Introduction

The policy of trade liberalisation and free-market economic system in the 1980s has created both challenges and chances for Bangladesh economic system. The creative activity of the World Trade Organization has created new ways of basking the comparative advantage for Bangladesh. At the same clip. the globalize trade scenario has opened up the structural restrictions of Bangladesh economic system. which needs immediate attending through the preparation of appropriate policy and actions. Bangladesh continues to endure from a low-growth. high-poverty syndrome. However. Bangladesh has a big labour force willing to work for low rewards ensuing in a really competitory place for labour-intensive fabrication exports. It has a big figure of entrepreneurial business communities who are able to develop and run little and average graduated table endeavors.

It has a sufficient sum of natural gas militias which can potentially supply low-priced energy for a downstream industrial construction. With amicable and reciprocally good regional cooperation. Bangladesh can be an ideal location for immense foreign direct investings. which can function as a immense market for goods and services in the South Asia. The growing potency of Bangladesh is. nevertheless. limited by a high population denseness and limited handiness of land. which consequences in a go oning force per unit area on nutrient supply. The low-income degree makes it hard for families to salvage. therefore restraining the domestic development attempts. The instruction and wellness degrees are low. ensuing in a labour force missing the accomplishments needed for a modern economic system. In add-on. the traditions of cardinal control of the economic system and the clumsiness of authorities policy continue to work as a hindrance against private sector investing.

Within this planetary and regional trade scenario. this paper attempts to supply a outline of Bangladesh trade with the South Asian Association for Regional Cooperation ( SAARC ) states and of its policies sing bilateral and planetary trade. The common construction of the economic systems and the same intensive monetary value fight could take to a great trade of formal trade between Bangladesh and the SAARC states. but this potency is yet to be realized. Bangladesh suffers from a immense trade shortage with India. This paper will put particular accent on the trade dealingss with India and the proposed South Asiatic Growth Quadrangle consisting of seven north-eastern provinces of India. Bangladesh. Nepal and Bhutan. This paper will besides analyze the impact of GDP and of the exchange rate and its variableness on the export and import growing of Bangladesh.

This survey will besides analyze the trade policies of Bangladesh with particular mention to both nominal and effectual duty degrees. and non-tariff barriers that hinder the growing of Bangladesh planetary trade with its adjacent states. Intra-SAARC trade is really negligible. This survey will gauge a gravitation theoretical account of international trade to analyze whether intra-SAARC trade is lower or higher than what is predicated by the economic theoretical account. The consequences of this theoretical account will assist us understand the possibilities of trade creative activity and recreation effects ensuing from the South Asiatic Preferential Trading Agreements ( SAPTA ) among SAARC member states.

Gravity theoretical accounts of international trade estimate the trade flow as a map of variables that straight or indirectly affect the determiners of normal trade flow. The typical gravitation theoretical account specification relates bilateral trade to income. population ( or per capita income ) and distance between the trading spouses. If one finds a positive coefficient on the silent person variable bespeaking that two states. both of which participate in the same discriminatory agreement. trade more with one another than predicted by their incomes and distance. so the decision drawn is that the agreement is trade-creating for its members. This paper will reexamine the duty grants agreed upon by the SAARC member states.

Literature Review

As it would look. a important portion of the literature on the province of bilateral and regional economic and trade cooperation in South Asia trades with factors lending to weak province of integrating in the part. Harmonizing to Sawhney and Kumar ( 2008 ) . the implicit in grounds originate from a combination of political. economic and institutional factors. A big section of relevant literature trades with placing chances that could emerge from closer cooperation among states in the part.

Three strands of discourse are normally discernable in this context: foremost. designation of challenges and chances of cooperation through regional and bilateral trade and other understandings with engagement of SAARC member states ; secondly. quantitative appraisals of economic additions. public assistance losingss which could potentially arise from such cooperation ; and thirdly. evidence?based appraisals of trade potencies at sect unwritten degrees. Along with analysis at the regional degree. some portion of the literature has explored the relevant issues at the bilateral degree. A figure of surveies have attempted to measure whether a bilateral path is more preferred to a regional one in progressing the degree of trade and economic cooperation in the context of South Asia.

In recent times. increasing attending is being given to the province of bilateral economic cooperation between Bangladesh and India. One pecking restriction in this connexion has been the deficiency of equal informations on informal trade which has tended to restrain the range of analysis refering to bilateral and regional trade in South Asia. 9 Merely a few surveies have attempted to capture this of import facet of trade in the part ( Bakht 1996 ; World Bank 2006 ) . In a feasibleness survey on the chances of bilateral FTA between Bangladesh and India. Bhuyan and Ray ( 2006 ) conclude that such understanding between the two states would convey about significant benefits to both spouses. I

n contrast to the many-sided agreements. bilateral FTAs could be fast?tracked and would offer extra discriminatory intervention to the spouse states. Based on a reappraisal of bilateral FTAs. they conclude that this manner of trading agreement has shown a better record of success in spread outing trade between states. and stimulates investing compared to regional or sub?regional integrating strategies. De and Bhattacharyay ( 2007 ) argue that a bilateral FTA with India would enable Bangladesh to beef up her bridgehead in the Indian market.

In position of the NTBs that badly limit the chances of bilateral trade between these states. the survey suggests that an FTA with India would be the best manner to turn to the issue of NTBs. Some of the other surveies have put more accent on the regional path. Among those. Sawhney and Kumar ( 2008 ) hold that execution of the regional free trade understanding ( e. g. SAFTA ) would ensue in positive results
for all member states. The writers besides conclude that regional cooperation through FTAs such as SAFTA could take to higher volume of trade in goods and services through allocative efficiency and enhanced production capacity.

Rahman ( 2001 ) identifies a figure of issues which would necessitate pressing attending if Bangladesh-India bilateral economic relation is to derive impulse including multilateralism versus bilaterality. sectoral versus comprehensive attack. duty?free market entree. regulations of beginning ( RoO ) . remotion of NTBs and the demand for policy coordination to excite investing. A figure of surveies have argued in favor of taking a holistic attack encompassing cooperation in countries of trade. investing. conveyance and substructure in order to gain the possible chances of bilateral economic cooperation affecting SAARC member states ( CPD 2004 ) .

However. in jointing a contrasting position. Baysan et Al. ( 2006 ) argue that the SAFTA makes sense merely in the context of a much broader scheme of making a larger discriminatory trade country in the part that would necessitate to embrace China and besides members of the Association of Southeast Asiatic Nations ( ASEAN ) . Assuming that the SAFTA understanding was at that place to remain. the writers recommend a figure of stairss towards publicity of intra?regional trade in a mode that minimizes likely trade recreation costs and maximizes possible benefits. In this context. some surveies have highlighted the positive impact in footings of growing and poorness decrease through regional cooperation by mentioning other RTAs such as South East Asian and European regional entries ( Sawhney and Kumar 2008 ) .

In recent times. a figure of surveies have tried to quantify the possible benefits originating from cooperation among SAARC states. both at regional and bilateral degrees. A figure of surveies have tried to gauge the grade of market entree under the discriminatory intervention. Mukherji ( 2000 ) estimates that the one-year value of all imports that entered the SAARC member states under SAPTA penchants amounted to about USD 480 million at the terminal of the 1990s.

Harmonizing to his estimations. the portion of intra-regional imports covered by the SAPTA penchants was the highest for Pakistan ( 39. 6 per cent ) . followed by Nepal ( 35. 2 per cent ) . India ( 30 per cent ) . Bhutan ( 17 per cent ) and Sri Lanka ( 12 per cent ) . In contrast the import value coverage of Bangladesh and Maldives was comparatively low. Based on import informations for FY1997-98. highest gross loss was sustained by India ( USD 2. 45 million ) . whereas that of Bangladesh was comparatively modest ( USD 0. 02 million )

In a more recent survey undertaken to measure the public presentation of SAPTA that besides explored the chances of the so proposed SAFTA. Hirantha ( 2004 ) applied the well- known gravitation theoretical account to gauge possible benefits of an FTA in South Asia. 11 The survey finds that there will be significant trade creative activity in the part under SAPTA with no important trade recreation impact. The estimated consequences for 2002 showed that bilateral trade between any two braces of SAARC member states would be about 10. 5 times higher under the SAPTA compared to two otherwise similar states in absence of an RTA.

Furthermore. harmonizing to estimated coefficients. non merely would intra?regional trade be enhanced. but this would besides take to increased bilateral trade with non?members. This consequence contradicted earlier survey of ( Hassan 2001 ) which indicated that take downing of trade among SAARC states would non ensue in significant benefits and would take consequence in decreased trade with non?members. 12 Rahman et Al. ( 2006 ) supported the earlier findings of Hirantha ( 2004 ) and argued that there would be important intra-bloc export creative activity as a consequence of SAPTA ; though there would be net export recreation. 13 However. consequences of this survey showed that Bangladesh. India and Pakistan were expected to derive by fall ining the RTA. while Nepal. Maldives and Sri Lanka would be negatively affected.

Given the fact of Bangladesh’s export chances in India. a figure of surveies have tried to place possible market chances for Bangladeshi sectors/products peculiarly in the Indian market. Based on analysis of secondary informations and stakeholders’ perceptual experience. Bhuyan and Ray ( 2006 ) place a set of possible exportable merchandises from Bangladesh that could bask export possible in the Indian market. These were fish merchandises ( including runt ) . leather goods. cement. light technology points. jute merchandises. pharmaceutical merchandises. ceramic merchandises and processed agro?products.

The writers recommended that an FTA with India would enable Bangladeshi manufacturers and exporters to hold entree to the much needed natural stuffs and semi-finished merchandises at competitory monetary value. In yet another survey. using a estimable general equilibrium ( CGE ) model. Siriwardana and Yang ( 2007 ) estimation that a figure of Bangladeshi points. including drinks and baccy. fabricated metal merchandises. fabric and leather. crude oil and other minerals. nutrient industries. and veggies and fruits sector. will derive well in the Indian market both in the short?run every bit good as long?run. if import responsibilities are abolished by India.

In a recent survey. the World Bank ( 2006 ) . nevertheless. finds that the chance for trade between Bangladesh and India. through a bilateral FTA. to be instead limited. Analysis undertaken for a figure of points including cement. visible radiation bulbs. bike jinrikisha Surs and sugar indicate that if a bilateral FTA is signed with India it will be India which would be able to spread out her exports to Bangladesh ; Bangladesh’s export possible in the Indian market is instead limited. The survey points out the grounds being ( a ) faster productiveness growing in India bolstering India’s comparative advantage in viing goods. and/or ( B ) duty and NTBs restraining Bangladesh’s major exports ( RMG ) every bit good as minor exports which have experienced rapid growing in other markets.

The survey argues that in a state of affairs where an Indian provider gets advantage of confined protected market under the bilateral FTA with Bangladesh. there was likeliness of collusion amongst Indian manufacturers or between them and Bangladeshi importers which would cut down some of the public assistance additions. Harmonizing to this survey. Bangladesh’s involvements would be better served through many-sided liberalisation. In similar vena. Bandara and Yu ( 2003 ) besides conclude that SAFTA would take to a fringy 0. 21 per cent addition in existent income for India. 0. 03 per cent addition for Sri Lanka. 0. 10 per cent loss for Bangladesh. while the remainder of South Asia would derive 0. 08 per cent in footings of existent income.

More late. Raihan ( 2008 ) used the WITS/SMART theoretical account and carried out simulation exercising in position of assorted scenarios under the SAFTA agreement ( remotion of intra?regional duty for all states ) . The survey makes an effort to quantify export potencies of Bangladesh in the Indian market. The mold exercising identifies export points of Bangladesh at disaggregated HS 6 figure degree which were likely to spread out in the Indian market under the SAFTA. The survey finds that under the SAFTA Bangladesh’s exports to Indian market would lift by merely about USD 78 million. Top 30 merchandises ( at the 6 figure HS codification ) . together. history for 83 per cent of the addition in Bangladesh’s export net incomes ( USD 64. 9 million ) .

A reappraisal of literature indicates that the bulk of surveies have tended to concentrate on duty barriers and the impact of remotion of responsibilities on regional and bilateral trade. However. the presence of big figure of NTBs was besides recognised as a major restraint in these and other surveies. Rahman ( 2010 ) identifies outstanding characteristics of the NTBs prevailing in South Asiatic trade. and examined cross?country experiences in turn toing the NTBs. The survey besides documented how the NTBs are being addressed within the SAFTA architecture. Particularly. an in?depth expression at NTB?related issues has become even more necessary in position of the recent arguments. and the modes that are being put in topographic point to turn to those. An of import recent survey by Razzaque ( 2010 ) . which combines qualitative analysis with three different types of quantitative analyses ( gravitation theoretical account. CGE theoretical account and GTAP ) argues that the weaker economic systems in the SAARC part are expected to lose significantly from the SAFTA understanding. at least in its current signifier.

The survey shows that the losingss for the weaker economic systems. peculiarly for Bangladesh and Nepal. arise from increased imports from regional spouses. nominal addition in exports within the part and loss of duty gross. Consequences of appraisal carried out in this survey based on WITS/SMART simulation. are similar to that of Bandra and Yu ( 2003 ) . and shows that SAFTA will take to an addition in Bangladesh imports from the part of about USD 400 million compared to lift in regional exports of merely about USD 33 million. Consequences of the survey besides show that merely India stands to see regional export additions that would be higher than imports from regional beginnings.

The gravitation simulation consequences suggest that SAFTA would act upon regional trade flows chiefly by increasing India’s exports. and Bangladesh and Nepal’s imports. For every USD 100 worth of new export trade about USD 78 would accrue to India. whereas portion of Bangladesh. Maldives and Bhutan would be undistinguished. The writers recommend that LDC members of the SAFTA should go on with their several policy reforms. and will necessitate to turn to supply-side constrictions in order to profit from the progressively larger regional market.

In another survey. Raihan and Razzaque ( 2007 ) ran two different simulations utilizing the GTAP theoretical account and database. In the first scenario. the writers depict a instance in which all member states eliminate their intra-regional duties but retain their several duties with the remainder of the universe intact. In the 2nd scenario. in add-on to SAFTA duty cuts. the writers let Bangladesh cut down its duties against the remainder of the universe by 50 per cent. Comparisons of the assorted scenarios give an chance to analyze trade recreation effects when finding the overall public assistance effects for Bangladesh. The consequences show that full duty liberalization under SAFTA entirely would take to a net public assistance loss of USD 184 million for Bangladesh India. Sri Lanka. and the remainder of South Asia in this scenario registry public assistance additions. as trade creative activity effects dominate trade recreation effects.

However. when Bangladesh undertakes MFN ( most favoured state ) duty cuts by 50 per cent along with the full duty liberalization for SAFTA members. it stands to derive by USD 84. 1 million. In the latter exercising. the positive public assistance additions of other states were maintained. ADB and UNCTAD ( 2008 ) finds that the public assistance additions. based on CGE analysis. for Bangladesh are likely to be one of the highest. Harmonizing to the survey. export additions for Bangladesh in SAFTA market under the phase?I of liberalization ( 2008-09 ) would be important ( 38. 08 per cent to South Asia ) . but non every bit high as the peak export growing to SAFTA seen by other states. The survey farther contends that Bangladesh will be able to increase her planetary exports by about 4. 3 per cent by 2016 on history of SAFTA. A figure of writers have highlighted the importance of better regional connectivity to further and advance intra-regional trade and intensify economic cooperation among the regional states.

Rahmatullah ( 2010 ) points out in this connexion that due to miss of integrating of the conveyance system in South Asia. logistics costs are really high and ranges between 13?14 per cent of GDP. compared to 8 per cent in the US. Whilst many surveies have focused on aggregative degree additions and losingss arising from regional cooperation among SAARC states. those concentrating on placing possible chances of bilateral trade between Bangladesh and India. at a disaggregated degree. as was pointed out above are few. Additionally. in position of the rapid alterations in the construction of bilateral trade in recent times. a closer expression at the relevant issues has become even more pressing. Since the sensitive lists have emerged as a major country of concern. an in?depth expression at the Indian sensitive list. from the Bangladesh position. is besides called for in order to place the autumn chances of market entree by Bangladesh in the Indian market.

The issue of subscribing bilateral FTA as a more comprehensive and rapid tool of heightening trade among SAARC states has been highlighted by a figure of writers. de Mel ( 2010 ) points out in this connexion that negative lists of India. Pakistan and Sri Lanka are well larger than those in the several bilateral trade understandings. Repeating this. Weerakoon ( 2010 ) observes that SAFTA has already been overtaken by bilateral procedure in many cases. and would look to be in danger of being farther upstaged by bilateral and other regional enterprises.

A reappraisal of literature therefore. in general indicates that under the bing scenarios the possible benefits arising from regional trade cooperation among the SAARC states would non be significant. Bangladesh’s additions besides appear to be inconsequential. The thought of bilateral FTA has been examined by some. but here besides the positive impact in footings of extra trade flows is instead bound. However. one common restriction of most of these surveies had been that these are based on inactive analysis. One manner of turn toing this is to analyze and analyze the informations with respect to the kineticss of trade. its composing and seting under scrutiny factors lending to and factors restraining the trade flows.