March 17, 2008 (LBO) – Politics and non-tariff barriers are likely to constrain trade among South Asian nations even if import tariffs are removed, a new study on the benefits of a regional trade pact had said. The study on the benefits of the South Asia Free Trade Agreement (SAFTA) says estimates show that the potential trade between SAFTA members is 120 percent more than the actual trade.
“The entire difference between predicted and actual trade has been attributed to tariffs and it has been argued that removal of tariffs will increase trade to the predicted level,” said the study sponsored by the Asian Development Bank and the United Nations Conference on Trade and Development-India.
“However, the entire difference between predicted trade and actual trade may not be due to tariffs. The results show that even if tariffs are not removed, the gap between potential and actual intra-regional trade exists.”
It said the increase in trade which can be directly attributed to removal of tariffs under SAFTA is 80 percent of the actual intra-regional trade from the predicted intra-regional trade of 120 percent.
“This implies that apart from tariffs there exist other barriers to trade. Intra-regional