A South Asian Preferential Trading Arrangement: Implications for Regional Trade in Food Commodities

Abstract

As regionalism is regaining its momentum in different parts of the world, South Asian countries are becoming increasingly interested in regional integration to achieve expanded trade and economic growth in the region. This study attempts to analyze the implications of a South Asian Preferential Trading Arrangement (SAPTA) for expanded trade in food commodities. The import and export intensity indices for food commodities suggest many strong trade linkages between different South Asian countries. Using a partial equilibrium model, the ex-ante trade creation and trade diversion effects of a SAPTA are computed for food commodities. The results indicate that SAPTA would yield a considerable trade expansion in the region and would be welfare improving for all the South Asian countries.