SANEI is inviting Research Proposals for its 15th Round of Regional Research Competition (RRC) within the thematic focus “Regional Integration in South Asia”. The proposals should relate to South Asian country(ies).
The South Asia Free Trade Area (SAFTA) was established in January 2006 to integrate the economies of the region. Since then member countries have undertaken a number of measures to achieve this objective. Nevertheless, South Asia remains one of the least integrated regions in the world from the standpoint of trade, services, and capital flows. The reason is that the two largest economies in the region—India and Pakistan—barely trade with each other. This fact has been a key constraint in holding back regional integration.
In 2011 there was an important breakthrough on trade between the two countries when Pakistan announced it was ready to grant most favored nation (MFN) status to India, thereby reciprocating India’s granting of MFN to Pakistan in 1996. Following a series of high level meetings between the two countries, the Pakistan Cabinet announced in February 2012 that MFN status with India would become operational in 2013. As a consequence, the positive list of items that could be imported from India would be replaced by a negative and sensitive items list consistent with the SAFTA agreement.
This change in trade relations between India and Pakistan is likely to give a significant boost to SAFTA and renewed impetus to South Asian regional integration. It is therefore important to look again at the economic impact of SAFTA. Specifically, what would be the effects of a revitalized SAFTA on trade in goods and services, cross border investments, growth, and welfare in the member countries?
In recent years, the South Asian countries have pursued trade liberalization as part of their economic reforms process. For example, India has reduced tariffs and items under the sensitive list ahead of the tariff reduction schedule laid down under SAFTA. Also, most members have free trade agreements (FTAs) with other countries. South Asian members have also signed bilateral agreements with each other. Most notably, India has a FTA with Sri Lanka, Bhutan and Nepal, and Pakistan and Sri Lanka also have a FTA. What are the implications of these trade arrangements on trade flows?
Non-tariff barriers have been a concern of SAFTA member countries. While non-tariff measures are legitimate as long as they meet the requirements laid down by the WTO, these measures could impact trade negatively. Sometimes these measures have the effect of creating unnecessary obstacles to international trade. For instance, regulations may lack transparency, or they may involve unnecessary and cumbersome procedures which could deter market access. What are the specific non-tariff barriers that countries impose and how can these be reduced or eliminated?
One way in which international trade has overcome market access problem is through participation in global production networks. All South Asian countries have actively participated in global value chains of certain commodities. In recent years there has been an emergence of regional production networks. Can these networks be identified and what are their main characteristics?
Intra-regional trade could increase considerably if there was easier transportation of goods across borders. What are the impediments to trade and the transaction costs incurred? How can these be reduced and what will be the impact on trade if trade facilitation measures are adopted to reduce transaction costs?
Intra-regional investments are still very low. Until recently India did not allow outward or inward flow of investments with two South Asian countries (Bangladesh and Pakistan). India has now modified the investment regulations related to these two countries to allow investment flows. These changes are likely to give a boost to cross border investment flows. How will the investment and trade linkages be affected by these changes?
SAARC member countries have recently signed the South Asian Trade in Services Agreement (SATIS). Will this significantly increase intra-regional trade in services? While the region has a strong services sector, in which sectors are there intra-regional trade possibilities? What are the needed regulatory regimes to facilitate services trade?
There is vast potential in trade in energy which remains untapped. There are several complementarities amongst these countries with some countries having surpluses in some types of energy and others having deficits in those. However, there has been limited success in energy trade in the region. Several questions are relevant in this area. What is the energy trade potential in the region? What is the political economy of trade in the energy sector? What kind of connectivity in the region would facilitate energy trading?
The research topics that could be examined include:
1. Estimating economic impacts of SAFTA.
2. Regional and bilateral trade agreements.
3. Intra-industry trade and trade complementarities.
4. Impediments to trade and transaction costs.
5. Non-tariff barriers.
6. Cross border investments.
7. Regional and bilateral trade in services.
8. Energy trade.
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An applicant must submit the proposal as per instructions. Applicant must also download and fill in the below linked documents to submit with the proposal:
SANEI Supplemental Application