Published Date: Aug 8, 2014
Crying hoarse: South Asia trade
It’s not as if the dismal state of South Asia trade had not been highlighted before. Indeed, as a region, South Asia had failed to adapt to global dynamics, whereby countries have taken advantage of regional clustering instead of solely relying on distant, developed economies of the world for trade.
But, relative terms speak more, and a recent study on South-South trade by Dr. Salim Raihan, Professor of Economics at the University of Dhaka, only reinforces how regional politics in South Asia
may have hindered welfare impacts of trade for populations across the board.
For a refresher, the North-South distinction demarcates the richer advanced economies from the less fortunate, underdeveloped and developing world. Between 1990 and 2010, the share of intra-North trade in global trade fell from 55.5 percent to 32 percent as North-South trade took an upturn. The most remarkable increase, though, was in intra-South trade, which rose from 6.4 percent to 19.4 percent during the period.
The irony for South Asia, however, is even more remarkable. The trade models used in the study indicate that the highest positive effect
on intra-South trade has been from per capita GDP growth and common borders, while the strongest negative impact stems from distance (this is also expected intuitively from the gravity modelling used in the study). But, the study also qualifies that ‘these variables have differential effects when it comes to trade between different groups of South countries’. Thank you Dr. Raihan, that qualification is necessary in the context of South Asia, especially when the results are such.
The study goes on to highlight that in case of duty-free market access in emerging South countries (which include the BRICS, or more importantly for South Asia, India), there could be a ‘significant rise in welfare’ for all Least-Developed Countries (LDCs, which include five SAARC members) and Small and Vulnerable Economies (SVEs). However, tariff preferences alone in emerging South countries would not suffice to bring about a substantial change in exports of LDCs and SVEs.
Now let’s reconsider the situation in the region. Intra-regional
trade share in SAARC has not only been at a disappointing 4.23 percent of the region’s total trade but has also remained largely stagnant as South-South trade increased over the last two decades. The region has persistently failed to capitalise trade benefits on the basis of geographical proximity and domestic growth unlike most of the global South.
Further, a study by the Sustainable Development Policy Institute
(SDPI) underscores that the social impact of growth in the South Asia region over the past few years remains questionable in terms of poverty headcount, income inequality, food insecurity, energy scarcity, and climate risk reduction, among other factors. Differences in the accruing
benefits of growth have been prevalent not just within member states of
SAARC but also amongst them, giving some in the region a lead while others lag behind and thereby exacerbating the incidence of poverty and income inequality.
With the impact of regional trade not only imminent but also well-qualified and challenges common, South Asian economies have a lot to miss from pulling curtains on each other. Rhetoric doesn’t suffice, and for South Asia, not even signed agreements.
Source : http://www.brecorder.com/br-research/44:miscellaneous/4645:crying-hoarse-south-asia-trade/