Promoting intra-regional trade in South Asia will help lukewarm demand, says a study

A recent study has advocated promotion of more inclusiveness in the trade policy making process besides using business associations, civil society organisations, media and academia to play a contributory role to develop trade in South Asia.

The study states that participatory approach will make the regional trade reform process more transparent by permitting accessibility of all relevant stakeholders in the system. If these measures are undertaken, intra-regional trade in South Asia will increase by at least three times from its current level over the next five to seven years, the study done by Consumer Unity and Trust Society (CUTS) shows.

According to CUTS general secretary and founding member, Pradeep S. Mehta, the importance of South Asia’s intra-regional trade, which has received only a lukewarm treatment in the past, is now paramount for all South Asian countries from the point of view of their trade expansion strategies.

South Asian products are gradually being competed out from their traditional export markets in North America, Western Europe, and South East Asia, because of deepening of preferences granted to respective regional trading partners in such destinations. Besides, slow rate of recovery from the economic crisis of 2008 which originated in the U.S. as well as the looming European sovereign debt crisis are threatening to unsettle South Asia’s export promotion plans.

Mr. Mehta said in light of these developments, India has recently acknowledged that room for increasing exports in the short-run is limited. But a huge opportunity for sustaining trade growth awaits India and its regional trading partners in South Asia if they show willingness to look for it within the neighbourhood, he added. The study shows that there are more than 300 product categories with high trade potential and minimal trade risks, which are not being given preferential treatment under the provisions of South Asian Free Trade Area (SAFTA).

“If lower preferential tariff rates are applied on such products, intra-regional trade would increase by more than 70 per cent of its current level,” he added.

The study also points out that South Asia’s intra-regional trade has stagnated because of high unjustified trade costs due to widespread prevalence of non-tariff barriers (NTBs).

Building supply capacity using provisions of national trade policies, South Asian countries should allocate financial and technical assistance to high potential products under their national trade policies. For instance, India should recognise South Asian trading partners as focus countries under the National Foreign Trade Policy (NFTP 2009-14), recognise potential products for regional trade as focus products and provide support to such focus products under Market Development Assistance (MDA), Technology Up-gradation Fund Scheme (TUFS), and Export Promotion Industrial zones as per NFTP.

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