SOUTH ASIAN FREE TRADE AREA: EXAMINING BANGLADESH’S TRADE POTENTIAL

This article examines the trade potential for Bangladesh within the framework of the South Asian Free Trade Area (SAFTA). It provides a detailed analysis of the structure of Bangladesh's existing trade with its SAARC partners, highlighting the massive trade imbalance, particularly with India. The study then uses trade potential models to empirically estimate the scope for export expansion for Bangladesh under a more liberalized regional trade regime. The research identifies the key sectors where Bangladesh has a potential comparative advantage and could significantly increase its exports. The paper also provides a critical assessment of the major barriers that prevent the realization of this potential, including high non-tariff barriers in other South Asian markets, poor transport and transit infrastructure, and the persistence of long sensitive lists under SAFTA. The analysis concludes that while SAFTA offers a significant theoretical potential for Bangladesh, realizing these gains will require a concerted effort to address the non-tariff and infrastructural barriers to trade.

The South Asian Free Trade Area (SAFTA) was launched with the promise of boosting intra-regional trade and accelerating economic growth. This paper provides a specific examination of the trade potential for Bangladesh under this new arrangement. The study begins with a baseline analysis of Bangladesh's trade patterns within South Asia, confirming the low level of intra-regional trade and the severe trade deficit with India. The core of the article is an empirical exercise to estimate Bangladesh's export potential. Using trade complementarity indices and other analytical tools, the paper identifies a range of products, both traditional and non-traditional, where Bangladesh could significantly increase its exports to the larger markets of India and Pakistan if the barriers were removed. Having established this potential, the second part of the paper provides a sobering analysis of the real-world obstacles that stand in the way. It moves beyond tariffs to focus on the much more significant challenge of non-tariff barriers (NTBs), such as complex and non-transparent customs procedures and sanitary and phytosanitary (SPS) standards, which are often used to block Bangladeshi exports. The paper also reiterates the critical importance of improving physical connectivity. The findings lead to a clear policy agenda: for Bangladesh to realize its trade potential in SAFTA, its diplomatic efforts must shift from a focus on tariff concessions to a much more vigorous campaign to dismantle the NTBs and to promote investment in regional transport infrastructure.