There have been limited experiences with trade liberalisation in the region.
The Indo-Sri Lanka bilateral FTA for instance, even within a short period of less than three years of implementation, has led to a lot of dynamism in the intra-regional investments. India-Sri Lanka FTA has brought down the trade surplus of India with the country from 8.6:1 to 4.9:1 in just two years.
Similarly, India-Nepal FTA of 1996 spurred some Indian companies to shift production of common consumer goods of every day use such as toothpaste for the north-Indian market to Nepal. As a result these items emerged as some of the most important items of Nepal's exports to India.
SAFTA may help in evolving a horizontal specialisation across the region to enable the most optimal utilisation of the synergies of the member countries for their mutual advantage. Sri Lanka may well emerge as the region's hub for rubber-based industries, Bangladesh for energy-intensive industries and Bhutan, forest-based industries, and so on.
According to a study conducted by UNCTAD:
Nepal is not likely to gain additional market access in India under SAFTA, but it will expand its market access in Bangladesh and Maldives by 52 percent and in Pakistan and Sri Lanka by 46 percent when SAFTA is fully implemented
Bangladesh's welfare gains are predicted to be the highest in South Asia, and the country could do well in areas like apparel, pharmaceuticals, plastics and ceramics.
Pakistan may record a twofold growth in its exports in the region and see positive impacts on employment in the agricultural sector. But it could lose on commodities like apparel, leather products and sugar.
The study has estimated that full implementation of SAFTA could cause Nepal to lose revenue amounting to about US$ 0.1 billion (on the basis of simple and weighted average tariff).
The study has also noted that regional trade largely suffers from barriers apart from tariffs. Removal of non-tariff...