500-1750, did place significant importance on internationaltrade, but only as a means of expanding the wealth of sovereignstates and maintain their military power. It was important fora country to maintain a positive trade balance � exports morethan imports � in order to ensure the net inflow of earningsfrom trade to the country were positive.7

The mercantilists prescribed that wages and other inputcosts should be kept low, so as to keep the prices of goodslower in the international markets and facilitate exports. Therewas hardly any place for consumer welfare effects of trade inthis approach.

The early classical economists, particularly David Hume(Political Discourses, 1752), pointed out a fundamental flawin the mercantilistic approach to trade. A continued inflow ofexport earnings will lead to a situation in which more moneywill be in circulation in the domestic market than is needed toclear the total goods and services available for purchase. Thiswill lead to inflation in the domestic market and, as prices goup, their price competence in the international marketdiminishes, eroding the state�s positive trade balance.8

A new approach to trade, proposed by Adam Smith (AnEnquiry into the Nature and Causes of the Wealth of Nations,


1776), popularly known as the absolute advantage theory,replaced the merchantilistic approach by pointing out hithertounrecognised benefits of trade between countries. The centralthesis is that if countries allocate their productive resourcesto produce only those goods in which they are best at andthereafter trade their surpluses with each other, it is possiblefor consumers in each country to consume more of all goods.9

Since this system entrusts production of each good to thebest producers, not only will consumers benefit from greaterquantities available for consumption but also will have theluxury of choosing the best quality products at the lowestpossible prices.

The absolute advantage theory was a radical departure fromthe earlier understanding of benefits from trade and it putconsumer welfare impact on trade centre stage.10 A subsequentqualification was made to it by the theory of comparativeadvantage proposed by David Ricardo (The Principles ofPolitical Economy and Taxation, 1817).

Comparative advantage theory reaffirmed the importanceof international trade and advances a better case for it bystating that, even if a country possesses an absolute advantagein producing all or most varieties of goods in demand, it shouldallocate its resources to produce only those goods in which ithas an advantage compared to other goods and leave productionof the rest to its trading partners. This also results in a win-win situation for all partner countries engaged in trade as totalavailability of all goods for consumption increases.

The Ricardian theory is based on productivity differencesbetween countries. But, it did not offer an explanation for theunderlying dynamics of how such productivity differencesoriginate or the role of consumer demand in sustaining trade.A series of propositions on both demand and production/supplysides of the classical trade theory augmented it and threwfurther light on potential gains from trade.11


Supply-side analysis basically enquired into the origins of acountry�s comparative advantages arising from its endowmentof the underlying factors of production.12 Accordingly,differences in technology and usage of factor proportionsdetermine the inter-country variation in production costs andhence prices, leading up to determination of relative marketcompetence of products originating from a country. Low pricestrigger demand for a particular good in the international marketand factors of production (labour and capital) seeking betterreturns naturally get reallocated to that sector in the producingcountry.

This version of neo-classical trade theory continues to havea special appeal to economists championing the cause of freetrade on the grounds of optimisation at a global level, ofproductive efficiency, consumption and the automaticutilisation of factors of production at full capacity. Here,consumer preference for goods is as important as the supplyfactors in determining price competitiveness of goods fortrading nations.

Thus, the classical trade theory and its modern variants,centred on the concept of comparative advantage, essentiallytreat consumer welfare as an integral part of benefits of opentrade and as inseparable from producer welfare.

Furthermore, positive consumer welfare gains followingopen international trade can be treated as more predictableand assured in the classical approach, while net producerwelfare gains depend on the result of redistribution of incomeof factors of production, as they are reallocated from non-tradable sectors to tradable sectors, which could be positiveor negative. It may additionally be noted that, while lowerprices directly contribute to consumer welfare gains, the risein returns to productive factors resulting from trade alsoenhance the same by raising purchasing power.


In the later period, post the development of neoclassicaltrade theories, empirical testing of real world trade patternsrevealed many interesting facts which could not be explainedsolely by the factor endowment models and their corollariesderived from classical theory. These include occurrences liketrade between countries with similar factor endowment andproductivity levels, intra-industry trade or export and importof same product categories, trade in intermediate goods orlarge amounts of multinational production, etc. A large bodyof literature, which is often classified as New Trade Theories(NTT), helped to provide partial explanations to suchphenomenon and predict patterns of trade flows (Sen, 2005).

NTTs attempt to explain the role of market structures andscale economies in determining trade patterns. Naturalpreferences of industry location and trade with movement offactors across borders are some of the areas of enquiry. But,as various commentators have noted, new theories are inconsonance with traditional classical theory and have focusedon analysing the exceptions in the traditional theory whichcall for better explanations.

Hence, the foundation of classical comparative advantagetheory, inherently embedded in the notion of consumerwelfare, still remains the single most important influence onreal world trade policy-making.

Consumer Welfare and Theory of Trade AgreementsTheoretical literature on the purpose and role of trade

agreements cite �terms-of-trade� as the major motivation andexplanation for the existence of trade agreements. A country,in an attempt to improve its terms-of-trade or in other wordslower the costs of its imports relative to earnings from itsexports, affects the terms-of-trade of its trading partners andthereby causes a negative externality on their aggregatenational welfare.


Retaliation in kind from trading partners triggers a tradewar. The basic premise of the terms-of-trade approach is that,without mediation and legally enforceable commitments toundertake trade liberalisation, trading partners willcompetitively engage in a race to improve their relative terms-of-trade with each other, causing global welfare loss (Grossmanand Helpman, 1995).

Trade agreements provide necessary legal instruments toprevent countries from falling into terms-of-trade-driven tradewars. Two of the most important principles underlying the legalinstruments of an ideal trade agreement are non-discriminationand reciprocity (Bagwell and Staiger, 1999 and 2001).13

Reciprocity forms the fundamental basis of tradenegotiations, where import allowances are exchanged forexport opportunities, guaranteeing restriction of unilateralattempts to influence own terms-of-trade by trading partners.Thus, the elementary theory of trade agreements necessitatesimport relaxation as an integral part of the trade liberalisationprocess and underscores the essential fact that producerwelfare can only coexist with consumer welfare.

One of the key questions addressed in the literature ontrade agreements is whether multilateral agreements (MTAs)are superior to preferential trade agreements (PTAs), in whichparticipation is restricted to only a small subset of countriesacross the world. Multilateral trade liberalisation under theWTO is often considered as the first best option, as non-discriminatory market access granted to all countries spanningthe WTO membership ensures self-selection of the bestproducers from a global pool. PTAs thus stand the risk ofdiverting imports from possibly more efficient producersoutside the preferential region to those enjoying preferenceswithin the preferential region.

But, PTAs have proliferated and thrived across the worldeven as the membership and scope of the multilateral systemhas widened since the formation of the WTO in 1995. A


number of alternative explanations exist to explain this. Therelative ease of negotiations with smaller membershipcompared to multilateral system, the motive of advancing tradepolicy reforms in stages, quicker way to increasing marketsize, a means to signal openness to foreign investors, etc., arefactors which make PTAs a more attractive option. A countrymay sign PTAs to lock-in its trade policy reforms and to weakenthe chances of reversal of trade liberalisation policies at thenational level. The relative ease of negotiations also means thatdeeper levels of trade liberalisation, beyond mere tariff reductionin goods, may be more easily achieved at the regional level andhence PTAs are preferred to multilateral agreements to pursethe goals of cross-border investments and trade in services(Bhagwati and Panagariya, 1996).

A number of political motives are also attributed to thegrowth of PTAs. PTAs are often used as a tool to reinforcediplomatic relationships between countries. Such agreementsare entered into with the intention of pooling commonresources, warding off external threats, by showing regionalsolidarity and increasing collective bargaining power at themultilateral level (Rodrik, 1995).

Some empirical research studies discount the negative tradediversion effects of PTAs and find economic justification inPTAs signed between countries closer to each other in termsof physical distance, complementary export and import basketsand those with comparable economic size (see WTO, 2011).

Irrespective of their relative economic merits, themultilateral trading system and PTAs function under the sameguiding principles and share many common objectives. Thebasic construct of reciprocity is necessarily the backbone ofPTAs as well. Without realising the importance of imports ina mutually beneficial trade relationship, PTAs cannot function,despite their advantage in terms of smaller administration costs.Thus, consumer welfare, though often overlooked, is animperative at all levels of trade liberalisation.


Regional Economic Cooperation in South AsiaSouth Asian countries with relatively open economies in

the immediate post-independence period in the 1940s generallyresorted to inward-looking policies subsequently and rankedamongst some of the most protected countries in the worldby the 1970s. Government interventions in economic activitywere high and tariff and non-tariff barriers made South Asianmarkets inaccessible, until a gradual reversal in economicoutlook started in the region from the 1980s onwards.

Nevertheless, the move towards opening up and liberalisingstate control has been gradual and countries in the regionfocused on exploring other export markets outside the regionrather than within. From the early 1990s, led by the reformprocess in India, trade liberalisation in the region expanded,resulting in high growth in trade and domestic income(Weerakoon, 2010).

The South Asian Association for Regional Cooperation(SAARC) comprising seven South Asian countries, Bangladesh,Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, wasformed in 1985 with the adoption of its Charter at its firstSummit in Dhaka, Bangladesh. It was created to enable andfacilitate periodic, regional consultations on matters of mutualinterest and to explore the possibility of cooperation ineconomic, social, cultural and other fields.

In April 1993, the proposal to set up a SAARC PreferentialTrading Agreement (SAPTA) was accepted by all sevenmember states and SAPTA came into formal operation inDecember 1995. SAPTA was initially viewed as an instrumentthat could transform the South Asian trade landscape throughgreater regional integration. This optimism began to wane withthe slow progress of SAPTA under four rounds of tradenegotiations, as it did not increase the volume of intra-regionaltrade and investment flows. This was mainly because of thelimited tariff preferences extended to a country�s trading


interest, limited depth in tariff cuts and prevalence of non-tariff barriers (NTBs).

Contrary to general belief, the rules of origin of SAPTAwere more liberal compared to other PTAs, as a product wouldbe considered as originating from a country if it generated alocal value-added content of 40 percent (30 percent for LDCs).This also included profit made not only by the manufacturersbut also by the traders. The non-qualifying/minimal operationswere confined to packaging and transportation operations only.

These problems were visible in the first preferential tradingarrangement in Asia, the Bangkok Agreement (BA), and werehighlighted before SAPTA came into operation.14 Free tradeagreements make substantial provisions on simplification ofbanking facilities for import financing, transit facilities for thelandlocked countries, removal of barriers to intra-SAARCinvestments, macroeconomic consultation, rules for faircompetition and promotion of venture capital, developmentof communication systems and transportation infrastructure,easing foreign exchange controls on repatriation of profits andsimplification of procedures for business visa, etc., that mayremove existing impediments to further expansion of intra-regional trade.

Intra-regional trade remains disappointingly low, accountingfor about four percent of trade in South Asia. Political tensionsin the region, particularly between India and Pakistan, haveonly served to undermine regional economic cooperation(Weerakoon and Wijayasiri, 2001). A number of SAARCmember countries decided to embark on bilateral free tradeagreements (BFTAs). The Indo-Lanka BFTA was signed inlate 1998 and came into operation in early 2000. Long existingIndo-Nepal treaties were formalised as a BFTA in 1996 (RIS,2004).15

In addition, several South Asian countries joined widerregional groupings in Asia such as the Indian Ocean Rim


Association for Regional Cooperation (IOR-ARC initiated in1997) and BIMSTEC (Bangladesh, India, Myanmar, Sri Lankaand Thailand Economic Cooperation initiated in 1997). Boththese groupings were not preferential trading blocs � IOR-ARC was based on open regionalism, where unilateral tradeliberalisation was advocated, while BIMSTEC was initiallybased on sectoral cooperation. Membership in such pan-Asianregional groupings was obtained by some South Asian countriesin the hope of gaining more economic benefits, which theSAPTA process was not delivering. These regional groupingswere also not very effective in generating trade among membercountries.

The SAFTA Agreement was signed in January 2004 duringthe twelfth SAARC Summit in Pakistan. The Agreement cameinto force in January 2006. The Agreement has come at atime when the trading environment in South Asia wascomplicated by the slow progress of SAPTA and a number ofparallel regional and pan-regional initiatives were being put inplace. Hence it consists of far-reaching trade and investmentliberalisation measures that go beyond the removal of tariffsand NTBs (Hirantha, 2002).

The SAFTA Ministerial Council (SMC) has also beenestablished, which comprises of the Commerce Ministers ofall the Member States. To assist SMC, a SAFTA Committeeof Experts (SCOE) has been formed. So far, seven meetings ofthe SAFTA Committee of Experts have been held. The seventhmeeting is scheduled to be held in 2012 in Pakistan. In August2011, the total value of exports of Member States of SAFTAhas reached around US$1.3bn since the launching of SAFTATrade Liberalisation Programme in July 2006.

The member countries in SAFTA not only have close culturaland historical ties but also follow similar trade policies aftertheir independence. When comparing in terms of economicstructure, namely, savings as a percentage of GDP,


demographic profile and labour mobility, SAFTA membercountries have many similarities. Although a majority of thepopulation still lives in rural areas, all of these countries arebecoming increasingly urbanised. With the exception of SriLanka, which had undertaken significant liberalisation in thelate 1970s, restrictive trade policies remained dominant in thisregion for nearly four decades. Recognising the importanceof international trade, unilateral trade liberalisation policiesbegan to be introduced in the second-half of the 1980s.However, a more systematic liberalisation started in the 1990sin almost all countries.

Table 1.1: Key Indicators of South Asia

Economic Bangladesh Bhutan India Maldives Nepal Pakistan Sri SouthIndicators Lanka Asia

Surface 144000 38390 3287260 300 147180 796100 65610 5131070Area(sq. km)(2009)

Population 148.69 0.725 1170.94 0.315885 29.959 173.59 20.859 1579.46(millions)

% GDP 5.83 7.44 9.72 4.78 4.55 4.36 8.01 8.83Growth

Gini 31.00 46.80 36.80 37.40 47.30 32.70 40.30Index*

% 81.30 49.50 75.60 12.20 77.60 61.00 29.10 73.90Population>$2 aday**

GNP per 546.66 732.87 817.13 2645.84 225.99 629.94 853.52 758.80capita(constant2000US$)***

Survey Years: * Bangladesh, India (2005), Bhutan (2003), Maldives, Nepal(2004), Pakistan (2006) and Sri Lanka (2007).

** Bangladesh, India, South Asia (2005), Bhutan (2003), Maldives, Nepal(2004), Pakistan (2006) and Sri Lanka (2007).

*** Bangladesh, India, Pakistan, South Asia(2010), World (2009), Maldives(2004), Sri Lanka (2002), Bhutan and Nepal (2000).


Economic growth accelerated in many of these countriespost-1990s and the average annual growth of GDP per capitaimproved in almost all countries in the period 1996-2006. HighGDP growth rates did not contribute to the improvement inper capita income in these countries, reflecting a highpopulation growth rate, with the exception of Bhutan. Indiais the largest country, followed by Pakistan, in terms of bothsurface area and population. Therefore, India and Pakistanhave crucial roles to play in ensuring successful regionalcooperation in the South Asian region (Hirantha 2002).

Trade in the SAFTA region is currently low. Most of theSAFTA member countries have a low trade-GDP ratio andhave initiated external sector liberalisation (that is, bringingdown tariff barriers), starting only in the 1990s. A large numberof NTBs currently exist in the region (Banik, 2001).

As McCombie and Thirlwall (1997) and Paulino andThirlwall (2004) point out, robust economic growthencourages a more liberalised trade regime. With a similarexport profile, trading partners are better off with fewerrestrictions. Because countries in the SAFTA region share asimilar export profile, they also face the same types of NTBs.

Hence, they share a similar negotiating stance for removingthese barriers. Most countries in SAFTA are undertakingconsiderable external sector liberalisation (ESCAP, 2006).

South Asian countries exhibit many similarities in economicactivity, implying that long run movements in real output arelikely to be similar. Such co-movements of outputs may bedue to common factors such as geographical proximity andsimilar industrial profile. When countries share a similarindustrial profile and are located closely, demand shocks inone country may spread regionally. This could also arise asthese economies all share common trade linkages with majorexport markets such as the EU and the Middle East.


Another reason for the presence of common economictrends and hence co-movements of output could be explainedthrough intra-industry trade. As far as the trade structure isrepresentative of the output structure, the cycles shouldbecome more synchronised because they would be affectedby common shocks. This is the argument of Kenen (1969),who stated that when countries trade in similar commodities,this increases the synchronicity of their output.16

In fact, this aforementioned economic characteristic ofSouth Asian countries will enable them to go beyond the FTAframework and work for deeper economic integration, suchas forming a common market and economic union (Banik,Biswas and Saunders, 2006).

Table 1.2: Average Annual Growth of GDP, GDP Per Capitaand Exports and Imports of Goods and Services, 1990-2010

1990-1999 2000-2010

Country GDP GDP per Export Import GDP GDP Export Import

(%) Capita of Goods of Goods (%) per of Goods of Goods

(%) and and Capita and and

Services Services (%) Services Services

(%) (%) (%) (%)

Bangladesh 4.80 2.58 12.65 8.44 5.81 4.32 9.87 6.92

Bhutan 5.28 5.24 - - 8.40 5.79 20.26 9.58

India 5.63 3.72 11.97 13.31 7.44 5.90 13.58 13.09

Maldives 9.13 7.05 9.41 12.42 5.64 4.09 8.42 7.35

Nepal 4.84 2.29 - - 4.10 1.95 1.95 4.46

Pakistan 3.98 1.28 3.66 2.68 4.62 2.68 8.38 5.53

Sri Lanka 5.26 4.39 6.99 8.52 5.27 4.19 6.33 5.53

South Asia 5.32 3.29 9.92 10.03 6.93 5.31 12.43 11.75

World 2.74 1.25 6.40 6.14 2.71 1.49 5.22 4.97

Source: World Development Indicators, World Bank.Survey Years: Maldives (1996-1999).


More liberal government policies are likely to be beneficialfor an FTA. There is a general consensus in the literature thattrade volume, for both exports and imports, increases followingexternal sector liberalisation (Agosin and Kohli, 1991). Highertrade volume resulting from external sector liberalisation isexpected to increase the likelihood of FTA formation.

Today, South Asia accounts for only three percent of globalgross domestic product (GDP), even though one-fifth of theworld�s population lives in the region (UNCTAD 2008a). Inthe area of investment, according to ADB�s Asian DevelopmentOutlook (2007), South Asia has averaged more than 7.5 percentgrowth since 2003.

In 2004-06, FDI to South Asia increased by an average ofUS$13.3bn per year. FDI inflows to South Asia in 2006amounted to US$22274mn � a paltry 2.1 percent of the region�sGDP and a mere 1.6 percent of world FDI. South Asia�s FDIshare is not even an eighth of East Asia�s US$214.2bn(UNCTAD 2008a).

In 2006, FDI outflows from South Asia amounted toUS$9820mn. These numbers show the extent of untappedopportunity, in terms of foreign markets and investments,which exist for South Asia.

South Asian Free Trade Agreement: A Review ofLiterature

Because of the current low levels of intraregional trade inSouth Asia and the limitations of the SAFTA process to providedynamism to regional trade, many observers believe thatregional economic integration in South Asia is likely to remaina distant dream. However, many researchers are of the viewthat SAFTA should be better judged by its unexploitedpotential, rather than by its achievements so far. Accordingly,the performance of the Agreement so far may not be the idealmeasuring road for evaluating its desirability.


While there is a rich body of literature on the benefits andfeasibility of SAFTA, there is no consensus on the potentialeconomic effects of SAFTA. Nevertheless, internationalinstitutions and bodies recognise it is vital for the region�sgrowth aspirations. The Asian Development Bank (ADB)recognises the critical role of regional cooperation andintegration in South Asia in achieving the MillenniumDevelopment Goals by 2015, in that they can help in unlockingthe region�s vast economic potential, in achieving sustainedand rapid growth and in reducing poverty (ADB, 2008). 17

It is widely recognised that irrespective of precise economicoutcomes in the short run, in the long term, regionalcooperation and integration will enable South Asia to play amore effective role in wider Asian integration (Kelegama andAdhikari, 2002, Kemal, 2004, Delgado, 2007, Kabir, 2007,ADB and UNCTAD, 2008, Lee, 2008 and De, 2009). Evenstudies which are sceptical about the monetary outcomes ofthe initiative, find benefits in terms of regional peace and othernon-economic dividends (Panagaria, 2003, and Nag, 2008).

Since it is not practical to cover the entire gamut of issuescoming under the purview of regional economic cooperation,focus in each work has been restricted to a numbered part ofthem and hence the outcomes and predictions also vary acrossstudies because of the partial nature of analysis. In the sectionsbelow, a review is offered which distinguishes betweenconceptual arguments and empirical results in the literatureon South Asian trade. It is followed by an assessment of thekey gaps in existing literature on regional economic integrationin South Asia.

Economic Case of SAFTAMany studies have analysed the success of SAFTA on the

basis of the existence of necessary economic conditions forsuccess of RTAs like trade complementarities and differences


in competitiveness of the countries. Indices of tradecomplementarity, which indicate reciprocal demand fortrading partners� exported products, are used to assess whethera proposed regional trade agreement will succeed. Kemal etal. (2000) used such indices for all five leading South Asiancountries and found that there is a lack of strong tradecomplementarity in the bilateral trade structures of South Asiaand hence expressed low expectations from the futureprospects of SAFTA.

Pitgala (2005) addresses the issue of whether the SouthAsian countries possess the requisite conditions to become asuccessful trading block by going beyond simplecomplementarity, using the �natural trading block� hypothesis.The study uses three definitions of the �natural trading block�hypothesis, i.e. the trade volume, geographic proximity andthe complementarily approaches. By trade volume approach,which suggests that members of a regional agreement shouldtrade disproportionately with each other in order to be asuccessful bloc, it was found that the South Asian economiesfall short.

Evidence from this work does not support the �geographicalproximity� hypothesis, reflected by the trade intensity index(TII), either, with the South Asian countries demonstratingan increased tendency to trade with industrial countries dueto cultural ethnic or religious affiliations. Results of theapplication of complementarity criterion also confirmed earlierresults that prospects of regional trade are quite low.18

Krueger (2004) puts forward a similar view that, althoughpotential gains exist from SAFTA, the South Asian region doesnot meet most of the theory-based criteria for successful tradeagreements. The study concludes that, since the profile ofregional trade indicates trade in similar goods, SAFTA haslimited capability to increase intra-regional or extra-regionaltrade for its member states.


Nevertheless, there are counter arguments which critiquesuch claims. One of the major problems of analysis in theapplication of various criteria in the studies mentioned aboveis that they account for only past trends in goods trade fromthe era of regional trade restrictions. Despite reforms in theexternal sector, trade among South Asian countries is stillrestrictive, especially considering the sectors whereopportunities for trade exist (Ghani and Din, 2006).

The comparative advantage of these countries lies in thelow technology-intensive items such as agricultural products,leather footwear, textiles and clothing. As the level ofeconomic development increased following reforms, the regionhas exhibited diversification in export baskets and trends inintra-industry trade have also changed (Hassan, 2001,Rodriguez-Delgado, 2007).

One of the most frequent arguments levelled against SAFTAis that the Agreement is expected to increase regional trade (tradecreation) but may do so at the expense of trade flows from moreefficient non-regional suppliers (trade diversion). Baysan et al,(2006), examine the economic case for SAFTA in the light ofother preferential trading arrangements in the region, particularlyIndia Sri Lanka Free Trade Agreement (ISFTA).

The study suggests that SAFTA is unlikely to find the mostefficient suppliers within the region and harmful tradediversion may result. But, SAFTA will present firms in membercountries with the opportunity to exploit economies of scalethrough access to an enlarged and diversified market.

Complementarities which previously did not exist wouldbe found in such a scenario. Some quantitative studies basedon Global Trade Analysis Project (GTAP) modelling point tonet welfare gains for the region as a whole and suggest thatSAFTA will be trade-creating, which, in turn, would offerdynamic gains (Derosa and Govindan, (1996). Some studiesdemonstrate that such gains would be much larger for theregion when liberalisation is on a non-discriminatory basis.


Currently, the level of protection amongst SAARC countriesis very high and barriers to intra-regional trade are especiallyhigh. Much of the unexploited potential thus cannot beunearthed by observing past trends. One of the reasons whichmakes the economic case for SAFTA appear weak is thepolitical economy of selection of the excluded sectors fromapplication of preferential rates and rules of origin (RoO) issue.

As domestic lobbies make sure that the sectors that do notwithstand competition are excluded from tariff preferencesand go along free trade in sectors in which they are competitive,inefficient selection of excluded products is the outcome whichsubsequently results in weak possibilities for actual trade andthus real potential remains hidden.

A similar outcome occurs due to strict RoO. One of themain arguments advanced in favour of SAFTA is that there issubstantial informal trade between countries. An FTA maymake formal trade even more expensive than informal tradeby adding to the costs of complying with the RoO. SimplifiedROOs and application of preferential trade thus may makeformal trade viable and thus a major chunk of the unaccountedtrade will surface to the effect that the Agreement�s role inadvancing trade relations will be found much more thanconventional expectations (Weerakoon, 2010).

It has often been argued, particularly in earlier studies, thatthe move toward SAFTA gained momentum due to politicalreasons. Following a trend around the world, SAFTA wasconceived with a political agenda, rather than economic.SAFTA is often seen as a vehicle for promoting political tiesbetween India and Pakistan.

Bandara and Wusheng (2001) and Hossain (2006) expressthe view that the possibility of free trade will not be operationalwithout resolving political issues between member countries.Frail diplomatic relations between India and Pakistan havebeen analysed as a major hindrance to the success and future


of SAFTA in South Asia (Hussain, 1999, Mukherjee, 2004,and Dhungel, 2008). It should be noted that trade negotiationsare often seen as a means of resolving political conflict, evenas political tensions are accused of preventing the progress ofnegotiations.

SAFTA is likely to lead to stronger economic growth,notwithstanding the controversies pertaining to trade anddevelopment policies and the mixed results of specific impactsfrom various studies. The Agreement would help to promotepolicy credibility by �locking in� uniform trade and investmentpolicies among member countries (Ahmed and Ghani, 2008).19

Group action may influence all members to abide by acommon reform agenda. Of course, RTAs do not guaranteeequal distribution of benefits to members. Since India is a largeand rapidly growing member country of SAFTA, it has thepotential to serve as a �growth-pole� for the region and couldhave growth-enhancing effects for the region.

In addition, further inroads towards smoother functioningof SAFTA are yet to be made by bringing trade in servicesunder its purview. This is necessary in view of the fact thatabout 50 percent of the value added to South Asian GDPoriginates from the services sector. The content and meaningof the discussion on the viability of regional trade based onindicators like complementarity will change substantially, oncethe scope of the Agreement increases.

Quantitative AssessmentsAs mentioned in the previous section, one of the most

pressing questions is whether the regional agreement wouldresult in overall inefficiency induced by trade diversion.Hirantha (2002) examined the progress of SAPTA and theprospects of SAFTA using trade data for 1996 to 2002, usinga gravity model. The gravity model results show strongevidence of trade creation in the region under SAPTA with no


trade diversion effects, as far as trade with non-members isconcerned. According to the study, this is because an increasein intra-regional trade would be accompanied by an increasein trade with non-members.

Based on studies conducted using the framework of thegravity model, RIS (2004) reports similar results. In conformitywith previous studies, RIS suggests that complete eliminationof tariffs under SAFTA may increase the intra-regional trade1.6 times. It further suggests that, in the dynamic framework,the gains from liberalisation are at least 25 percent higherthan the static gains and the long run trade diversion effectswould be minimal, as a competitive environment would helpdomestic industries to mature in due course.

SAFTA consists of far reaching trade and investmentliberalisation measures that go beyond the removal of tariffsand NTBs. Free trade agreements make substantial provisionson simplification of banking facilities for import financing,transit facilities for landlocked countries, removal of barriersto intra-SAARC investments, macroeconomic consultation,rules for fair competition and promotion of venture capital,development of communication systems and transportationinfrastructure, easing foreign exchange controls on repatriationof profits, simplification of procedures for business visa, etc.,that may remove existing impediments to further expansionof intra-regional trade.

A series of studies incorporated the effects of suchdimensions in the traditional analysis and found that a numberof factors would contribute to generating welfare-generatingoutcomes from trade in the long run.

Further, some of these studies also suggest that long runefficiency gains in export industries due to positive spillovereffects from intra-regional trade will enhance trade with non-members.


It is, therefore, suggested that efforts are made to expeditenecessary structural adjustments in member states and tradepolicy reforms and allied facilitation measures shouldnecessarily be adopted with tariff negotiations. Thus, theproposition that comprehensive regional integration will bringabout substantial benefits to SAARC region is well foundedin the literature.

Raihan and Razzaque (2007), using computable generalequilibrium (CGE) modelling, estimated the trade creation andtrade diversion effects of SAFTA. They show that a fullimplementation of SAFTA will lead to welfare gains for India,Sri Lanka and other South Asian countries, though Bangladeshwill suffer from welfare loss. Bangladesh�s welfare loss ismainly driven by the negative trade diversion effect.

However, the simulation results also suggest that thenegative trade diversion effect can be undermined by someassociated unilateral trade liberalisation measures. Bangladeshand other LDCs in South Asia will have to raise their exportshare into the Indian market substantially, in order to increasewelfare through positive terms of trade effect. Exportdiversification in this regard is very important.

Kumar and Saini (2007) examined different scenarios forSAFTA and its implications on the welfare of each country.They find that a South Asian Free Trade Area, as envisagedunder SAFTA, does not result in equal welfare gains for allthe member countries. SAFTA results in small welfare gainsfor all the South Asian countries, with the exception ofBangladesh. The rest of South Asia gains by about half-a-billiondollars, while India gains by about US$204mn and Sri Lankaby just US$89mn. Bangladesh, on the other hand, sufferswelfare losses of about US$225mn. The gains in welfare forIndia and Sri Lanka are basically due to gains in terms of tradeand, to a lesser extent, from improvements in allocativeefficiency.


The results of this study also show that Bangladesh�s apparelsector gains more on account of its increase in global exports,which could increase as much as six percent on account ofSAFTA. As a result of SAFTA phase II, Bangladesh�s globalexports of wearing apparel show increase of about US$262mn,of which only US$3mn are apparel exports to South Asiancountries. Thus, 98 percent of wearing apparel exports are tothe rest of the world. This is also corroborated by the factthat, in SAFTA phase II, India�s textiles exports to Bangladeshincrease by 84 percent and 90 percent of India�s total SouthAsian textile exports increase goes to Bangladesh.

Certain studies show sectoral gains in agricultural andchemical products, electrical and electronic equipment, etc.20

Sectoral predictions include India�s gains in agricultural sectorslike sugar, poultry, dairy and manufacturing, including motorvehicle parts. There are losses to sectors like wearing appareland leather. Pakistan gains mainly in wheat, horticulture andtextiles, with setbacks likely in sugar and wearing apparel. SriLankan gains would be less pronounced, since it already hasan FTA with India, and is about to conclude an FTA withPakistan. There is likely to be a similar situation with Bhutanand Nepal.

One of the most important observations from sectoralstudies is that India�s gains would suffer if Pakistan partiallyparticipates in SAFTA. These results indicate that predictedlosses to LDCs can be offset by exploiting key sectors ofcompetence. Even studies which foresee marginal welfarelosses predict overall positive employment generation effectsfor LDCs, particularly Bangladesh (Gilbert, 2008, and Bouetet al., 2010).

In addition, quantitative studies acknowledge the limitationsof subjecting the potential benefits from greaterrapprochement, diplomacy and stability owing to greaterinvolvement through SAFTA.21 However, despite such


omissions owing to methodological limitations, the neteconomic impact of SAFTA can be seen as beneficial. Allcountries experience welfare gains albeit at varying degrees,but it would be important to give some flexibility to countriesto protect their vulnerable sectors � this is particularly thecase for the manufacturing sector in the smaller LDCs (Dayalet al., 2008).

Even in the case of LDCs, gains are generally predicted tobe modest only in the initial phase of liberalisation and wouldturn out to be significant subsequently, once there iscomprehensive liberalisation.

Omissions in the Traditional AnalysisA larger role of a free trade agreement for the overall benefit

of South Asia with its wide-ranging potential impacts has beenwell recognised in the literature, though all the previous studiesmiss out on certain specific positive outcomes, which areextremely difficult to quantify. It is crucial to pay attention tothe main observations on intangible benefits, which are oftenforgotten, in order to truly appreciate the prospects of SAFTA.

Zalazar-Xirinachs (2004) observes in the context of anextensive survey on Latin American trade agreements that amajor positive influence of RTAs on domestic policy reformis by way of positive behavioural changes in the traditionallyrent-seeking behaviour by the business communities. The studynotes that �in many countries, the prospect and the reality ofincreased import competition has led the local businesscommunities to be more interested in reducing domesticdistortions in transportation costs, the costs of telephone calls,electricity rates and interest rates that hinder their ability tocompete with firms from countries with which FTAs havebeen entered�.

A joint report by ADB and UNCTAD (2008) predicts thispossibility in the case of South Asia. SAFTA, to the extent


that it reduces rents for high tariff protected intermediateproducts, will reduce costs for downstream finished productmanufacturers and make them more cost competitive, bothregionally and globally. Regional Trade Agreements can,therefore, help countries build on their comparativeadvantages, sharpen their industrial efficiency and act as aspringboard to integrate into the world economy. It has beenargued that increased economic integration would carry withit the ability not only to secure new and larger markets fortraditional products but also to enable the diversification ofdomestic economic structures.

More recent studies have highlighted this aspect and have,therefore, argued for pursuing deeper economic integrationin South Asia, not only in trade in goods but also in servicesand investment (Chanda, 2005, De, 2005, 2009) and Mehta,2005.

Trade facilitation, covering a wide range of reforms foreasing trade flows, is a sensitive issue which has not beenadequately examined in existing literature. Transportation isperhaps the most troublesome aspect of trade facilitation inthe region. Roy and Banerjee (2010) note that, despite anintegrated road and rail network that connected most of SouthAsia during the colonial era, overland connectivity betweenSouth Asian countries today is suffering and is hostage to thepolitical climate prevailing in the region.

The most important observation on this topic is in fact that,in South Asia, unlike most other developing regions in theworld, lack of adequate transport infrastructure is not themost pressing issue (Weeraheva, 2009, Hertel and Mirza,2009), but an antipathy towards putting it to use is a muchgreater hurdle.22

Pakistan�s refusal to allow overland traffic to India fromAfghanistan and Bangladesh�s reluctance to open an overlandroute connecting north-east India to the rest of South Asia


and the port of Chittagong has prevented a trans-South Asianroad network from emerging. Even where overland routes doexist, such as between Bangladesh and Nepal and Bangladeshand Bhutan through India, rent-seeking officialdom is identifiedto have made trade unduly expensive. Like roads, railwaysalso suffer from behind-the-border issues like:� Lack of efficient railway dry ports with logistical support;� Rent-seeking and theft of cargo while in transit;� Lack of multi-modal linkages with railways; and� Lack of efficient and cheap trans-shipment facilities

between rail hubs and seaports (in some cases).Smooth transit is of very high intrinsic value and should

necessarily be an integral element of any cross-bordermovement of goods and vehicles and yields significant influenceon national and regional economies.23 The presentarrangement of transit in South Asia is bilateral, where Indiaprovides overland transit to Bangladesh, Nepal and Bhutanfor their bilateral trade and maritime transit to Nepal andBhutan for their international trade. The prospect of growthin trade volume is definitely going to focus attention on totransit-related administrative reform, governance and security.Improvement in these areas will hike the current modestestimates of trade benefits in unimaginable ways. These factorsneed to be taken into consideration in the traditional analysis.

An efficient overland infrastructure would allow goods tomove smoothly across South Asia, reaching out to the mostefficient hub using multi-modal means. The resultantcompetition would lead to the emergence of efficient hub andfeeder route combinations, using rail, road, and regionalshipping routes, greatly reducing the transaction costs imposedon South Asia�s entrepreneurs. Many of these entrepreneursare left out of the global and the regional market preciselybecause they are priced out of it by the incidence of transactioncosts on trading (Banerjee and Roy, 2010).24


As can be seen from the global trend of reforms of customsadministrations, South Asian countries too have seenimprovements in the overall quality of their customs-relatedbureaucracy, though it still leaves scope for improvement by ahuge margin. With the exception of Afghanistan and Bhutan,the widespread use of electronic data interchange (EDI) andthe increasing use of paperless transactions has become thenorm in South Asia�s customs administration.

However, the scope of EDI and the use of informationtechnology (IT) are still limited and there is ample room forimproving the level of procedural simplicity and documentationrequirements. In all countries, many agencies, apart fromcustoms, involved with the clearance of goods, are not yet upto the mark in automation and hence paper trails remain. It isnot so much the absence of an IT infrastructure, whichincreasingly is less of a concern, but rather the lack ofmovement in procedural reforms that is holding up furtherefficiency gains at South Asia�s customs gateways (Banerjeeand Roy, 2010).

South Asian economies are aiming to undertake tradefacilitation measures that will greatly reduce current physicaland non-physical barriers to trade by means of both visibleinfrastructure (such as multi-modal corridors and terminals)and invisible infrastructure (such as reformed policies,procedures and regulations).

Due to the lack of adequate research on trade facilitation,not much information is available on either the multiplier effectsit will generate or on the benefits through inter-industrylinkages such a situation will kick-start. This is not only anarea of research that needs special attention from scholars inSouth Asia but is also a key consideration for policy makerstaking decisions on the issue.


ConclusionsIn classical trade theory and its modern variants, centred

on the concept of comparative advantage, consumer welfareis treated as inseparable from producer welfare. Further,positive consumer welfare gains, following open internationaltrade, are considered as more predictable and assured, as netproducer welfare gains depend on the results of redistributionof productive factors from non-tradable sectors to tradablesectors, which can be positive or negative.

New Trade Theories, which attempt to explain phenomenalike intra-industry trade, effects of externalities, technologicaladvancements, increasing returns to scale owing to trade, etc.,go beyond the restrictive assumptions of classical comparativeadvantage theory, but none of these schools of thought can beobserved to critique, in any way, the potential positiveconsumer welfare gains arising out of open international trade.

Theories of trade agreements (principally, the terms-of-trade theory) show that the primary function of tradeagreements is to resolve the mistrust between trading partnersdriven by terms-of-trade wars which lead to sub-optimal traderelations between them.

For this, these theories predict that reciprocity andtransparency are the most crucial or inevitable principles ofideal trade agreements. This strand of theoretical literaturealso reveals that consumer and producer welfare gains areoften wrongly treated separately, because they accrue distinctlyto the importing and exporting countries respectively.

The critical observation here is that it is both theoreticallyand practically impossible for a trade agreement to function ifone or more of participating countries expect either onlyproducer welfare gains or only consumer welfare gains out ofit. Each member state must show willingness to accept amixture of both.


A frequently cited reason for the hitherto failure of SAFTAis the preservation by member countries of a large number ofproducts with intra-regional trade potential under sensitiveor protective lists. Quantitative assessments on the economicimpacts of SAFTA, are by and large inconclusive, as studiesfind both overall positive as well as negative impacts. Empiricalresults depend primarily on the assumptions made in theunderlying modes used for the analysis and they vary widelybetween studies.

Similarly, there exist arguments for and against the positivepotential effects of SAFTA in the studies using theoretical andpolitical economy approaches. For instance there arecompelling counter arguments in the literature to prove thatthere need not be any negative trade diversion impact as aresult of trade liberalisation under SAFTA, which has beenoften cited as a major concern.

The consumer welfare impact of SAFTA is almostcompletely ignored in the literature so far. Consumer welfaregains find a mention only in quantitative studies using generalequilibrium models. Even in such studies, this concept istreated only partially as general equilibrium models generateonly overall gains net of producer and consumer welfare gains.

Chapter 2Potential Impacts

of SAFTA onConsumer Welfare:

A Quantitative Assessment

IntroductionAs narrated in the previous chapter, though existing

literature on potential impact of SAFTA remains inconclusive,most of the available research results do not discount thepossibility of member countries drawing high economic andpolitical dividends from the initiative. Many researchers areof the view that the potential of SAFTA to contribute towardseconomic growth and development in the region is hidden bythe Agreement�s inability so far to generate actual tradepreferences within the region, sufficient enough to stimulatethe minimum level of intra-regional trade flows which wouldkick-start a positive vicious cycle of trade leading to moretrade.

The rapid growth in world trade during the past twodecades has been achieved not only by reduction in traderestrictions but also by the transformation of productionpatterns and processes. The current global trend of


specialisation and fragmentation of production processes isthe result of access to efficient, reliable and low cost supplychains and the cause of competitiveness of both firms andcountries.

Transport and other supply chain costs have beensignificantly reduced because of scale economies as trade grewand this has further inspired more trade and commerce. Thiscircular link is missing in South Asia, as SAFTA members arestill grappling with preferential market access issues in goodstrade and are yet to embark on services trade liberalisationand other complementing trade policy reforms.

Though South Asian countries have shifted to more outwardlooking policies in 1990s, reducing restrictions on privatesector involvement in business and trade, remnants from theprevious economic policy approaches still remain. Exportpromotion has replaced import substitution as the centraltheme for most governments in the region, but there are echoesof mercantilist attitude, increasing exports, while stillattempting to restrict imports (World Bank, 2008).

The review of select literature carried out under this studyhas also revealed that an assessment of the consumer welfaregains from trade liberalisation has not been adequatelyresearched in the context of SAFTA. A change in this attitudeis imperative to push the tariff liberalisation agenda forward,without which deeper economic integration will remainunattainable.

The first step towards this is to realise the importance ofgranting import concessions, not only just as a policy tool togain export markets but also as a significant source of economicbenefits on its own. In this chapter, an empirical analysis isundertaken to assess potential welfare gains to South Asianconsumers arising out of enhanced intra-regional imports. Theanalysis uses a basic method to measure consumer welfareimpacts from an increase in imports, as currently reserved


product categories are brought under the ambit of the tariffliberalisation scheme under SAFTA.

The basis for this analysis is drawn from the notion that,when countries are allowed to choose sectors that can beexcluded from tariff preferences under a PTA, domestic lobbieswork to ensure exclusion of products in which they may notwithstand competition from the partner countries, as isobserved from India-Sri Lanka FTA (Baysan, Panagaria andPitgala, 2006). Thus lists of excluded products often providea good starting point for identifying sectors of importance forintra-regional trade.

Assessing Consumer Welfare Gains under SAFTA:Methodology and Product Selection

It is generally recognised that SAPTA, the predecessor ofSAFTA, failed to achieve its intended objective of enhancingintra-regional trade as a result of limited product coverageand limited extent of tariff concessions exchanged amongmember countries. The primary objective sought throughSAFTA was, therefore, to generate sufficient tariff preferencesby increasing product coverage under the Agreement�s tariffliberalisation programme (TLP).25

Though member countries adopted a reduced sensitive listcontaining items which are not subject to tariff reduction, therespective lists maintained are still large and include manyitems in which SAFTA trading partners� exhibits �revealedcomparative advantage�.

With the exception of Bhutan, all other seven memberselected to exclude more than 10 percent of total product lines(HS 6-Digit Level) from the ambit of the TLP. At the timepreferential tariff reductions were initiated under SAFTA in2006, all the major five member countries kept 15 to 25 percentof total product lines out of bounds under their respective


sensitive lists. Since then, only a marginal reduction in the listof restricted product lines has been achieved. While Indiabrought down it lists for LDCs from 744 to 484 product lines,the list for non-LDCs has remained the same at around 860product lines. Bangladesh, Nepal, Pakistan and Sri Lanka stillretain more than 1000 product categories in their lists, withan unfulfilled commitment to bring about a 20-percentreduction.

In this study, a two stage method has been used todetermine the consumer welfare gains from enhanced intra-regional trade in the region. In the first stage, an algorithmicprocess is used to select products from the sensitive lists offive major SAFTA member nations (Bangladesh, Nepal, India,Pakistan and Sri Lanka), in order to calculate figures ofminimum gains for product categories with maximum potentialeffects on consumer welfare.

The selection of products is carried out by sequentiallyapplying two criteria: (i) products in sensitive lists of a SAFTAmember country (m) with high shares in the total exports ofSAFTA partner countries (p) to rest of the world (RoW),reflecting the export potential of partner countries in suchproducts, (ii) the list thus selected is further filtered by selectingproducts in which exports of partner countries to the membercountry is minimal and imports of the member country arehigh, reflecting high intra-regional trade potential in future.

In the second stage, the potential consumer welfare gainsfor each SAFTA member is calculated as the difference betweencurrent import expenditure incurred by the member countryon the selected products and likely import expenditure if thatcountry were to import the same products from SAFTAtrading partners at a lower price currently offered by them.26

CWmi = ? (PmiQmi � PpiQmi), where;CWmi � Consumer Welfare due to change in import price of

country m in product i


Pmi � Import price of member country m in product i fromROW

Ppi � Export price of SAFTA partner country (p) in product(i) to ROW27

Qmi � Import Quantity of member country (m) in product(i) from ROW

In the second stage calculation process, those productcategories will automatically get eliminated in which thecurrent export price of the SAFTA trading partner to RoWexceeds the current import price of a member country fromRoW. Only those products with potential for savings onimports leading to reduction in consumer expenditure areconsidered and thus the estimation method helps to identifyproducts with maximum potential consumer welfare gains foreach country and, therefore, qualify for removal from theirrespective sensitive lists.

One of the important features of this methodology is thatit minimises the risks of displacement of domestic industriesowing to imports � the single most important concern of animporting country � because it ensures selection of productcategories which already rank high in the import baskets ofthe respective SAFTA members. Another objection oftenraised against reduction of imports tariffs is the loss of revenuefrom the same.

As will be dealt with in the next section, the intra-regionaltrade scenario emerging from tariff reductions on selectedproducts in their sensitive lists, each SAFTA member standsto gain in terms of an increase in export earnings which couldbe taxed to offset the loss of customs revenue. Dependenceon customs revenue is to be forgone in any case with theprogress of multilateral trade liberalisation to which theselected SAFTA members are committed as WTO signatories.

The estimates arrived at using this method would form thebasis for more detailed studies on the effects of reduction in


transportation costs and other trade facilitation measures,which would further reduce the import costs and subsequentlyprices facing consumers. Thus, the stated methodology usedfor the study and selection of products based on the mentionedcriteria will facilitate comparison of import costs with othertrade costs and relative merits of tariff liberalisation in eachproduct category could be assessed in detail.

Results of Consumer Welfare GainsAfter identification of products which satisfy the

aforementioned criteria from the sensitive lists of each of thefive major SAFTA members (Bangladesh, India, Nepal,Pakistan and Sri Lanka), consumer welfare gains, representedby reduced import bills, arising for each country in eachproduct category were calculated. Table 2.1 summarises theaggregate results. A combined total of 355 product categoriesare identified from the sensitive lists of the five countries whichhave high regional trade potential and promise high welfaregains. The current aggregate import bills paid to RoW by the

Table 2.1: Summary of Results on Aggregate ConsumerWelfare Gains (analysis of products in the sensitive lists)

Country Product Lines Consumer Current Value Percentage of

in Sensitive Welfare Gains Imports of Consumer

Lists (in US$mn) Country from Welfare Gains

ROW (in US$mn) in Imports

Bangladesh 50 398.56 2781.33 14.33

India 161 597.29 1095.45 54.52

Nepal 73 457.50 1068.27 42.83

Pakistan 44 206.18 349.24 59.04

Sri Lanka 27 288.61 918.54 31.42

Total 355 1948.15 6212.83 31.36

Source: Author�s calculations based on trade data 2009-10, Trade Map;International Trade Centre, Geneva & UN Comtrade Database.


SAFTA members under consideration on these productcategories amount to US$6212.83mn. Intra-regional trade atreduced prices would generate 31.36 percent savings on thisimport expenditure, leading to annual savings of aboutUS$1948.15mn for buyers belonging to the region.

Figure 2.1 shows the share of each SAFTA member inaggregate welfare gains. India tops the list in terms of share inaggregate regional gains, accounting for about 30 percent. Itis commensurate with the high number of product lines thatqualified for removal from India�s sensitive list. Despite theslight variation in share on total gains, all countries stand togain substantially in terms of gains per capita, in proportionwith their economic size and population. Though Pakistanreceives only 10.5 percent of total gains, the lowest, it standsto save 59.04 percent on its current import expenditure onselected products.

Bangladesh50 product lines qualify for removal from Bangladesh�s

sensitive list, bringing about US$398.5mn worth of savings onimports, which is about 14 percent of current expenditure

Figure 2.1: Country-wise share in AggregateRegional Consumer Welfare Gains


Table 2.2: Summary of Results onConsumer Welfare Gains for Bangladesh

SAFTA Product Consumer Current Value Percentage ofTrading Lines in Welfare Gains of Imports by ConsumerPartner Sensitive List (in of US$mn) Bangladesh Welfare

from ROW Gains in(in US$mn) Imports

Pakistan 14 227.01 1317.56 17.23

India 9 143.47 1388.53 10.33

Sri Lanka 13 1.21 4.14 29.22

Nepal 14 26.870 71.08 37.80

Total 50 398.56 2781.33 14.33


(Table 2.2). Import from SAFTA trading partners is almostevenly distributed in terms of product lines, but most of thegains accrue from imports from Pakistan (57 percent) and India(36 percent). Bangladesh stands to gain mostly through importsof mineral fuels and oil by-products (Figures 2.2 and 2.3).


Other major items which would reduce import bills areelectrical equipment and pharmaceutical products. Thoughthe contribution of imports from Sri Lanka and Nepal amountto only less than seven percent of total gains, Bangladesh wouldsave about 30 percent on current import spending by importingfrom these two regional trading partners.

IndiaResults for India show total gains worth US$597.29mn

(Table 2.3). Even though this figure is much higher in absoluteterms, compared to other countries, relative gains for Indiamay be lower than its SAFTA trading partners, given its largeeconomic and demographic size. An interesting feature is thatmore than 90 percent of the gains accrue by way of importsfrom Pakistan of plastic-based articles.

Though only five products (chiefly iron and steel-basedarticles) are eligible for imports from Nepal, India stands to gain70 percent on their import bills. Forty-one product lines eligiblefor imports from Bangladesh chiefly consist of articles of apparel.However, because of comparatively low price differentialbetween the two countries saving on these items togethercontribute to only 2.15 percent of India�s total welfare gains.


Table 2.3: Summary of Results on Consumer Welfare Gains for India

SAFTA Product Consumer Current Value Percentage ofTrading Lines in Welfare Gains of Imports by ConsumerPartner Sensitive List (in US$mn) India from ROW Welfare Gains

(in US$ mn) in Imports

Pakistan 63 545.00 939.53 58.01

Sri Lanka 52 32.01 90.74 35.27

Bangladesh 41 12.82 54.66 23.46

Nepal 5 7.46 10.52 70.92


Figure 2.5: Product-wise Origin ofConsumer Welfare Gains (India)


NepalNepal accounts for about 23.5 percent of aggregate regional

welfare gains. Through import displacement in 73 selectedproduct categories, the landlocked state would saveUS$475.5mn, which is almost 50 percent of their currentimport expenditure on these categories (Table 2.4). Imports

Table 2.4: Summary of Results onConsumer Welfare Gains for Nepal

SAFTA Product Consumer Current Value Percentage ofTrading Lines in Welfare Gains of Imports by ConsumerPartner Sensitive List (in US$mn) Nepal from Welfare

ROW Gains in(in US$mn) Imports

Bangladesh 45 11.23 25.55 43.96

Pakistan 20 255.04 586.59 43.48

Sri Lanka 4 0.12 0.85 12.56

India 4 191.12 455.28 41.98



from India and Pakistan account for the bulk of the country�swelfare gains. The key items which would help Nepal save onspending are mineral fuels and minerals including salt, sulphurand limestone. Nepal�s trade prospects with Sri Lanka seemto be weak, as the latter�s export opportunities lie in rubber-based products and apparel. However, with other countriesin the region, there exist import opportunities for Nepal withgood prospects for welfare gains.

PakistanIn the case of Pakistan, the results show a selection of 44

product lines from its sensitive list with an aggregate saving ofUS$206.18mn, which is close to 60 percent of its currentimport bills on the selected product categories (Table 2.5). Asin the case of India, Pakistan stands to gain predominantlythrough imports from India, accounting for almost all of itstotal welfare gains. Pharmaceuticals and electrical items wouldconstitute most of its new import basket from South Asiantrading partners.


Table 2.5: Summary of Results on Consumer Welfare Gains for Pakistan

SAFTA Product Consumer Current Value Percentage ofTrading Lines in Welfare Gains of Imports by ConsumerPartner Sensitive List (in US$mn) Pakistan from Welfare


India 6 203.88 339.25 60.10

Sri Lanka 13 0.36 1.68 21.29

Nepal 5 0.30 1.36 22.11

Bangladesh 20 1.64 6.95 23.59



Sri LankaThough aggregate welfare gains of Sri Lanka amount to a

comparatively lower figure of US$288.61mn, per capita gainsto the country would be the highest, as it is the least populatedamongst the selected South Asian countries. On the 27 productcategories included in its sensitive lists, diverted imports fromwithin the region would help Sri Lanka to save 31.42 percentof its current import expenditure. Almost all of its expected

Table 2.6: Summary of Results onConsumer Welfare Gains for Sri Lanka

SAFTA Product Consumer Current Value Percentage ofTrading Lines in Welfare Gains of Imports by ConsumerPartner Sensitive List (in US$mn) Sri Lanka from Welfare


India 12 286.46 914.68 31.32

Pakistan 5 0.28 0.69 40.34

Nepal 10 1.88 3.17 59.24

Total 27 288.61 918.54 31.42



gains come through imports from India in mineral fuels andoil by-products. Sri Lanka would not gain by imports fromBangladesh, as its own export basket constitutes articles ofapparel and is price competitive and capable of capturing partof the South Asian textile market with Bangladesh. Thoughthe welfare gains accruing to Sri Lanka, by way of importsfrom Nepal, are only US$1.88mn, the island nation is set tosave close to 60 percent of imports from RoW by choosingalternatives from Nepal on certain items.

Export Opportunities in Selected Products and TradePotential

An increase in intra-regional trade also implies enhancedexport opportunities for each of the SAFTA members. As wehave only considered replacement of imports to the regionfrom RoW with cheaper imports from within, the differencebetween current total import expenditure on the selectedproducts and the aggregate savings on import bills by allcountries should amount to the total exports that would beinternalised by South Asian region. This figure stands ataround US$4000mn.


While it may be argued that only internalisation of exportscould occur in this scenario, without a real increase in exportvolume, we must consider the dynamic effects on regionalexports. The key issue that confronts intra-regional tradepotential is the supply capacity of trading partners from theregion. If the supply capacity remains static, mere diversionof exports to RoW with exports to SAFTA partners is theprobable result which may lower the aggregate nominal exportearnings for a country, but, in all likelihood, it raises theprofitability in real terms, since lower preferential tariffs withinthe SAFTA region allow producers/exporters to lower theirprice, while raising profit margins.

Trade potential in a particular product category with a staticsupply capacity scenario can be assessed as the differencebetween the minimum set (importing country�s total worldimports, exporting South Asian partner�s total world exports)and existing imports of the importing country from thatparticular partner country, where exports and imports are inquantity terms. This simplistic measure shows whether SouthAsian trading partners can meet each others� importrequirements with their current export quantity. Thoughrequired data on all the selected product categories is notavailable, intra-regional trade potential assessed using thismeasure stands between 80 to 90 percent of current importsfrom RoW.

There are two key elements to be considered here withrespect to potential export market expansion. Firstly, assumingthat global market conditions remain the same, there is noparticular reason why existing export markets in RoW cannotbe retained by South Asian countries, while new exportopportunities emerge within the region. Secondly, dependingon the magnitude of the import price elasticity of the respectiveproducts in the importing countries, lower prices wouldincrease import demand and thereby expand the intra-regional


export markets further. Therefore, huge opportunities forsubstantial export expansion in many product lines are availableto SAFTA members which may be tapped by addressing supplyconstraints.

Figure 2.12 shows the main product categories in whichexport opportunities emerge for each SAFTA member countryunder consideration. Bangladesh�s export basket is heavilyskewed with textile products. For India, the export basket isfairly balanced with pharmaceuticals, electrical items andmineral fuels. While for Nepal articles of iron and steel aswell as industrial inputs based on iron feature prominently inits potential export profile, for Pakistan, mineral fuels dominate,accounting for two-thirds of its total export prospects. SriLanka�s prospects are spread between textile items and cashcrops, including rubber, tea and spices. The potential exportbaskets give a clear indication of targeting of export promotionpolicies in the context of regional trade in South Asia.

Figure 2.12: Product Category-wise Export Opportunities

Contd...


Contd...


From Minimum to Maximum GainsAs stated at the outset, the method used in this study

provides the minimum consumer welfare gains accruing toSouth Asian consumers directly from preferential tariffreduction under SAFTA. Even though we have only selectedproduct categories which assure the figures given in thepreceding sections, certain counter arguments are often raisedin the popular discourse for which further clarification maybe needed. More importantly, it needs to be noted that theassessment of consumer welfare gains here omits certaincrucial aspects because of data limitations, implying that theactual welfare gains could be much higher.

One of the first questions raised is whether the South Asianexport price will hold for regional trading partners oncepreferential trading within the region comes into operation.While there can be no straightforward answers to this, on acloser examination, it can be seen that the export price offeredto RoW is likely to go down for regional trading partners.This is mainly due to two reasons.

Firstly, the export price to RoW covers mostly the MFNtariffs rates, as South Asian exporters hardly enjoy preferentialrates in their main export destinations. Even in the case ofBangladesh and Nepal, who benefit out of Duty Free Quota


Free (DFQF) rates applicable to LDCs in certain developedcountry markets, preferential market access is limited to afixed number of product lines.

Secondly, since a preferential rate below MFN is on offerunder SAFTA, there is no particular reason for the exportprice to rise. Further, if it is safe to assume that transportationcosts would be less because of proximity to each other withinthe region, export prices (South Asia to RoW) may actuallyfall when it comes to intra-regional trade.

Another major concern raised is the possibility of tradediversion. With respect to selected products mentioned in thepreceding sections, the fact that at least one South Asian partnercountry has revealed comparative advantage in terms of itscurrent export performance in global markets lessens theprobability of negative trade diversion effects. Since SouthAsian exporters are already price competitive, compared toRoW even before liberalisation, removal of these productsfrom the sensitive list is unlikely to replace more efficientproducers from outside the preferential region.

Further, the figures for consumer welfare gains generatedunder this study only show the effects of change in importprice with fixed quantity of imports. But, the initial changesin import prices owing to preferential trade are only a startingpoint, which trigger other factors into action, with a combinedeffect of increasing consumer welfare gains several times theinitial figures. Specifically, the following three main effectsshould be considered:� Effects of domestic price reduction due to enhanced import

competition,� Effects of trade creation due to increase in import demand,

and� Effects of reduction in trade costs and subsequently import

prices within the SAARC region following development oftrade infrastructure.


The first effect here implies savings on consumerexpenditure on not only imported products but alsodomestically manufactured items facing import competition.A fall in import prices within the South Asian region will havea competitive effect on domestic manufacturing in the selectedsectors as well as exports from RoW, leading to overall controleffects on prices of the commodities under consideration. Thesecond effect of trade creation is closely linked with this. Here,as the affordability of consumers rises because of fall in prices,more of the imported product will be in demand, implyingpossible trade creation. In general, irrespective of whethertrade creation actually occurs or not, consumption baskets ofbuyers expand, as their real income increases.

The third effect refers to an often hidden positive impacton consumption. The fact that South Asian countries areimporting the selected products from RoW, although regionaltrading partners are relatively more price competitive, suggeststhat non-tariff barriers (NTBs) could be impeding trade in suchproducts more than tariffs and that these NTBs hurt SouthAsian exporters more than RoW exporters. As noted in theprevious chapter, intra-regional trade costs because of poorconnectivity, transport infrastructure, costly customsprocedures and absence of adequate trade finance are veryhigh in South Asia.

There is a dire need for trade policy reforms at the regionallevel to improve this situation, which could not be initiatedwithout actual increase in trade volume between South Asiancountries. As trade volume increases, it would naturally fuelgrowth of trade relationships, resulting in better tradefacilitation measures, procedural ease and economies of scalein the transport sector, better returns and rents frominvestments in trade infrastructure and additional incentivesfor private enterprises to explore regional markets. Substantialcuts in trade costs can surely be expected from such a virtuouscycle of trade to more trade.


Extension of Analysis beyond Sensitive Lists:Implications for Non-Tariff Reforms

Since the efforts to reintegrate South Asia are still stuck atthe first stage of tariff reforms, physical blockades maintainedfor four decades at the international borders in the regionpreceding the formation of SAARC continue to be leftunattended. As exposed in Chapter 1, there exists evidence inabundance in the literature for numerous barriers whichrestrict trade even after the application of preferential tariffrates.

As mentioned in detail earlier, the most commonly citednon-tariff barriers in South Asia are poor trade infrastructureat borders and ports, lack of transit arrangements andprocedural delays on account of border security measures. Itis noted that such trade impediments are common throughoutthe Asia Pacific region and, in addition, documentationrequirements for accessing the benefits of preferential ratesmake it extremely difficult for traders to take advantage oftrade agreements without incurring significant compliancecosts (James, 2007).

It has been reported in the context of the functioning ofmany Asian regional trade agreements that a major part of theexisting trade happens outside the preference regime. Such atrend is visible in the case of SAFTA as well. Many stakeholdersand researchers have raised an important concern that, evenafter the application of preferential rates, traders prefer notto avail because of strict rules and costs associated withdocumentation for proving local manufacturing content ofexported products. Thus, many products outside the sensitivelists also face significant levels of trade barriers and are notregionally sourced, even though there are cheaper alternatives,in the absence of avoidable trade barriers and consequentcosts.


In order to examine whether preferential rates availableunder SAFTA are underutilised in the case of products outsidethe sensitive lists, the analytical method used for selectingproducts in the sensitive list is extended to all products underthis study. Following the methodology, explained in section2.2, products were selected from the non-sensitive list categoryin which high import demand and export capacity are exhibitedby SAFTA trading partners and, at the same time, trade isalmost non-existent between them.

This selection is further filtered by applying the criterionthat export price of a SAFTA member to Rest of the World(RoW) is lower than the import price offered by RoW. Thedifference between export price and import price quoted intrade with RoW is then multiplied with the import quantityto arrive at consumer welfare gains or savings on importexpenditure. The aggregate results for the region generatedthrough this exercise are given in Table 2.7.

Table 2.7: Summary of Results of Aggregate Consumer WelfareGains (analysis of products outside the sensitive lists)

Country Product Percentage of Consumer Current Value Percentage of

Lines Product Lines in Welfare of Imports Consumer

Total Lines (in US$mn) from ROW Welfare in

(in US$mn) Imports

Bangladesh 12 3.54 30.28 74.76 40.51

India 27 7.96 85.39 134.27 63.59

Nepal 50 14.75 38.19 75.04 50.89

Pakistan 71 20.94 1574.09 7600.14 20.71

Sri Lanka 179 52.80 289.58 677.67 42.73

Total 339 100.00 2017.53 8561.88 23.56



In summary, 339 product lines could be found to havesatisfied the criterion and through the re-sourcing of theseproducts from within the region more than US$200mn couldbe saved by all the SAFTA members together, by way ofreduction in import costs. Sri Lanka ranks first in term of thenumber of products eligible for imports. The island nationstands to save about US$290mn annually by importing 179product categories from SAFTA trading partners, instead ofimporting from RoW at a higher price, as it presently does.The country-wise share in aggregate welfare gains (Figure 2.13)is highest for Pakistan at 78.02 percent (US$1574mn), followedby Sri Lanka at 14.35 percent. In this case, India, Bangladeshand Nepal together account for only less than eight percent ofthe total gains.

It is of particluar importance that Pakistan and Sri lankastand to gain the most in the category of enhanced trade innon-sensitive list products in which preferential rates arealready applicable. Unharvested gains in this category indicatethe existence of highly restrictive non-tariff barriers. This resultis also a pronouncement of utilisation rate of SAFTA provisions

Figure 2.13: Country-wise Share in Aggregate RegionalConsumer Welfare Gains (Non-Sensetive List Products)


by individual member states. The lower the unharvested gains,the more accessibly their markets have been thrown up forSAFTA trading partners after bringing products under the tariffreduction scheme of the Agreement. Thus, the scope forimprovement in accessibility of their own markets throughnon-tariff reforms is huge for Pakistan and Sri lanka.

Cotton features as an important product for the importbaskets of India, Nepal and Sri Lanka. As much as 64 percentof India�s potential gains lies in opening up imports in thecotton sector. For Pakistan, the main product category ismineral fuels, oils and distillation by-products, accounting formore than 90 percent of gains credited to Pakistan. Theprominent import product category for Bangladesh is preciousstones and metal-based articles (86.32 percent of gains) andthat for Nepal is electrical and electronic equipments (69.57percent). Table 2.8 gives country-wise summary of consumerwelfare gains in the non-sensitive list category.

Table 2.8: Country-Wise Summary ofResults of Consumer Welfare Gains

BangladeshSAFTA Product Percentage Consumer Percentage of Current Percentage

Member Lines of Product Welfare Consumer Value of

Country Lines in (in US$mn) Welfare Imports by Consumer

Total in Total Bangladesh Welfare

Product Consumer from ROW in

Lines welfare (in US$mn) Imports

Pakistan 3 25.00 3.80 12.54 31.57 12.03

India 4 33.33 25.27 83.44 39.96 63.24

Sri Lanka 2 16.67 0.00 0.01 0.17 2.02

Nepal 3 25.00 1.21 4.01 3.06 39.70

Total 12 100.00 30.28 100.00 74.76 40.51

Contd...


India

SAFTA Product Percentage Consumer Percentage of Current Percentage



Total in Total India Welfare



Pakistan 13 48.15 80.19 93.32 120.43 66.58

Sri Lanka 8 29.63 5.04 5.86 13.41 37.57

Bangladesh 6 22.22 0.16 0.19 0.43 37.87

Total 27 100.00 85.39 99.37 134.27 63.59

Pakistan

FTA Product Percentage Consumer Percentage of Current Percentage



Total in Total Pakistan Welfare



India 10 14.08 1495.69 95.02 7477.11 20.00

Sri Lanka 18 25.35 21.10 1.34 36.90 57.20

Nepal 20 28.17 35.33 2.24 52.81 66.89

Bangladesh 23 32.39 21.97 1.40 33.32 65.93

Total 71 100.00 1574.09 100.00 7600.14 20.71Contd...


Nepal




Total in Total Nepal Welfare



Bangladesh 2 4.00 0.04 0.09 0.04 87.36

Pakistan 41 82.00 11.29 29.57 20.97 53.86

India 7 14.00 26.86 70.33 54.03 49.71

Total 50 100.00 38.19 100.00 75.04 50.89

Sri Lanka




Total in Total Sri Lanka Welfare



India 10 5.59 38.58 13.32 205.53 18.77

Pakistan 59 32.96 162.62 56.16 328.70 49.47

Nepal 33 18.44 55.75 19.25 80.37 69.37

Bangladesh 77 43.02 32.63 11.27 63.08 51.73

Total 179 100.00 289.58 100.00 677.67 42.73



Summary and ConclusionsThe method used for assessing potential consumer welfare

gains of SAFTA in this study, started by selecting thoseproducts with high intraregional trade potential, which arecurrently retained in the sensitive lists of the 5 largest economiesout of the 8 member states of SAFTA (Bangladesh, India,Nepal, Pakistan and Sri Lanka). Such products were selectedfrom the respective sensitive lists of each of the five countriesby applying two criteria to assess intraregional trade potential:(i) high import demand for such products in the country underconsideration as reflected by their current imports from thenon-SAFTA region, and (ii) high export capacity in suchproducts by one or more of other SAFTA members as reflectedby their exports to the non-SAFTA region.

The potential consumer welfare accruing to each countryis derived by taking the difference between the total importexpenditure in the selected products incurred by the countryunder consideration and likely import expenditure if thatcountry were to import the same products from SAFTAtrading partners at a lower price currently offered by them.

Results show an aggregate minimum consumer welfare gainof US$1948.15mn per annum to the South Asian region byway of savings on aggregate consumer expenditure on importedproducts in the selected categories. This figure (savings onconsumer expenditure) is about 31 percent of the total currentimport expenditure on these categories. In certain productcategories, the savings go up to more than 80 percent of thecurrent import expenditure.

When the analysis was extended to non-sensitive listproducts, it was found that there is scope to increase tradeeven in product categories where tariff liberalisation underSAFTA is already being implemented. This provides empiricalsupport to the argument that the lack of non-tariff tradereforms and adequate trade facilitation measures is currently


undercutting the advantages of preferential tariff rates, andthereby leading to the underutilisation of the provisions of theAgreement. Such underutilisation is seen most prominently inthe case of Pakistan, followed by Sri Lanka.

The estimation method used in this study helps to identifyproducts with the maximum potential consumer welfare gainsfor each country and therefore, qualify for removal from theirrespective sensitive lists. The estimates form the basis for moredetailed studies on the potential effects of reduction intransportation costs and other trade facilitation measureswhich will augment consumer welfare gains and will facilitatecomparison with other trade costs and relative merits of tariffliberalisation in each product category.

Chapter 3Perceptions and

Expectations aboutRegional Economic

Cooperation in South Asia

IntroductionThe popular discourse on South Asian economic relations

has undergone many transformations since the idea of SAARCwas proposed and realised in the early 1980s. One of the maingoals of SAARC was the �promotion and strengthening ofcollective self-reliance among the countries of South Asia�.28

However, the discourse has been heavily influenced by theever-tilting kaleidoscope of bilateral political relations betweenSAARC member states. As a result, an objective analysis ofthe economic costs and benefits of open trade in South Asiawithout considering political implications has always remainedinconsequential.

In the wake of the formation of WTO in 1995, closelyfollowing policy reorientation in all the leading countries inthe region towards export-based growth strategies, theimmediate focus was their participation in the multilateralnegotiations to expand trade liberalisation. Though SAPTAalso came into force in 1995, regionalism took backseat during


this period, as exploration of export markers in theneighbourhood was not considered worth the enormousnegotiating capital required for keeping non-trade issues atbay. Proliferation of PTAs amongst WTO member nationsand success stories elsewhere rekindled interest in SAPTA,leading to its subsequent upgradation to SAFTA in 2004.

During this period, mercurial bilateral relations betweenIndia and Pakistan, the largest member states, played a bigrole in shaping the expectations of various stakeholders fromall over South Asia about the potential of a regional tradeagreement. Consequently, around the turn of the century, itwas widely believed that bilateral trade pacts would have betterprospects and these were pursued with greater emphasis.India-Sri Lanka (1998), Pakistan-Sri Lanka (2002), India-Bangladesh (amended Agreement, 2006), Bhutan-India (2006)etc. were the major developments in this direction.

Due to this multifaceted approach towards trade policy aswell as frequent changes in the focus of dialogues on trade-related issues, opinions about regional trade vary widelybetween and within different stakeholder groups directlyassociated with trade in South Asia. The diversity in viewpointshas naturally fed into the policy formulation process at thenational level and has had a strong bearing on the course ofregional trade negotiations thus far. Analysing the perceptionsof relevant stakeholder groups is useful in understanding thenuances of SAFTA negotiations. The findings from aperceptions survey conducted as a part of this study arepresented and discussed in the following sections.

Perception Survey: MethodThe perception survey of key informants and stakeholders

on regional trade integration in South Asia was carried outbased on the premise that political economy considerations


rooted in conflicting interests of diverse stakeholder groupeclipse pure economic reasoning, when it comes to decision-making on trade policy decision in the region. The stakeholdergroups selected as part of the survey included: (i) Producers/Traders/Exporters, (ii) Government Officials, (iii) Trade-Related Service Professionals29 (iv)Political Persons, (v)Academics/Researchers, (vi) Civil Society Organisations, (vii)Business/Industry Organisations and (viii) the Media.

The survey was conducted in 12 cities across Bangladesh,India, Nepal, Pakistan and Sri Lanka :

� Bangladesh: Dhaka and Chittagong;� India: Chennai, Delhi, Kolkata and Mumbai;� Nepal: Biratnagar and Kathmandu;� Pakistan: Islamabad, Karachi and Lahore; and� Sri Lanka: Colombo.In each city, about 25 interviews were conducted. In all,

about 250 stakeholders were targeted across the five focuscountries for the survey. From an initial list, potentialinterviewees were selected based on the extent andimportance of the involvement of respective stakeholder

Figure 3.1 Country-wise share of responses


groups in South Asian regional trade. Efforts were made toensure a balanced representation from each stakeholder group.A primary list of stakeholders was filtered after groupingrespondents, based on their observed attitude/approachtoward trade policy and perceived degree of involvement intrade policy-making. This exercise was done with the objectiveof capturing the diversity of views. Figure three gives thecountry-wise and group-wise share of responses.30

Figure 3.2 Group-wise share of responses

Perception StudyQualitative Mapping of Diverse Views

Stakeholders from five South Asian countries interviewedin the study were selected based on their direct associationwith intra-regional trade in various capacities. Thus theirviews based on experiences are very diverse in nature. Also,the sample size forms only a small part of the size of thepopulation. Hence, a strictly qualitative mapping ofresponses has been carried out along with limitedquantitative assessment based of the following methods.

Contd...


Perceptions and Expectations of SAFTAThe feedback form used for the survey consisted of

questions addressing two broad objectives: (i) gauge theperceptions of stakeholders about the merits of instrumentsof economic cooperation in South Asia in general and therelative merits of SAFTA, and (ii) gauge stakeholderexpectations about the future prospects of intra-regional tradein South Asia.

As regards the first objective, the perception assessment islinked to two possible underlying factors; (a) awareness about

a) Categorisation � Responses for each questions aregrouped into categories; eg; 4 categories for those whofavour and disfavour SAFTA as an effective instrumentfor regional integration with high and low awarenesslevels, 4 categories for those who favour and disfavourSAFTA as an effective instrument for regionalintegration with optimistic and pessimistic opinion onpolitical feasibility of the Agreement.

b) Cross-Correlations � A measure of similarity (rangingbetween -1 to 1; high negative to high positive) forrecognising patterns; eg; cross-correlation betweenawareness and optimism about political feasibility ofSAFTA amongst those who favour SAFTA on thegrounds of economic potential.

c) Paraphrasing � Transcripts of selected representativeresponses in largest categories with high crosscorrelation between relevant variables, awareness,general opinion about political feasibility and economicpotential etc.The perception survey results helps to gauge the overall

outlook of stakeholders in general and are not representativeof the outlook of any particular stakeholder category.


SAFTA and its relative economic merits and demerits, and (b)the influence of political realities on perceptions, as comparedto economic arguments. An additional emphasis has been givento the awareness of the economic merits and consumer welfareimpacts of SAFTA. Similarly, stakeholders� expectations fromintra-regional trade are assessed on the basis of dependencyof such expectations on (a) objective economic reasoning and(b) perceptions based on past experiences.

At the outset, it is instructive to note the relationshipbetween perceptions and expectations using a simplecorrelation indicator. While 61 percent of the respondentsbelieved SAFTA has not been an effective instrument forgaining benefits from trade in the region, 82 percent were ofthe opinion that intra-regional trade is currently far below theexpectations. From this pool, a correlation check between therating of SAFTA (high, low) and economic potential of theregional trade pact (high, low) returns a low coefficient of0.01. The observation to be noted here is as follows:

In general, for the majority of stakeholders, opinionsabout SAFTA as an effective instrument for enhancingregional trade are not linked to their opinions on theimportance of regional trade integration.A starting point for enquiry would be to ask why faith in

benefits of regional trade sustains, while the most significantinstrument for harnessing the same does not elicit the sameconfidence from stakeholders. One of the straightforwardanswers is that bilateral agreements are now seen as a relativelyless complicated way of enhancing trade in the neighbourhood,while not discounting the importance of market integrationof the region as a whole. This view is founded on recent successof bilateral arrangements as well as the stalling of SAFTA andWTO negotiations. But, it is still neither clear whether theSouth Asian trade community sees the problems of SAFTAnegotiations perceived by them as unsolvable nor evident


whether they are rightly informed opinions. A deeper lookinto the nature of opinions is needed for a clearer picture.

What Shapes PerceptionsA key observation which emerged from the survey is that

ideas about trade and its effects are highly influenced by thenature of stakeholder engagement with the topic. There is amarked difference between viewpoints across stakeholdergroups. A majority of the respondents from academia andpolicy groups reported that regional trade liberalisation isinferior to the multilateral route. These views appear to belargely based on what has been stated in existing literature onthe subject. Traders directly associated with the export-importsector, on the other hand find bilateral agreements, withadministrative efficiency and faster results, to be moretransparent and beneficial. By matching stakeholder responsesto different issues, certain common themes could however beidentified.

How SAFTA Is Compared to AlternativesOne of the common elements in perceptions is the way

regionalism is compared to other alternative modes of tradeliberalisation. Very few identified their opinion withmaximisation of efficiency gains from multilateralliberalisation. Most of those who do admit that self-selectionof best producers at the global level results in best possibleprices and quality discredit participation of South Asiancountries in the WTO process as uncertain and timeconsuming. Likewise, in a comparison between SAFTA andbilateral agreements, bilateral agreements are preferred onthe same grounds. For beneficiaries, actual and speedy resultsmatter more than what theorists say about the pros and consof an international trade agreement at all levels.


There are two particular aspects noticeable fromcomparative viewpoints. Firstly, complexity of negotiations,as reflected by reports in the popular media, has much largerimpact on the opinions of stakeholders belonging to allcategories. Secondly, those who find merit in trade agreementsin the reverse order � from bilateral to multilateral � think soprimarily because they see bilateral as building blocks toregional and subsequently multilateral negotiations. Thus,complexity owing to intrusion of non-trade issues31 into tradetalks could be resolved in a stage by stage process.

An overwhelming 96 percent of the interviewees suggestedthat political priorities influence far more than economic logicin trade talks at all levels. Variability of comparativeperspectives with reasons for failure of SAFTA returns a highcorrelation between the two (0.86), showing that SAFTA isconsidered the second-best choice because of more non-tradeissues to be sorted out before negotiations can progress,compared to bilateral negotiations. Following this reasoning,it may so be generalised that:

There is hardly any resistance to SAFTA on the groundsthat the Agreement lacks economic merits, rather popularsupport for it, which would determine its success in thefuture, critically depends on the extent to which non-tradeissues are disentangled from trade negotiations.

On Economics and Politics of South Asian RegionalismAs most stakeholders believe that trade talks cannot be

separated from political considerations, the overwhelmingresponse was that better returns from SAFTA negotiationsshould contribute to lessen the intensity of other internationaldisputes in the region, rather than trade negotiations gettingaffected by them. Through diverse expressions, a commontheme emerges - economics and politics of trade negotiationsare necessarily complementary, not competing, ends. Political


establishments create strongholds in their domesticconstituencies by proving themselves harvesters of commercialopportunities wherever available, so as to improve the standardof living of the masses.

When asked about the predominant reason why the regionaleconomic cooperation agenda continues to stagnate in South Asia,interviewees selected distrust among South Asia countries as thekey factor over other issues such as the lack of complementarityin production consumption patterns in South Asia and the lackof economic potential. More than 75 percent of the respondentswho held this view also raised doubts about the effectiveness ofSAFTA in bringing about a change in the scenario.

In conjunction with the earlier observation, it clearly showsthat regional trade negotiations have always been seen througha political prism and leadership in the region has failed toeffectively connect economic benefits from trade with SAFTAnegotiations. This is evident from the fact that while tradeliberalisation has been aggressively pursued during the reformperiod, numerous agreements (with the exception of SAFTA)between South Asian countries have turned out to beprogressive whenever political leadership delivered oneconomic promises.

A substantial transformation in the course of SAFTA ishighly probable if political leadership realises and uses thepotential of the Agreement for the fulfilment of their non-economic objectives.32

Place of Consumer Welfare in Perceptions of Trade ImpactsAnother striking observation is that consumer welfare gain

is rarely recognised as a positive result of open trade. Thegeneral discourse on trade only deals with the production side.Across all stakeholder groups, including researchers onregional economic issues, there is a lack of understanding and/or neglect of the consumption aspects of trade. More than 60


percent of the stakeholders interviewed were unaware ofconsumer welfare impacts of trade, and even less so of thepotential for such benefits from SAFTA. Any estimation ofreduction in import bills due to cheaper goods in the contextof regional trade could not be recalled.

One of the most interesting results from the survey is that,out of the respondents who expressed ignorance about thetopic, almost all agreed that consumer welfare aspects alsoshould be considered in future analysis to get a clearer andbalanced picture about the potential of the Agreement. Thoughthe conviction behind such opinion in the context of the surveymay be questioned, it goes undisputed that a phenomenalavenue for change lies on this point. Spreading awarenessabout this often-forgotten topic has the potential to sway theperceptions of trade objectives, in general, and regionalism,in particular, from one way to another. Augmenting thehighlighted result in previous section, it may be stated that:

A hitherto ignored catalyst for change in politicalutilisation of SAFTA is awareness generation on consumerwelfare gains from the Agreement, given the fact thatconsumers, as a group, constitute the entire electorate.

Stakeholders� Views on Future StepsApart from a lack of awareness, a lack of inclusivity in

trade policy making was one of the main concerns raised bystakeholders. Omissions have been made in the past becauseof partial or limited involvement of affected stakeholder groupsdue to the lack of institutional mechanisms to facilitate thesame in South Asian countries. While it is recognised that achange in the policy formulation process by way of institutionaland procedural restructuring is not possible in the short run,it has been suggested that stakeholder groups can proactivelymake efforts to provide inputs to make the process at thegovernmental level better informed.


While members of the business community andadministrative and political representatives as stakeholdershave direct access to policy-making processes at the nationallevel and the academic community has relatively better chanceof exerting influence, consumer organisations lack bothawareness of trade issues concerning them and channels ofinfluence.

Given this scenario, ideas on steps for the future differedacross groups. For the former categories, objective and in-depth studies on effects of the Agreement featured as thepriority, while, for consumer groups, the urgency was onawareness generation and usage of collective bargaining powerto gain access to policy-making process.

On the question of the principal deterrents of regional tradenegotiations, the lack of adequate representation of allcategories of beneficiaries was ranked as the second mostimportant factor after political distrust. The majority reportedthat an attitudinal change is warranted. Protectionism stillobscures the right approach to trade negotiations and comeswith heavy cost of lagging traditional sectors ridden withproductive inefficiencies.

Overcoming Hurdles: Networking Is the Key All stakeholder categories unequivocally agreed that, as a

first step, national dialogues on a wide scale deserveconsideration. In such dialogues, three aspects should behighlighted: (1) prospects of peace dividends from economiccooperation, (2) benefits from increases in imports and (3)other benefits of regional integration, considering growingregionalism at the global level which increasingly threatens torestrict market expansion plans of South Asian countriesoutside the region.

As far as the promotion of such dialogues across countriesis concerned, networking and discussion with the objective of


awareness generation at the national level should strengtheninternational initiatives of composite dialogues. The order ofpriority is: (1) networking amongst consumer organisationsat the national and regional level, (2) media campaigns atnational and regional level and (3) networking amongst policymakers, industry and consumer organisations at the nationallevel.

With the objective of weaving in consumer welfare as animportant consideration in the trade policy-making process,deeper research results on the topic are imperative. Richerliterature is the starting point for advocacy and the academiccommunity as a stakeholder group should contribute in therespect.

It is critical to inspire further detailed studies on the topicof consumer welfare gains, generating more informeddiscussions and subsequently mainstreaming the issue in thepolicy-making process. With the objective of inspiring furtherstudies, a workshop specifically targeting trade economistsfrom within and outside the region shall be conducted, whichshould have a snowballing effect.

As observed from the survey and unlike the popular notion,most stakeholders in the region have positive expectations fromSAFTA, which is only hidden by pessimism aboutintergovernmental political relations in the region. Thisgeneral positive expectation can be tapped best by buildingnetworks of producer/exporter and consumer organisationsin the region.

Since consumer welfare is an issue dearer to consumergroups, who lack liaison with trade policy-making mechanismsand producer groups, though they have strong liaison withthe trade policy-making process, are ignorant about how muchimportant pursuing consumer welfare is to their on interest,the missing link is proper communication between these twogroups. Advocacy efforts in the future should tap into the


complementarity of mutual interests of consumer and producergroups in regional trade liberalisation and use the existingstrong channels of trade/industry organisations to influencepolicy-making.

ConclusionsPerceptions about regional trade vary widely between and

within different stakeholder groups associated with trade inall South Asian countries and such perceptions have directlyand indirectly influenced the progress of regional tradenegotiations. The survey suggests that stakeholder opinionabout SAFTA is largely pessimistic. This is largely due toscepticism on its political feasibility, rather than a reflectionof the lack of the Agreement�s economic merits.

Most stakeholders believe in SAFTA�s economic potentialand are of the opinion that the future of the Agreement dependson the extent to which non-trade issues are disentangled fromtrade negotiations.

Consumer welfare has not been prioritised in trade talksin the region and remains a widely ignored issue. Awarenessgeneration on the benefits of imports is necessary to bringinclusiveness and balance to discussions on trade policyformation at the national level. Subsequently, it would help toensure informed participation of different stakeholders inregional negotiations. Consideration of consumer welfare gainsis also necessary for resolving protectionist tendencies in SouthAsian countries.

In addition, consumers as a group form a strong politicalconstituency and the prospects of consumption benefits havethe potential to bring about a major attitudinal change in theapproach of political leadership towards regional tradeliberalisation. Networking amongst consumer organisationsand awareness generation campaigns are the starting pointsfor bringing about this change.

Chapter 4Conclusions

From a conceptual as well as practical view point, consumerwelfare and producer welfare are two inseparable outcomesof open international trade, since efficiency gains in productionin turn benefit consumers through the availability of cheaperand better quality products. An increase in imports will alsoexpand consumer choice.

Moreover, trade agreements � the vehicles of liberalisation� can only function on the basis of a reciprocal exchange ofexport opportunities for import concessions. Thoughconsumer welfare gain following open international trade isoften more predictable and assured it is not given dueconsideration in the mainstream discourse on trade and itsimpacts on economic development.

It is widely recognised that SAFTA members maintain largesensitive lists with high intra-regional trade potential. Whileprotectionist tendencies continue at the regional level, benefitsfrom an increase in imports are disregarded in policy circles,despite the fact that denying such benefits is detrimental tothe expansion of production and exports as well. The endresult is stagnant regional trade and recognition of theAgreement as an ineffective tool.

While existing literature is divided on the economic effectsof South Asian regional trade, evidence suggests positive net


gains on many counts which are often not considered undertraditional analysis done for predictive purposes because ofmethodological and practical limitations. Moreover manyarguments raised in the literature such as the potential harmfultrade diversion effects have been shown to stand on uncertaingrounds in later works.

The consumer welfare impact of SAFTA is almostcompletely ignored in much of the existing literature. Thisstudy has therefore attempted an empirical exercise to assessthe consumer welfare gains from SAFTA arising out ofsubjecting currently excluded products to preferential ratesunder the Agreement.

Using an algorithmic process of selection, products withhigh intraregional trade potential currently retained in thesensitive lists of 5 largest economies out of the 8 member statesof SAFTA (Bangladesh, India, Nepal, Pakistan and Sri Lanka)were chosen. Potential consumer welfare accruing to eachcountry was then derived by taking the difference betweenthe total import expenditure in the selected products incurredby the country under consideration and likely importexpenditure if that country were to import the same productsfrom SAFTA trading partners at a lower price currently offeredby them.

Results show an aggregate minimum consumer welfare gainof more than US$1.9bn per annum to the South Asian regionby way of savings on aggregate consumer expenditure. Thisfigure (savings on consumer expenditure) is about 31 percentof the total current import expenditure on these categories.The exercise helped to identify products with maximumpotential consumer welfare gains for each country andtherefore, qualify for removal from their respective sensitivelist. The estimated figures are only the starting point or minimalassured gains and enlisting them will facilitate comparison withother trade costs and relative merits of tariff liberalisation in


each product category. More detailed studies on the effectsof reduction in transportation costs and other trade facilitationmeasures would inflate these figures.

The analysis was extended for products outside the sensitivelists in order to find out whether there are products with hightrade potential which remain non-traded even after applicationof preferential tariff rates under SAFTA because of high tradecosts owing to numerous NTBs including poor tradeinfrastructure at borders and ports, lack of transitarrangements and procedural delays on account of testing anddocumentation requirements. A total of 339 product linescould be found to be in this category, implying highunderutilisation of tariff liberalisation because of lack ofmatching reforms for reducing non-tariff barriers. Anadditional US$2bn per annum could be saved by facilitatingtrade in these products. This figure of consumer welfare gainsis also reflective of avoidable trade costs owing to NTBs withinSouth Asian region.

The study also carried out a perceptions survey of keystakeholders associated with trade issues in the region. Thesurvey found that opinions about regional trade varies widelybetween and within different stakeholder groups in all SouthAsian countries and such perceptions play important role inshaping the course of regional trade negotiations. Mostnotably, it came to the fore that most stakeholders believe thelack of SAFTA�s success till date is largely because of politicalrather than economic reasons, for which solutions do exist.

Policy makers should focus on separating non-trade issuesfrom trade negotiations as much as possible. Buildingwidespread awareness about the untapped and neglectedaspects of consumer welfare gains will help to refocus thedebate on economic issues. It will also serve to better informon-going negotiations and thereby help to check protectionisttendencies in the region. The most important complementary


feature of this approach will be to shift the focus of politicalaspirations of the regional leadership without actually havingto eliminate it from SAFTA proceedings.

As consumers as a group form a strong constituency, theprospects of political dividends from catering to their needswill surface and thus political intervention on trade issues couldbe constructive rather than obstructive as it has been in thepast. Initiatives for networking amongst consumerorganisations at the national and international level in SouthAsia with this objective in mind offer the prospect of bringingabout a long awaited change in the history of regionalism inSouth Asia.

Priorities for Future ResearchConsumer gains have not received adequate attention in

literature on regional trade in South Asia and are generallyimplicitly expressed in studies based on general equilibriummodels. This study is an effort towards analysing the consumerwelfare gains of trade in isolation.

Existing studies mostly describe trade processes and tradeconstraints and provide empirical assessments of the outcomesof trade liberalisation. They cover mainly goods, with onlylimited coverage of trade in services and cross-borderinvestment. Extending the existing line of analysis to theconsumer welfare outcomes of deeper economic integration,including services trade and investment flows, is one of themost important priorities for further research.

A comparison of the South Asian scenario with theexperiences of other trading blocs as well as the identificationof trade complementarities are two useful additional analyticalexercises. This study can also be advanced by moving on tosector specific analysis. A more formal and full analyticalstructure can be adopted to analyse product substitutability


including an analysis of product quality differences as well assupply side capacity.

Analytical extension linking future growth of regional tradeunder alternative scenarios and changes in consumer welfaregains will help to unfold the dynamic scenario as against thestatic analysis carried out under this study.

One of the main concerns is loss of government revenueowing to tariff reduction. This issue can be addressed bysearching for ways in which trade costs can be minimisedwithout inflicting drastic cuts in tariff revenue. Growth intrade can also be linked to growth in income and employmentwhich will offset revenue losses. By highlighting the cases inwhich neighbors are natural trading partners, a betterunderstanding about the most profitable sectors from regionaltrade can be obtained.

Further research should be done with the objective ofsupporting informative policy actions. Studies on tradeliberalisation must be linked to its developmental outcomesand must be presented in non-technical ways. Research onissues such as product variety and increase in consumer choicesand allied benefits, possibility of reduction in trade coasts bynon-tariff trade reforms, identification of consumers� gainsthrough trade in non-traditional sectors, value added services,tourism, BPOs etc. can be of immense value to policy makers.

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Endnotes

1 World Development Indicators (WDI Database), World Bank,2011.

2 Ibid. Middle income countries also registered a sharper growth intrade-GDP ratio and developing countries together now account forabout 35 percent of world trade.

3 This is evident from the reluctance on the part of SAFTA membersto reduce items in their sensitive lists on which tariff reduction is notapplied. Detailed exposition is given in Chapter 2.

4 See Moinuddin (2008) and Moktan (2008).

5 For similar view, see also �Fact Sheet- South Asia Growth andRegional Integration�, World Bank, 2007.

6 Based on 2003-2004 data, Qamar (2005) shows that afterexcluding the items that are on the positive list for India, 45 percentof the items could be imported by Pakistan at a lowerr cost fromIndia than the current cost of import from the rest of the world.

7 Mercantilist thinking is based on the view that national wealthcorresponds to the country�s holdings of precious metals andpositive trade balance is a means of accumulating it.

8 This argument by Hume is based on his proposition based on price-specie flow mechanism. For detailed exposition on mercatilisticapproach to trade and its shortcomings, see Appleyard and Field(2001).

9 Ibid. On the production side, divisions of labour and scaleeconomies are the driving forces behind efficiency gains in terms oflesser input costs per unit of output.

10 For detailed exposition, see Coats (1975) and Irvin (1996).

11 For important contributions towards the development of classicaltrade theory, see Chipman (1965).

12 Ibid. Supply-side analysis referred to encompasses the Heckscher-Ohlin model and subsequent qualifications inspired by it.


13 Most Favoured Nation (MFN) and National Treatment clausesstand for non-discrimination principle. Reciprocity is designed intothe method of negotiations under a trade agreement. For a criticalreview of the traditional theory of trade agreements see Ethier(2007).

14 It was highlighted that the Bangkok Agreement failed to be aneffective preferential agreement due to such shortcomings andSAPTA should take due caution of this (Kelegama, 1996).

15 A number of other sub-regional initiatives such as growthquadrangles (Bangladesh, Bhutan, Nepal and India) and triangles(Sri Lanka, Maldives and South India) were mooted. These sub-regional initiatives were not considered for preferential trading butfor sectoral cooperation.

16 Symmetry in economic activity also implies that there is a lessercontradiction in terms of formulating internal and externalmacroeconomic policies.

17 ADB has launched Strategy 2020 for South Asia, which includesregional integration as one of the three development agendas (theothers are inclusive economic growth and environmentallysustainable growth), see ADB (2008) for details.

18 Lack of complementarities is generally attributed to the fact thatmost of the countries in the region are competitors in the exportmarkets, dominated by textile and apparel exports.

19 For a conceptual exposure on trade costs due to lack ofaccompanying reforms see Anderson and Wincoop (2004). Thepositive impacts of trade agreement on domestic policy reforms inthe South Asian context have been extensively dealt with in Ahmedet al. (2004), Kemal (2004), Chanda (2005) and ADB (2007).

20 See Bandara and Yu (2003), Rahman et al., (2006), Rahman andAmin (2009) and Moktan (2008).

21 Almost all quantitative studies have duly acknowledged this aspect.See Pitgala (2005) and Kalicharan (2007).

22 Among the major causes of high trade transaction costs in easternSouth Asia are the cumbersome and complex cross-border tradingpractices, which also increase the possibility of corruption. Thegoods carried by road in South Asia are largely subject totransshipment at the border, which imposes serious impediments toregional and multilateral trade. The position is further compoundedby lack of harmonisation of technical standards. It is argued thatwith only accompanying reforms in these areas will SAFTA wouldfunction to achieve the eventual benefits of moving to a CustomsUnion in 2015 and an Economic Union in 2020 (Chaturvedi, 2006,and De, 2008).


23 A general overview of experiences from world over on this topicand a conceptual treatment on benefits of trade facilitation areavailable in Walkrenhorst and Yasui (2003) and Wilson et al.(2004).

24 For instance, it has been documented that exports from Nepalheaded to Europe or North America would benefit if they couldeffectively access Mumbai port, rather than using Kolkata/Haldia.The cost of exporting a carpet from Nepal to Europe using Mumbaiinstead of Kolkata would save US$1,300, a substantial amountequaling 30 to 40 percent of the total value of export and wouldsave 7-10 days in terms of time (Subramanian and Arnold, 2001).

25 SAFTA TLP stipulates reduction of tariff rates to upper limits of 20and 30 percent for developing and least developed countriesrespectively within 2 years from the date of enforcement of theAgreement (1.1.2006). It also requires annual reduction of 10percent for developing countries and 5 percent for least developedcountries during this period for products with tariff rates less thanthe prescribed upper limits on the date of enforcement.

26 Country wise trade data for the analysis is accessed from UNCommodity Trade database (UNCOMTRADE) and data onimport and export prices and quantity for the year 2009 is accessedfrom Trade Maps, International Trade Centre. The analysis iscarried out at HS07 6-Digit level

27 Export price of SAFTA member is taken as the current importprices faced by their RoW partners in selected products. These pricefigures include MFN tariff rates and transportation charges whichare deemed higher for countries outside the region. Therefore, it isimplied here that these figures are likely to be even lower for SAFTAtrading partners because of geographical proximity.

28 Article 1, Charter of SAARC.

29 Sectors such as transport, insurance, banking etc.

30 A strictly qualitative assessment of the survey responses is carriedout in the following sections.

31 Non-trade issues here refer to border disputes, water-sharingarrangements, etc., and allied differences in the political front.

32 This implies political class would have the incentive to mainstreamconsumer welfare gains in trade policy discourse, consumers beingtheir largest constituency. Thus, by changing the incentive structureof key stakeholders in terms of their participation in the regionaltrade negotiations, the direction and rate of progress of thenegotiations are likely to change, as the relative position ofconsumers as a stakeholder group improves.

Annexure Tables

Consum

ers and Econom

ic Cooperation

95

Bangladesh

SAFTA HS Product Description Price Quantity Consumer Current Percentage

Member CODE Difference Imported Welfare Value Imports of Consumer

Country (6 Digit) by Bangladesh (in US$) by Bangladesh Welfare in

Level from ROW from ROW Imports

(in Tons) (in US$)

Pakistan 100620 Rice, husked (brown) 273 1.00 273.00 1000 27.30

252321 Portland cement, white, whether or not 55 426.47 23455.88 58000 40.44

artificially coloured

271011 Aviation spirit 50 77509.92 3875496.18 50769000 7.63

271019 Light petroleum distillates nes 118 1883865.96 222296183.73 1250887000 17.77

520812 Plain weave cotton fabric,>/=85%, >100 g/m2 23 2422.79 55724.23 12458000 0.45

to 200 g/m2, unbleached

520813 Twill weave cotton fabric,>/=85%, not more 221 367.42 81200.29 1994000 4.07

than 200 g/m2, unbleached

630221 Bed linen, of cotton, printed, not knitted 6022 46.00 277019.83 566000 48.94

630231 Bed linen, of cotton, nes 1650 41.00 67650.68 300000 22.55Contd...

Partner Country-wise and Product-wise consumer welfare gains for five major South Asian Countries(analysis of products in the sensitive lists)


63

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93

.08

1210

361.

7441

4200

029

.22

Nep

al20

0931

Sing

le cit

rus

fruit

juice

, unf

erm

ente

d, B

rix29

525

.00

7375

.00

2300

032

.07

valu

e <=

20

at 2

0°C,

whe

t

20

0949

Pine

appl

e ju

ice, u

nfer

men

ted,

Brix

val

ue20

05.

0010

00.0

030

0033

.33

> 20

at 2

0°C,

whe

ther

or n

ot

Con

td...


20

0980

Frui

t &ve

g ju

ice n

es (e

xc m

x) u

nfer

men

ted27

218

4.92

5029

7.52

1790

0028

.10

insp

irite

d, w

heth

er/n

ot s

ugar

/swee

t

20

0990

Mix

ture

s of

juice

s un

ferm

ente

d &

not s

pirit

ed14

926

6.84

3975

9.07

2060

0019

.30

wheth

er o

r no

t sug

ared

or

swee

t

54

0792

Wov

en fa

brics

of s

ynth

etic

filam

ents,

7262

733.

9953

3021

5.32

6211

000

85.8

2

dye

d, n

es

55

0921

Yarn

,>/=

85%

of p

olye

ster

stapl

e fib

res,

2749

2215

.35

6089

989.

9864

0900

095

.02

single

, not

put

up

55

0922

Yarn

,>/=

85%

of p

olye

ster

stapl

e fib

res,

1687

7182

.26

1211

6475

.39

1619

6000

74.8

1

mul

tiple,

not

put

up,

nes

55

0951

Yarn

of p

olye

ster

stapl

e fib

res

mix

ed w

/20

610

96.1

122

5797

.93

2224

000

10.1

5

arti

stapl

e fib

re ,n

ot p

ut

up, n

es

55

0992

Yarn

of o

ther

syn

thet

ic sta

ple

fibre

s m

ixed

1127

381.

9943

0507

.53

1065

000

40.4

2

with

cot

ton,

not

put

up,

nes

63

0533

Sack

s, ba

gs, p

acki

ng, o

f str

ip p

lasti

c m

ater

ial

282

39.0

010

998.

1712

8000

8.59

72

1012

Flat

rol

led p

rod,

i/nas

,pla

td o

r co

ated

with

3035

077.

3510

5232

0.44

3174

5000

3.31

tin,>

/=60

0mm

wid

e,<0.

5mm

thk

Con

td...


73

0630

Tube

s, pi

pe &

hol

low

prof

iles,

iron

or n

as,

105

6258

.52

6571

44.8

944

0600

014

.91

weld

ed, o

f circ

cro

ss s

ect,n

es

73

0640

Tube

, pip

e &

hollo

w pr

ofile

, sta

inles

s ste

el,12

616

93.8

321

3422

.22

1372

000

15.5

6

weld

ed, o

f circ

cro

ss se

ct, n

es

73

0690

Tube

s, pi

pe &

hol

low

prof

iles,

iron

or s

teel,

805

801.

0564

4842

.93

9180

0070

.24

weld

ed, n

es

Tota

l

5596

1.20

2687

0146

.38

7108

5000

37.8

0

Gran

d To

tal

44

5145

2.28

3985

6262

0.80

2781

3260

0014

.33

Consum

ers and Econom

ic Cooperation

101

India

SAFTA HS Product Description Price Quantity Consumer Current Percentage

Member CODE Difference Imported Welfare Value Imports of Consumer

Country (6 Digit) by India (in US$) by India Welfare in

Level from ROW from ROW Imports

(in Tons) (in US$)

Pakistan 100620 Rice, husked (brown) 620 697.21 432270.92 700000 61.75

100630 Rice, semi-milled or wholly milled, 264 288.26 76099.64 162000 46.98

whether or not polished or glazed

100640 Rice, broken 77 280.94 21632.11 84000 25.75

391510 Polyethylene waste and scrap 49 5848.10 286556.96 2310000 12.41

391590 Plastics waste and scrap nes 166 158400.80 26294533.07 79042000 33.27

391610 Monofilaments >1 mm, profile shapes 2535 368.03 932966.05 1301000 71.71

etc of polymers of ethylene

391690 Monofilaments >1 mm, profile shapes 7262 1157.95 8409047.93 9567000 87.90

etc of plastics nes

391721 Tubes, pipes and hoses, rigid; of 2572 1224.07 3148312.42 4780000 65.86

polyethylene

Contd...


Con

td...

39

1722

Tube

s, pi

pes

and

hose

s, rig

id; o

f42

7425

.00

1068

50.0

014

7000

72.6

9

poly

prop

ylen

e

39

1723

Tube

s, pi

pes

and

hose

s, rig

id; o

f33

8814

89.0

850

4501

9.03

7435

000

67.8

5

poly

viny

l chl

orid

e

39

1729

Tube

s, pi

pes

and

hose

s, rig

id;

4723

2147

.82

1014

4175

.43

1229

2000

82.5

3

of p

lasti

cs n

es

39

1731

Tube

s, pi

pes&

hos

es, f

lexib

le, p

lasti

c,45

9219

74.9

890

6909

0.91

1247

0000

72.7

3

min

imum

bur

st pr

essu

re o

f 27.

6 M

Pa

39

1732

Tube

s, pi

pes

and

hose

s ne

s, pl

astic

, not

5542

1920

.10

1064

1211

.34

1415

5000

75.1

8

rein

forc

ed e

tc, w

ithou

t fitt

ings

39

1733

Tube

s, pi

pes

and

hose

s ne

s, pl

astic

, not

4217

66.0

027

8338

.49

4050

0068

.73

rein

forc

ed e

tc, w

ith fi

tting

s

39

1739

Tube

s, pi

pes

and

hose

s ne

s, pl

astic

2357

3549

.20

8365

475.

6514

2820

0058

.57

39

1740

Fitti

ngs,

plas

tic37

8227

52.8

210

4111

76.9

113

1640

0079

.09

39

1810

Floo

r, wa

ll an

d ce

iling

cov

erin

gs e

tc, o

f11

9136

81.8

243

8504

5.45

9072

000

48.3

4

poly

mer

s of

vin

yl c

hlor

ide


39

1890

Floo

r, wa

ll an

d ce

iling

cov

erin

gs e

tc,

3679

2978

.84

1095

9158

.37

1393

8000

78.6

3

of p

lasti

cs n

es

39

1910

Self-

adhe

sive

plat

es, s

heet

s, fil

m e

tc, o

f33

5114

88.8

549

8914

6.86

6478

000

77.0

2

plas

tic in

rol

ls <2

0 cm

wid

e

39

2010

Film

and

she

et e

tc, n

on-c

ellul

ar e

tc, o

f93

698

03.8

191

7637

0.57

2878

4000

31.8

8

poly

mer

s of

eth

ylen

e

39

2030

Film

and

she

et e

tc, n

on-c

ellul

ar e

tc, o

f13

9535

09.3

948

9560

5.43

8405

000

58.2

5

poly

mer

s of

sty

rene

39

2061

Film

and

she

et e

tc, n

on-c

ellul

ar e

tc, o

f14

0735

45.6

449

8871

7.35

1208

0000

41.3

0

poly

carb

onat

es

39

2062

Film

and

she

et e

tc, n

on-c

ellul

ar e

tc, o

f11

4375

01.7

085

7444

6.08

1982

7000

43.2

5

poly

ethy

lene

tere

phth

alat

es

39

2063

Film

and

she

et etc

, non

-cellu

lar

etc, o

f18

6487

9.87

1640

071.

1923

7300

069

.11

unsa

tura

ted

poly

este

rs

39

2069

Film

and

she

et e

tc, n

on-c

ellul

ar e

tc, o

f48

516

670.

0280

8495

9.76

4142

5000

19.5

2

poly

este

rs n

es

Con

td...


39

2111

Film

and

she

et e

tc, c

ellul

ar o

f pol

ymer

s96

428

1.04

2709

21.7

383

3000

32.5

2

of s

tyre

ne

39

2112

Film

and

she

et e

tc, c

ellul

ar o

f pol

ymer

s16

2917

94.9

829

2402

0.92

4719

000

61.9

6

of v

inyl

chl

orid

e

39

2113

Film

and

she

et e

tc, c

ellul

ar o

f pol

yure

than

e32

1223

93.1

676

8683

7.61

1008

0000

76.2

6

39

2114

Film

and

she

et e

tc, c

ellul

ar o

f reg

ener

ated

5613

31.0

017

4000

.79

2360

0073

.73

cellu

lose

39

2119

Film

and

she

et e

tc, c

ellul

ar o

f pla

stics

nes

2756

2601

.88

7170

793.

1611

8750

0060

.39

39

2190

Film

and

she

et e

tc, n

es o

f pla

stics

2170

2918

3.91

6332

9088

.33

9251

3000

68.4

5

39

2210

Bath

s, sh

ower

-bat

hs a

nd w

ash

basin

s,27

1279

2.02

2147

950.

8136

7100

058

.51

of p

lasti

cs

39

2220

Lava

tory

sea

ts an

d co

vers

of

plas

tics

2574

745.

0819

1783

8.22

3408

000

56.2

7

39

2290

Bide

ts, la

vato

ry p

ans,

flush

ing

ciste

rns

&25

5935

75.1

391

4874

7.75

1629

9000

56.1

3

simila

r pl

astic

san

itary

war

e

39

2310

Boxe

s, ca

ses,

crat

es &

sim

ilar

artic

les13

3058

83.3

978

2491

1.66

1665

0000

47.0

0

of p

lasti

c

Con

td...


Con

td...

39

2321

Sack

s an

d ba

gs (i

nclu

ding

con

es) o

f pol

ymer

s17

0330

45.1

451

8586

4.96

8231

000

63.0

0

of e

thyle

ne

39

2330

Carb

oys,

bottl

es, f

lask

s an

d sim

ilar

artic

les30

4547

05.5

014

3282

49.6

516

6810

0085

.90

of p

lasti

cs

39

2340

Spoo

ls, c

ops,

bobb

ins

and

simila

r su

ppor

ts,34

1354

.97

4606

8.83

2756

000

1.67

of p

lasti

cs

39

2350

Stop

pers

, lid

s, ca

ps a

nd o

ther

clo

sure

s19

3596

33.0

418

6399

26.3

037

9060

0049

.17

of p

lasti

cs

39

2490

Hou

seho

ld a

nd to

ilet a

rticle

s ne

s,11

4525

90.3

029

6588

8.36

7100

000

41.7

7

of p

lasti

cs

39

2510

Rese

rvoi

rs, t

anks

, vat

s et

c of

a c

apac

ity33

1415

9.99

5302

11.1

473

5000

72.1

4

exce

edin

g 30

0 l,

of p

lasti

cs

39

2520

Door

s, wi

ndow

s an

d th

eir fr

ames

and

220

1176

.84

2589

04.4

132

0100

08.

09

thre

shol

ds fo

r do

ors,

of p

lasti

cs

39

2530

Shut

ters

, blin

ds (

incl

Vene

tian)

& s

imila

r25

7537

9.99

9784

73.6

414

8500

065

.89

artic

les &

par

ts of

pla

stics

39

2590

Build

ers�

war

e ne

s, of

pla

stics

465

5604

.53

2606

107.

8514

3420

0018

.17


Con

td...

39

2610

Offi

ce o

r sc

hool

sup

plies

, of p

lasti

cs12

6320

62.8

326

0534

8.76

6731

000

38.7

1

39

2630

Fitti

ngs

for

furn

iture

, coa

chwo

rk o

r th

e82

811

42.8

694

6285

.71

2432

000

38.9

1

like,

of p

lasti

cs

39

2640

Stat

uette

s an

d ot

her

orna

men

tal a

rticle

s,39

635

50.7

914

0611

3.70

7620

000

18.4

5

of p

lasti

cs

39

2690

Artic

les o

f pla

stics

or

of o

ther

mat

eria

ls of

2392

9677

3.29

2314

8170

9.91

3282

5500

070

.52

Nos

39.

01 to

39.

14 n

es

52

0511

Cotto

n ya

rn,>

/=85

%,si

ngle,

unco

mbd

,76

425

06.0

019

1458

4.00

5360

334

35.7

2

>/=7

14.2

9 dt

ex, n

ot p

ut u

p

52

0528

Cotto

n ya

rn >

85%

sin

gle

com

bed

1479

227.

0033

5733

.00

1499

108

22.4

0

<83.

33 d

tex, n

ot r

etail

52

0547

Cotto

n ya

rn >

85%

mul

tiple

com

bed

2783

12.0

033

396.

0078

996

42.2

8

106-

83

dtex

, not

ret.

55

1221

Wov

en fa

brics

, con

tain

ing>

/=85

% o

f acr

ylic

2385

13.0

031

004.

2220

0000

15.5

0

stapl

e fib

res,

unbl

each

ed o

r bl

55

1291

Wov

en fa

brics

, con

tain

ing>

/=85

% o

f oth

9500

2.00

1900

0.00

5100

037

.25

synt

hetic

sta

ple

fibre

s, un

bl/b

l


Con

td...

55

1311

Plai

n we

ave

poly

est s

tapl

e fib

fab,

<85%

,54

427

2.01

1479

71.8

312

3600

011

.97

mix

d w

/cottn

,</=

170g

/m2,

unbl

/bl

55

1412

Twill

wea

ve p

olye

st sta

pl fi

b fa

b,<8

5%,m

ixd

1000

6.00

6000

.00

4200

014

.29

w/co

tton,

>170

g/m

2,un

bl/b

l

55

1611

Wov

en fa

brics

, con

tain

ing>

/=85

% o

f45

563.

0013

667.

3220

000

68.3

4

arti

ficia

l sta

ple

fibre

s, un

blea

ched

/bl

55

1634

Wov

en fa

b of

arti

sta

ple

fib,<

85%

mix

ed39

462

1.00

3946

2.00

4000

098

.66

w/w

ool/f

ine

anim

al h

air,

prin

ted

55

1641

Wov

en fa

brics

of a

rtific

ial s

tapl

e fib

,<85

%61

5010

.00

6150

0.00

7900

077

.85

mix

ed w

ith c

otto

n, u

nbl o

r bl

55

1691

Wov

en fa

brics

of a

rtific

ial s

tapl

e fib

res,

7560

6.00

4536

1.40

6500

069

.79

unbl

each

ed o

r bl

each

ed, n

es

62

0329

Men

/boy

s en

sem

bles

, of o

ther

text

ile12

5000

6.00

7500

00.0

011

4600

065

.45

mat

eria

ls, n

ot k

nitte

d

62

0333

Men

/boy

s ja

cket

s an

d bl

azer

s, of

syn

thet

ic28

444

14.0

039

8216

.00

7342

1654

.24

fibre

s, no

t kni

tted

62

0339

Men

/boy

s ja

cket

s an

d bl

azer

s, of

oth

er te

xtile

1850

0011

.00

2035

000.

0027

3900

074

.30

mat

eria

ls, n

ot k

nitte

d


62

0342

Men

/boy

s tro

user

s an

d sh

orts,

of c

otto

n,90

6335

8.00

3244

554.

0013

8055

5423

.50

not k

nitte

d

Tota

l

4151

58.9

954

5005

991.

9193

9533

208

58.0

1

Sri L

anka

4003

00Re

claim

ed r

ubbe

r in

prim

ary

form

s or

in10

6426

3.05

2798

83.0

937

8000

74.0

4

plat

es, s

heet

s or

stri

p

40

0510

Rubb

er c

ompo

unde

d wi

th c

arbo

n bl

ack

or87

965

02.9

357

1607

3.94

1776

6000

32.1

7

silica

(un

vulca

nise

d)

40

0520

Rubb

er s

olut

ions

; disp

ersio

ns o

th th

an th

ose

635

2499

.37

1587

097.

5919

7200

080

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of N

o 40

0510

(unv

ul)

40

0591

Com

poun

ded

rubb

er in

pla

tes,

shee

ts an

d78

1500

.93

1170

72.3

616

1800

07.

24

strip

(un

vulca

nise

d)

40

0599

Com

poun

ded

rubb

er, u

nvul

cani

sed

in70

834

68.7

524

5587

5.00

7659

000

32.0

7

prim

ary

form

s ne

s

40

0811

Plat

es, s

heet

s an

d str

ip o

f cell

ular

rub

ber

1582

1335

.87

2113

350.

0236

8300

057

.38

(vu

lcani

sed)

40

0819

Rods

and

pro

file

shap

es o

f cell

ular

rub

ber

871

58.9

951

384.

5616

2000

31.7

2

(vul

cani

sed)

Con

td...


Con

td...

40

0829

Rods

and

pro

file

shap

es o

f non

-cell

ular

1137

1085

.08

1233

733.

9749

2300

025

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rubb

er (

vulca

nise

d)

40

1220

Pneu

mat

ic tir

es u

sed

1921

3.94

4064

.77

2180

001.

86

40

1290

Solid

o c

ushi

ond

tires

, int

erch

ange

able

tire

2373

303.

0071

9008

.69

1325

000

54.2

6

tread

s &

tire

flaps

of r

br

40

1695

Rubb

er a

rticle

s in

flata

ble

nes,

vulca

nise

d82

0315

7.99

1296

019.

8217

7000

073

.22

rub

ber

61

0432

Wom

en/g

irls

jack

ets,

of c

otto

n, k

nitte

d70

004.

0028

000.

0012

0000

23.3

3

61

0433

Wom

en/g

irls

jack

ets,

of s

ynth

etic

fibre

s,25

004.

0010

000.

0016

6000

6.02

knitt

ed

61

0439

Wom

en/g

irls

jack

ets,

of o

ther

text

ile54

000

0.72

3896

9.07

7000

055

.67

mat

eria

ls, k

nitte

d

61

0442

Wom

en/g

irls

dres

ses,

of c

otto

n, k

nitte

d80

005.

0040

000.

0018

0000

22.2

2

61

0443

Wom

en/g

irls

dres

ses,

of s

ynth

etic

4429

7.00

3100

2.67

2830

0010

.96

fibre

s, kn

itted

61

0452

Wom

en/g

irls

skirt

s, of

cot

ton,

kni

tted

2200

01.

0022

000.

0042

000

52.3

8

61

0453

Wom

en/g

irls

skirt

s, of

syn

thet

ic fib

res,

knitt

ed80

000.

2520

39.2

213

000

15.6

9


Con

td...

61

0462

Wom

en/g

irls

trous

ers

and

shor

ts, o

f cot

ton,

1200

016

.00

1920

00.0

043

2000

44.4

4

knitt

ed

61

0463

Wom

en/g

irls

trous

ers

and

shor

ts, o

f98

336.

0058

998.

5820

3000

29.0

6

synt

hetic

fibr

es, k

nitte

d

61

0469

Wom

en/g

irls

trous

ers

and

shor

ts, o

f oth

er75

004.

0030

000.

0012

2000

24.5

9

text

ile m

ater

ials,

kni

tted

61

0821

Wom

en/g

irls

brief

s an

d pa

nties

, of c

otto

n,12

143

14.0

017

0001

.19

4220

0040

.28

knitt

ed

61

0822

Wom

en/g

irls

brief

s an

d pa

nties

, of m

an-m

ade

2250

02.

0045

000.

0013

4000

33.5

8

fibre

s, kn

itted

61

0829

Wom

en/g

irls

brief

s an

d pa

nties

, of o

ther

3250

4.00

1300

0.00

1170

0011

.11

text

ile m

ater

ials,

kni

tted

61

0831

Wom

en/g

irls

nigh

tdre

sses

and

pyj

amas

,23

334.

6010

740.

0389

000

12.0

7

of c

otto

n, k

nitte

d

61

0832

Wom

en/g

irls

nigh

tdre

sses

& p

yjam

as, o

f22

444

0.30

6765

.48

1400

048

.32

othe

r te

xtile

mat

eria

ls, k

nitte

d

61

0892

Wom

en/g

irls

bath

robe

s, dr

essin

g go

wns

,21

414

.00

2996

.03

3950

000.

76

etc,

of m

an-m

ade

fibre

s, kn

itted


Con

td...

61

0910

T-sh

irts,

singl

et a

nd o

ther

ves

ts, o

f cot

ton,

1044

821

0.00

2194

048.

4055

5400

039

.50

knitt

ed

61

0990

T-sh

irts,

singl

et a

nd o

ther

ves

ts, o

f oth

er18

657

105.

0019

5899

1.88

4269

000

45.8

9

text

ile m

ater

ials,

kni

tted

61

1011

Jers

eys,

pullo

vers

, car

diga

ns, w

aistc

oats

1353

315

.00

2029

96.1

886

3000

23.5

2

and

simila

r ar

ticles

, of

woo

61

1020

Pullo

vers

, car

diga

ns a

nd s

imila

r ar

ticles

1253

458

.00

7269

83.4

917

7100

041

.05

of c

otto

n, k

nitte

d

61

1030

Pullo

vers

, car

diga

ns a

nd s

imila

r ar

ticles

1014

349

.00

4970

04.7

215

2600

032

.57

of m

an-m

ade

fibre

s, kn

itted

62

0332

Men

/boy

s ja

cket

s an

d bl

azer

s, of

cot

ton,

1086

838

.00

4129

88.2

515

5300

026

.59

not k

nitte

d

62

0333

Men

/boy

s ja

cket

s an

d bl

azer

s, of

syn

thet

ic12

929

14.0

018

1003

.90

5170

0035

.01

fibr

es, n

ot k

nitte

d

62

0339

Men

/boy

s ja

cket

s an

d bl

azer

s, of

oth

er74

5511

.00

8200

4.38

6650

0012

.33

text

ile m

ater

ials,

not

kni

tted

62

0341

Men

/boy

s tro

user

s an

d sh

orts,

of w

ool o

r35

006.

0021

000.

0038

1000

5.51

fine

anim

al h

air,

not k

nitte

d


Con

td...

62

0342

Men

/boy

s tro

user

s an

d sh

orts,

of c

otto

n,81

2335

8.00

2908

023.

8297

1000

029

.95

not k

nitte

d

62

0349

Men

/boy

s tro

user

s an

d sh

orts,

of o

ther

text

ile39

6730

.00

1190

08.8

098

9000

12.0

3

mat

eria

ls, n

ot k

nitte

d

62

0423

Wom

en/g

irls

ense

mbl

es, o

f sy

nthe

tic f

ibre

s,29

429

1.64

4835

3.94

7300

066

.24

not k

nitte

d

62

0429

Wom

en/g

irls

ense

mbl

es, o

f oth

er te

xtile

2600

00.

4311

142.

8615

000

74.2

9

mat

eria

ls, n

ot k

nitte

d

62

0433

Wom

en/g

irls

jack

ets,

of s

ynth

etic

fibre

s,20

667

6.00

1240

01.2

332

2000

38.5

1

not k

nitte

d

62

0443

Wom

en/g

irls

dres

ses,

of s

ynth

etic

fibre

s,14

833

6.00

8899

8.50

3590

0024

.79

not k

nitte

d

62

0444

Wom

en/g

irls

dres

ses,

of a

rtific

ial f

ibre

s,85

001.

0085

00.0

095

000

8.95

not k

nitte

d

62

0453

Wom

en/g

irls

skirt

s, of

syn

thet

ic fib

res,

2000

04.

0080

000.

0019

2000

41.6

7

not k

nitte

d

62

0459

Wom

en/g

irls

skirt

s, of

oth

er te

xtile

7333

3.00

2199

9.12

1780

0012

.36

mat

eria

ls, n

ot k

nitte

d


Con

td...

62

0462

Wom

en/g

irls

trous

ers

and

shor

ts, o

f13

278

151.

0020

0498

6.52

5176

000

38.7

4

cotto

n, n

ot k

nitte

d

62

0463

Wom

en/g

irls

trous

ers

and

shor

ts, o

f96

2516

.00

1540

00.0

055

4000

27.8

0

synt

hetic

fibr

es, n

ot k

nitte

d

62

0469

Wom

en/g

irls

trous

ers

& s

horts

, of o

ther

1281

316

.00

2050

05.7

673

3000

27.9

7

text

ile m

ater

ials,

not

kni

tted

62

0520

Men

/boy

s sh

irts,

of c

otto

n, n

ot k

nitte

d14

962

213.

0031

8693

7.28

9577

000

33.2

8

62

0530

Men

/boy

s sh

irts,

of m

an-m

ade

fibre

s,31

0020

.00

6200

0.00

4020

0015

.42

not k

nitte

d

62

1220

Gird

les, p

anty

gird

les a

nd p

arts

ther

eof,

2057

114

.00

2879

96.6

864

5000

44.6

5

of t

extil

e m

ater

ials

62

1290

Cors

ets,

brac

es &

sim

ilar

artic

les &

2366

76.

0014

2001

.16

3400

0041

.77

parts

ther

eof,

of te

xtile

mat

eria

ls

Tota

l

1882

8.84

3200

5052

.94

9073

5000

35.2

7

Bang

lade

sh61

0413

Wom

en/g

irls

suits

, of s

ynth

etic

fibre

s, kn

itted

1663

20.

1015

84.0

020

0079

.20

61

0422

Wom

en/g

irls

ense

mbl

es, o

f cot

ton,

kni

tted

2067

2.06

4268

.17

5300

08.

05


Con

td...

61

0423

Wom

en/g

irls

ense

mbl

es, o

f sy

nthe

tic13

000.

0810

0.78

2000

5.04

fibre

s, kn

itted

61

0432

Wom

en/g

irls

jack

ets,

of c

otto

n, k

nitte

d11

000

4.00

4400

0.00

1200

0036

.67

61

0433

Wom

en/g

irls

jack

ets,

of s

ynth

etic

fibre

s,61

674.

0024

668.

0016

6000

14.8

6kn

itted

61

0442

Wom

en/g

irls

dres

ses,

of c

otto

n, k

nitte

d18

500

4.80

8880

0.00

1800

0049

.33

61

0443

Wom

en/g

irls

dres

ses,

of s

ynth

etic

fibre

s,94

297.

0066

002.

3028

3000

23.3

2kn

itted

61

0452

Wom

en/g

irls

skirt

s, of

cot

ton,

kni

tted

2100

01.

0021

000.

0042

000

50.0

0

61

0453

Wom

en/g

irls

skirt

s, of

syn

thet

ic fib

res,

8000

0.34

2736

.84

1300

021

.05

knitt

ed

61

0510

Men

/boy

s sh

irts,

of c

otto

n, k

nitte

d48

1010

2.29

4920

27.0

522

3100

022

.05

61

0520

Men

/boy

s sh

irts,

of m

an-m

ade

fibre

s,69

1713

.17

9110

0.68

3150

0028

.92

knitt

ed

61

0590

Men

/boy

s sh

irts,

of o

ther

text

ile m

ater

ials,

2820

08.

0522

6975

.61

2640

0085

.98

kni

tted

61

0910

T-sh

irts,

singl

et a

nd o

ther

ves

ts, o

f cot

ton,

6289

273.

7417

2157

8.49

5554

000

31.0

0

knitt

ed


Con

td...

61

0990

T-sh

irts,

singl

et a

nd o

ther

ves

ts, o

f oth

er11

647

134.

8915

7111

3.94

4269

000

36.8

0

text

ile m

ater

ials,

kni

tted

61

1020

Pullo

vers

, car

diga

ns a

nd s

imila

r ar

ticles

2147

79.9

717

1686

.32

1771

000

9.69

of c

otto

n, k

nitte

d

61

1030

Pullo

vers

, car

diga

ns a

nd s

imila

r ar

ticles

of

1025

058

.13

5958

66.6

715

2600

039

.05

man

-mad

e fib

res,

knitt

ed

61

1090

Pullo

vers

, car

diga

ns &

simila

r ar

ticles

of

oth

1033

37.

6378

865.

6834

6000

22.7

9

text

ile m

ater

ials,

kni

tted

62

0332

Men

/boy

s ja

cket

s an

d bl

azer

s, of

cot

ton,

1062

142

.41

4504

08.5

915

5300

029

.00

not k

nitte

d

62

0333

Men

/boy

s ja

cket

s an

d bl

azer

s, of

syn

thet

ic18

929

14.0

026

5002

.92

5170

0051

.26

fibr

es, n

ot k

nitte

d

62

0339

Men

/boy

s ja

cket

s an

d bl

azer

s, of

oth

er19

455

11.0

021

4003

.39

6650

0032

.18

text

ile m

ater

ials,

not

kni

tted

62

0341

Men

/boy

s tro

user

s an

d sh

orts

,of w

ool o

r27

500

7.26

1995

71.4

338

1000

52.3

8

fine

anim

al h

air,

not k

nitte

d

62

0342

Men

/boy

s tro

user

s an

d sh

orts,

of c

otto

n,20

4156

9.80

1162

966.

3897

1000

011

.98

not

kni

tted


Con

td...

62

0412

Wom

en/g

irls

suits

, of c

otto

n, n

ot k

nitte

d96

670.

6461

98.6

428

000

22.1

4

62

0413

Wom

en/g

irls

suits

, of

synt

hetic

fib

res,

1100

00.

9099

12.0

941

000

24.1

8

not

kni

tted

62

0433

Wom

en/g

irls

jack

ets,

of s

ynth

etic

fibre

s,22

875

7.02

1605

61.3

132

2000

49.8

6

not

kni

tted

62

0439

Wom

en/g

irls

jack

ets,

of o

ther

text

ile47

583

12.0

057

0998

.42

9430

0060

.55

mat

eria

ls, n

ot k

nitte

d

62

0442

Wom

en/g

irls

dres

ses,

of c

otto

n, n

ot k

nitte

d16

609

23.0

038

2004

.79

1210

000

31.5

7

62

0443

Wom

en/g

irls

dres

ses,

of s

ynth

etic

fibre

s,28

833

6.00

1729

98.9

635

9000

48.1

9

not k

nitte

d

62

0444

Wom

en/g

irls

dres

ses,

of a

rtific

ial f

ibre

s,46

000

1.00

4600

0.00

9500

048

.42

not k

nitte

d

62

0452

Wom

en/g

irls

skirt

s, of

cot

ton,

not

kni

tted

9789

21.0

120

5701

.72

6680

0030

.79

62

0453

Wom

en/g

irls

skirt

s, of

syn

thet

ic fib

res,

2100

04.

0084

000.

0019

2000

43.7

5

not

kni

tted

62

0459

Wom

en/g

irls

skirt

s, of

oth

er t

extil

e m

ater

ials,

2325

03.

0671

047.

2117

8000

39.9

1

not k

nitte

d


Con

td...

62

0462

Wom

en/g

irls

trous

ers

and

shor

ts, o

f cot

ton,

3679

228.

2383

9653

.60

5176

000

16.2

2

not k

nitte

d

62

0463

Wom

en/g

irls

trous

ers

and

shor

ts, o

f syn

thet

ic25

4619

.87

5059

3.06

5540

009.

13

fibre

s, no

t kni

tted

62

0469

Wom

en/g

irls

trous

ers

& s

horts

,of o

ther

1083

320

.46

2215

99.8

973

3000

30.2

3

text

ile m

ater

ials,

not

kni

tted

62

0520

Men

/boy

s sh

irts,

of c

otto

n, n

ot k

nitte

d40

9335

3.49

1446

818.

7795

7700

015

.11

62

0530

Men

/boy

s sh

irts,

of m

an-m

ade

fibre

s,23

3320

.79

4851

1.15

4020

0012

.07

not k

nitte

d

62

0590

Men

/boy

s sh

irts,

of o

ther

text

ile m

ater

ials,

5436

45.2

524

5982

.41

1513

000

16.2

6

not k

nitte

d

62

0630

Wom

en/g

irls

blou

ses

and

shirt

s, of

cot

ton,

8370

46.1

038

5888

.19

1769

000

21.8

1

not k

nitte

d

62

0640

Wom

en/g

irls

blou

ses

and

shirt

s, of

man

-mad

e19

067

15.0

028

6002

.93

6910

0041

.39

fibre

s, no

t kni

tted

62

0690

Wom

en/g

irls

blou

ses

and

shirt

s, of

oth

er18

800

5.00

9400

0.00

2490

0037

.75

text

ile m

ater

ials,

not

kni

tted

Tota

l

2178

.55

1282

2800

.40

5466

3000

23.4

6


Nep

al09

0220

Gree

n tea

(not

ferm

ented

) in

pack

ages

1631

499.

0581

3950

.21

1313

000

61.9

9

exce

edin

g 3

kg

09

0620

Cinn

amon

and

cin

nam

on-tr

ee fl

ower

s25

454.

5711

634.

2916

000

72.7

1

crus

hed

or g

roun

d

09

0930

Cum

in s

eeds

1565

4233

.26

6625

046.

1991

6500

072

.29

23

0610

Cotto

n se

ed o

il-ca

ke &

oth

sol

id r

esid

ues,

9178

.82

7172

.41

1600

044

.83

whe

ther

or n

ot g

roun

d or

pell

et

62

1440

Shaw

ls, s

carv

es, v

eils

and

the

like,

of20

000.

9018

00.0

090

0020

.00

artif

icial

fibr

es, n

ot k

nitte

d

Tota

l

4816

.60

7459

603.

1010

5190

0070

.92

Gran

d To

tal

4409

82.9

859

7293

448.

3510

9545

0208

54.5

2

Consum

ers and Econom

ic Cooperation

119

Nepal

SAFTA HS Product Description Price Quantity Consumer Current PercentageMember CODE Difference Imported Welfare Value Imports of ConsumerCountry (6 Digit by Nepal (in US$) by Nepal Welfare in

Level) from ROW from ROW Imports(in Tons) (in US$)

Bangladesh 610442 Women/girls dresses, of cotton, knitted 39527 0.02 693.46 1000 69.35

610462 Women/girls trousers and shorts, of 13041 0.04 483.00 1000 48.30

cotton, knitted

610510 Men/boys shirts, of cotton, knitted 34181 0.21 7023.45 10000 70.23

610910 T-shirts, singlet and other vests, of cotton, 14222 34.00 483549.07 906000 53.37

knitted

611011 Jerseys, pullovers, cardigans, waistcoats 26907 2.00 53814.00 102000 52.76

and similar articles, of woo

611019 Jerseys, pullovers, cardigans, waistcoats 15563 1.00 15563.00 35000 44.47

and similar articles, of fin

611030 Pullovers, cardigans and similar articles of 15777 29.00 457537.53 910000 50.28

man-made fibres, knitted

Contd...


Con

td...

61

1090

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42.8

3

Consum

ers and Econom

ic Cooperation

127

Pakistan

SAFTA HS Product Description Price Quantity Consumer Current PercentageMember CODE Difference Imported Welfare Value Imports of ConsumerCountry (6 Digit by Pakistan (in US$) by Pakistan Welfare in


India 300490 Medicaments nes, in dosage 27527 6344.93 174656842.49 228005000 76.60

851719 Telephone sets, nes 19181 41.16 789563.70 2589000 30.50

851730 Telephonic or telegraphic switching 65833 3.00 197499.44 445000 44.38

apparatus

851750 Apparatus for carrier-current/digital 130711 210.00 27449254.10 44190000 62.12

line systems

870323 Automobiles w reciprocate piston engine 147 5243.14 770741.03 63594000 1.21

displace > 1500 cc to 3000 cc

870331 Automobiles with diesel engine displacing 402 37.00 14873.44 428000 3.48

not more than 1500 cc

Total 11879.23 203878774.21 339251000 60.10

Contd...


Con

td...

Sri L

anka

6108

21W

omen

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and

pant

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7970

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61

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bath

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62

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Con

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Men

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61

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1011

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7316

000

1.03

and

simila

r ar

ticles

, of

woo

61

1030

Pullo

vers

, car

diga

ns a

nd s

imila

r ar

ticles

of

2668

2.00

5336

.00

6800

07.

85m

an-m

ade

fibre

s, kn

itted

62

0312

Men

/boy

s su

its, o

f syn

thet

ic fib

res,

not

9193

1.00

9193

.00

4000

022

.98

knitt

ed

62

0331

Men

/boy

s ja

cket

s an

d bl

azer

s, of

woo

l or

9622

1.00

9622

.00

6700

014

.36

fine

anim

al h

air,

not k

nitte

d

Con

td...


Con

td...

62

0339

Men

/boy

s ja

cket

s an

d bl

azer

s, of

oth

er te

xtile

418

5.00

2090

.00

3140

000.

67m

ater

ials,

not

kni

tted

62

0341

Men

/boy

s tro

user

s an

d sh

orts,

of w

ool o

r26

507

38.6

410

2420

1.03

2782

000

36.8

2fin

e an

imal

hai

r, no

t kni

tted

62

0342

Men

/boy

s tro

user

s an

d sh

orts,

of c

otto

n,17

4012

.00

2088

0.00

3390

006.

16no

t kni

tted

62

0343

Men

/boy

s tro

user

s an

d sh

orts,

of s

ynth

etic

1160

21.

0011

602.

0038

000

30.5

3fib

res,

not k

nitte

d

62

0419

Wom

en/g

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suits

, of

othe

r te

xtile

mat

eria

ls,24

892

0.66

1637

6.32

5000

032

.75

not k

nitte

d

62

0429

Wom

en/g

irls

ense

mbl

es, o

f oth

er te

xtile

6208

40.

1379

44.3

818

000

44.1

4m

ater

ials,

not

kni

tted

62

0439

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en/g

irls

jack

ets,

of o

ther

text

ile25

026

2.00

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2.00

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0029

.44

mat

eria

ls, n

ot k

nitte

d

62

0449

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en/g

irls

dres

ses,

of o

ther

text

ile10

029

0.38

3774

.08

6000

62.9

0m

ater

ials,

not

kni

tted

62

0469

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en/g

irls

trous

ers

& s

horts

, of o

ther

5861

1.00

5861

.00

4400

013

.32

text

ile m

ater

ials,

not

kni

tted


62

0520

Men

/boy

s sh

irts,

of c

otto

n, n

ot k

nitte

d22

761.

0022

76.0

046

000

4.95

62

0630

Wom

en/g

irls

blou

ses

and

shirt

s, of

cot

ton,

3460

1.00

3460

.00

5600

06.

18no

t kni

tted

63

0222

Bed

linen

, of m

an-m

ade

fibre

s, pr

inte

d,56

1224

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1376

64.4

226

9000

51.1

8no

t kni

tted

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l

171.

6116

3950

0.07

6949

000

23.5

9

Gran

d To

tal

1359

2.93

2061

7629

5.31

3492

3800

059

.04

Consum

ers and Econom

ic Cooperation

133

Sri Lanka

SAFTA HS Product Description Price Quantity Consumer Current PercentageMember CODE Difference Imported Welfare Value Imports of ConsumerCountry (6 Digit by Sri Lanka (in US$) by Sri Lanka Welfare in


India 100610 Rice in the husk (paddy or rough) 4231 1.00 4231.00 5000 84.62

100620 Rice, husked (brown) 560 37.99 21275.44 28000 75.98

100630 Rice, semi-milled or wholly milled, whether 46 51475.86 2367889.66 22392000 10.57or not polished or glazed

100640 Rice, broken 104 303.76 31591.40 113000 27.96

271011 Aviation spirit 204 240184.71 48997681.53 188545000 25.99

271019 Light petroleum distillates nes 260 895944.74 232945631.58 680918000 34.21

271099 Petroleum oils and products nes 1618 58.99 95450.36 123000 77.60

711411 Articles of gold/silversmith & prt of silver 1683 1000.00 1683000.00 15000000 11.22w/n plated/clad w/o prec met

870310 Snowmobiles, golf cars and similar vehicles 3661 1.00 3661.00 18000 20.34

870323 Automobiles w reciprocate piston engine 166 270.99 44984.52 3292000 1.37displace > 1500 cc to 3000 cc

Contd...


Con

td...

87

0324

Auto

mob

iles

with

rec

ipro

catin

g pi

ston

3321

47.3

915

7365

.95

1061

000

14.8

3en

gine

disp

lacin

g >

3000

cc

87

0331

Auto

mob

iles

with

dies

el en

gine

disp

lacin

g38

827

6.01

1070

91.2

231

8900

03.

36 n

ot m

ore

than

150

0 cc

Tota

l

1189

602.

4428

6459

853.

6691

4684

000

31.3

2

Paki

stan

1006

10Ri

ce in

the

husk

(pad

dy o

r ro

ugh)

4317

17.6

075

979.

2088

000

86.3

4

10

0620

Rice

, hus

ked

(bro

wn)

118

37.9

944

83.0

428

000

16.0

1

25

2321

Portl

and

cem

ent,

white

, whe

ther

or

not

4631

65.3

514

5606

.30

4020

0036

.22

artif

icial

ly c

olou

red

27

1099

Petro

leum

oils

and

pro

duct

s ne

s89

421

.00

2998

9.00

5500

054

.53

42

0329

Glov

es m

itten

s& m

itts,o

/t fo

r sp

ort,

of27

398.

0021

912.

0011

6000

18.8

9lea

ther

o o

f com

posit

ion

leath

er

Tota

l

3249

.95

2779

69.5

468

9000

40.3

4

Nep

al07

1333

Kidn

ey b

eans

whi

te p

ea b

eans

drie

d sh

elled

,87

40.0

034

80.0

040

000

8.70

wheth

er o

r no

t ski

nned

o s

plit

20

0911

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nge

juice

, unf

erm

ente

d &

not

spi

rited

,65

221

1.07

1376

15.8

126

7000

51.5

4wh

ether

not

sug

ared

sw

eet,

froze

n


20

0912

Ora

nge

juice

, unf

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d, B

rix v

alue

6352

.92

3334

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4800

06.

95<=

20

at 2

0°C,

whe

ther

or n

ot c

o

20

0919

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nge

juice

& n

es, u

nfer

men

ted

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pirit

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737.

8877

7728

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1157

000

67.2

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ether

or

not s

ugar

ed o

r sw

eet

20

0929

Gra

pefru

it ju

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nfer

men

ted,

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val

ue21

17.0

135

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1000

03.

57>

20 a

t 20°

C, w

heth

er o

r not

20

0939

Sing

le cit

rus

fruit

juice

, unf

erm

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d, B

rix10

1684

.00

8534

4.00

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0081

.28

valu

e >

20 a

t 20°

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heth

er

20

0969

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e ju

ice, i

ncl.

grap

e m

ust,

unfe

rmen

ted,

459

100.

9746

345.

6310

4000

44.5

6Br

ix v

alue

> 30

at 2

0°C,

w

20

0980

Frui

t& v

eg ju

ice n

es (e

xc m

x) u

nfer

men

ted71

645

3.97

3250

39.6

664

1000

50.7

1in

spiri

ted,

whe

ther

/not

sug

ar/sw

eet

20

0990

Mix

ture

s of

juice

s un

ferm

ente

d &

not s

pirit

ed10

1547

4.97

4820

94.0

277

8000

61.9

7 w

heth

er o

r not

suga

red

o sw

eet

72

1041

Flat

rol

led p

rod,

i/nas

,pltd

or

ctd

w zin

c,51

013.

0015

303.

0018

000

85.0

2co

rrug

ated

,>/=

600m

wid

e, ne

s

Tota

l

2175

.78

1876

641.

6531

6800

059

.24

Gran

d To

tal

11

9502

8.18

2886

1446

4.84

9185

4100

031

.42

Cost of Economic Non-Cooperation toConsumers in South Asia Questionnaire

(Perception Survey)

General Informationi) Name of Respondent

ii) Education: Graduation ( ); Post Graduation and above ( )

iii) Age

iv) Sex: Male ( ); Female ( )

v) City

vi) Country

vii) Respondent�s Profile: Producer/Trader/Exporter ( ); GovernmentOfficial ( ); Trade-Related Service ( ); Political Person ( );Academic/Researcher ( ); Civil Society Organisation ( ); Business/Industry Organisation ( ); Media ( )

viii) Name of the Organisation

ix) Email Address

Questions1. What is your thinking about overall impact of trade agreements

signed by your country?Multilateral Trade Agreement (World Trade OrganisationAgreement):

Regional Trade Agreement (South Asian Free Trade Agreement):

Bilateral Trade Agreements:

2. How do you perceive the current trade and regional cooperationscenario among South Asian countries? Explain your choice.As per expectations ( )


Below expectations ( )

Above expectations ( )

3. Are regional/bilateral trade negotiations among and betweenSouth Asian countries influenced by political priorities ratherthan economic logic? Explain your Argument.Yes ( )

No ( )

4. Do you believe that more trade liberalisation at the regional(South Asian) level is beneficial to consumers of your country?Explain your Point.Yes ( )

No ( )

5. Is trade-related consumer welfare ignored by trade policy makersof your country? Explain your Argument.Yes ( )

No ( )

6. What ought to be the volume of intra-regional trade amongSouth Asian countries in 2020? Explain your Choice.5-10% ( )

10-20% ( )

20-30% ( )

Above 30% ( )

7. What do you think is the best mode to deepen trade integrationin the South Asian region? Explain your Choice.Multilateral Trade Liberalisation (WTO) ( )

Regional Trade Agreement (SAFTA) ( )

Bilateral Trade Agreements ( )


8. Can economic and political relations in South Asia becomplimentary to each other to enhance trade and regionaleconomic cooperation? Explain your Choice.Yes ( )

No ( )

9. What factors hinder South Asian countries to enhance regionaltrade and economic cooperation? Explain your Choice.Please select what do you thinking most important factor (bymarking 1) and what do you think least important factor (bymarking 2)

Distrust among South Asian countries ( )Lack of complementarity in production and consumption ( )Lack of awareness about consumer benefits from regionaleconomic cooperation ( )

Lack of expectations about other economic benefits fromregional economic cooperation ( )

10. Do you think that consumer welfare impact analysis needs tobe taken into account in trade policy making? Explain yourArgument.Yes ( )No ( )

11. What do you think about generating more awareness aboutpositive consumer welfare impact of greater regional tradecooperation? Explain your Choice.Rank them in order of your choice � 1 = Lowest priority; 4 =Highest priority

Media campaign at national and regional level ( )Networking among consumer organisations at national andregional level ( )Networking among producers and consumers at national andregional level ( )Dialogue between politicians, producers and consumers atnational level ( )


12. What kind of steps must be taken by the political leadership ofSouth Asian countries to enhance regional trade and economiccooperation? Explain your Choice.Rank them in order of your choice � 1 = Lowest priority; 3 =Highest priority

Stop distrusting each other ( )

Highlight peace dividends from enhanced regional economiccooperation in their actions ( )

Take part in civil society initiatives toward enhancing regionaleconomic cooperation ( )

13. State some of your general views on the values and virtues ofgreater regional trade and economic cooperation.

consumers and economic cooperation - cuts citee

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