QUANTITATIVE ANALYSIS OF SAFTA: A BANGLADESH PERSPECTIVE

This article provides a quantitative analysis of the potential economic impacts of the South Asian Free Trade Area (SAFTA) from the perspective of Bangladesh. It employs a computational general equilibrium (CGE) model to simulate the effects of trade liberalization under SAFTA on the Bangladeshi economy. The study estimates the potential impacts on key macroeconomic variables, such as GDP, trade flows, and welfare. The research also provides a sectoral-level analysis, identifying the industries in Bangladesh that are likely to expand as a result of increased export opportunities and those that are likely to contract due to increased import competition. The paper's quantitative findings are then discussed in the context of the major policy challenges for Bangladesh, such as the need to address the large trade imbalance with India and to support the adjustment of industries that are negatively affected by liberalization. The analysis concludes that while SAFTA offers modest overall welfare gains for Bangladesh, realizing these gains and mitigating the adjustment costs requires a set of complementary domestic policies.

The debate over the economic impact of the South Asian Free Trade Area (SAFTA) has often been long on rhetoric and short on rigorous quantitative analysis. This paper seeks to fill this gap by employing a computational general equilibrium (CGE) model to simulate the potential effects of SAFTA on the Bangladesh economy. The study begins by outlining the structure of the CGE model and the data used in the simulation. The core of the article is the presentation and interpretation of the quantitative results. It provides specific numerical estimates of the likely changes in GDP, exports, imports, and overall economic welfare for Bangladesh under different trade liberalization scenarios. A key part of the analysis is a detailed examination of the sectoral impacts. The model identifies the specific industries, such as certain segments of the textile and apparel sector, that are projected to benefit from improved market access across the region. Conversely, it also identifies the import-competing sectors that would face significant adjustment pressures. The findings of the simulation suggest that the overall, economy-wide gains for Bangladesh from SAFTA, while positive, are likely to be modest in the short to medium term. The paper concludes that for SAFTA to be truly beneficial for Bangladesh, the trade liberalization it entails must be accompanied by a proactive set of domestic policies. These include investments in trade facilitation to reduce transport and transaction costs, and targeted support for industries and workers who are negatively affected by the new competitive environment.