How Can South Asia Turn Its Proximity from a Burden to an Advantage?
Around the world, trade has played a critical role in reducing poverty. Some of the most successful countries in East Asia, Europe, and North America owe much of their success to strong trade relations with their neighbors. However, South Asian cou...
| Main Authors: | , |
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| Format: | Brief |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/889941553259868763/How-Can-South-Asia-Turn-Its-Proximity-from-a-Burden-to-anAdvantage http://hdl.handle.net/10986/31440 |
| Summary: | Around the world, trade has played a
critical role in reducing poverty. Some of the most
successful countries in East Asia, Europe, and North America
owe much of their success to strong trade relations with
their neighbors. However, South Asian countries have yet to
reap the benefits of proximity. Intraregional trade accounts
for a little more than 5 percent of South Asia’s total
trade, compared with 50 percent in East Asia and the Pacific
and 22 percent in Sub-Saharan Africa.The World Bank’s recent
report, A Glass Half Full: The Promise of Regional Trade in
South Asia, clearly illustrates the gaps between current and
potential trade in South Asia.The force of gravity—the
degree of trade attraction between countries—is also
manifest in high levels of informal trade. Informal trade
has been estimated at 50 percent of formal trade in South
Asia, aggregating assessments of various studies covering
the 1993 to 2005 period.The large gaps between actual and
potential trade arise because South Asian trade regimes
discriminate against each other. This can be shown through
an index of trade restrictiveness. Based on global trade
data, such an index generates an implicit tariff that
measures a country’s tariff and non-tariff barriers on
imports. In India, Pakistan, and Sri Lanka, the index is two
to nine times higher for imports from South Asia than from
the rest of the world.Moreover, although the average burden
of non-tariff measures may not appear high, it is high for
specific product and market combinations in South Asia. It
varies from over 75 percent to over 2,000 percent. Sri Lanka
consistently appears on the list of product-market
combinations with the highest trade restrictiveness index in
the region. Barriers that have held back trade and
investment within South Asia include tariffs and para
tariffs, real and perceived non-tariff barriers,
connectivity costs as manifested in the cost of air travel,
and the broader trust deficit. |
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