Intra-regional trade in South Asia is very minimal compared to other economic blocs of the world. Between 1990 and 2005, intra-regional trade in South Asia increased only marginally from 2.68 percent to 4.85 percent of total trade of South Asian countries (Chanda 2011). While the figure intra-regional trade for 2007 remained at 4 percent for South Asia, such trade ranged between 20-60 percent in the case of many other regional economic blocs (ADB 2009). Although the South Asian Association for Regional Cooperation (SAARC) came into effect in 1985, trade has never been a major driver of this initiative. Although a Free Trade Agreement (SAFTA) came into existence in 2004, it has so far underperformed in making significant advancements in intra-regional trade. SAARC member states are also yet to initiate an institutional framework to take further steps toward full economic integration – for instance, there is no mechanism in place to discuss the next step (after an FTA) to form a customs union, then a common market, and finally to form a monetary union with a common central bank and a regional currency.

The net result of economic non-cooperation among the South Asian countries is high costs to consumers.

For instance, a recent study using “a gravity model shows that the potential of formal trade between India and Pakistan is roughly 20 times greater than recorded trade” if there were effective cooperation (Khan 2009) and this would bring down prices of many key commodities significantly by avoiding additional costs of imports from outside the region. Even after taking into account transport-related infrastructure bottlenecks, South Asian countries are capable of enhancing their intra-regional trade through better exploitation of complementarities in the South Asian value-chain.

The proposed paper examines the neglected aspect of consumer welfare gains that can result from deeper economic integration in South Asia. Towards this, the paper addresses the theoretical linkages between trade liberalisation and consumer welfare in general and comparatively analyses the results of existing studies on this topic in the context of SAFTA. The paper also will contain a quantitative assessment of potential consumer welfare gains due to removal of products from the respective sensitive lists of South Asian countries and bringing them under the Tariff Liberalisation programme under SAFTA. Finally, the paper will discuss the causes of and solutions to negligence of consumer welfare in the context of SAFTA negotiations in particular and economic non-cooperation in South Asia in general based on a perception survey of various stakeholders in South Asian countries, including traders, government officials, political office bearers, academicians/researchers, business/industry organisations, civil society organisations and media persons.

References:
ADB 2009, ‘Study on intra-regional trade and investment in South Asia’, Development Partnership Programme for South Asia, Study Report, Asian Development Bank, Manila.
Chanda, Rupa 2011, ‘Integrating services in South Asia: Trade, investment, and mobility’, Oxford University Press, New Delhi, India.
Khan, Mohsin S. 2009, ‘India-Pakistan trade: A roadmap for enhancing economic relations’, Policy Brief No. 09-15, Peterson Institute for International Economics, Washington D.C., USA.
The text of this abstract is available on the Consumer Unity & Trust Society (CUTS) International website, along with details of the project: <http://www.cuts-citee.org/COENCOSA/>