Bilateral Trade

Free Trade Agreement in South Asia: A Fad or Fortune

Present study analyses the issue of free trade agreement (SAFTA) in SAARC, if it is merely a fad or is a fortune. Though there is a small volume of bilateral trade between SAARC countries, the study revealed that there exists huge potential for bilateral trade. The gravity result showed a positive relation between intra region trade and growth in GDP. Trade data analyses revealed intra SAARC trade growing at a higher rate than SAARC - world trade. SAARC’s trade with major trading partners showed trade concentration in recent years shifting towards neighbouring and economically faster growing economies. Hence, though there is the challenge of proper implementation of SAFTA agreement, SAARC has a greater potential for intra region trade after SAFTA comes into operation in 2006. Therefore, the free trade agreement is not a mere fad, but potentially a fortune for South Asia.
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