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4 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA<br />
equilibrium (CGE); gravity model; SMART (software<br />
for market analysis and restrictions on trade) model;<br />
and panel data estimations have been employed. The<br />
fact that some of the policy scenarios have already been<br />
set (and in fact implementation of them has already<br />
commenced), adds to the greater precision with which<br />
the global trade and analysis project (GTAP) model can<br />
be used as a predictive tool.<br />
Given the various issues of trade and transport<br />
facilitation in South Asia, a quantification of gains from<br />
identified regional infrastructure projects using benefit<br />
cost analysis (BCA) is undertaken. Although regional<br />
in nature, the benefits are computed for the country<br />
which is undertaking the project on its territory to<br />
demonstrate the extent of benefits that can accrue. The<br />
four projects include: Upgrading of the Kolkata-<br />
Petrapole/Benapole corridor and Customs Facilities;<br />
Development of Bagdogra Airport as a Gateway and<br />
Hub; Railway Improvement at between Lahore and<br />
Wagah; and Colombo Port Expansion.<br />
There is also the view that in the new generation of<br />
free trade agreements (FTAs), services, investment, and<br />
rules (SAFTA++) are the key to the way in which<br />
countries gain through region-wide organisation of<br />
production and sourcing. 1 This study also examines<br />
the SAFTA++ scenario under which it identifies sectoral<br />
and modal comparative advantages in trade in services<br />
of each of the member countries and determines the<br />
extent to which complementarities exist. This is<br />
corroborated with the analysis of the service sectors in<br />
which cross-border trade potential exists and trade<br />
restrictions prevent in actualising this potential. Further,<br />
the study examines the potential for trade as well as<br />
the ways of accelerating the existing trade. Detailed<br />
analysis is undertaken for identified services sectors,<br />
which are health and related services, higher education,<br />
construction and related services, travel and tourism<br />
related services and telecommunication services. The<br />
possibility of mutual recognition agreements (MRAs)<br />
in these service sectors has been explored which may<br />
boost the trade in services within the SAFTA region.<br />
The study attempts to measure both qualitative and<br />
quantitative assessments of the outcomes in the affected<br />
sectors. Apart from providing a prognosis, the study<br />
will help in the formulation of concrete policy measures<br />
that will ensure more gains and mitigate potential<br />
negative impacts. Based on the existing domestic policies<br />
of the countries under review, suggestions have been<br />
made on what complementary measures could be<br />
introduced to mitigate the negative impacts and enhance<br />
positive impacts of SAFTA. The study provides economic<br />
assessments using analytical tools and rational<br />
causal chain analysis and clearly outlines the way<br />
forward for SAFTA in terms of policy directions.<br />
The study is organised as follows: The rest of the<br />
chapter provides the background of SAFTA and prevailing<br />
economic situation in the member countries with<br />
some discussion on the existing trade regimes. Chapter<br />
2 presents a review of literature and the debates on the<br />
rationale for SAFTA. It discusses both qualitative as<br />
well as quantitative studies undertaken with respect to<br />
regional cooperation focusing on SAFTA.<br />
Chapter 3 estimates a number of indices that<br />
indicate the extent and change in the competitiveness<br />
and complementarities between member countries of<br />
SAFTA to arrive at the economic rationale for SAFTA.<br />
Chapter 4 estimates the impact of SAFTA on trade in<br />
the region. Using the negative lists of member countries<br />
of SAFTA it presents results of the impact of different<br />
SAFTA scenarios on effective additional market access<br />
that will accrue to the member countries with SAFTA.<br />
Chapter 5 estimates the gravity model to arrive at the<br />
potential trade that may be achieved due to SAFTA for<br />
the region as a whole and also for each member country.<br />
Bilateral trade potentials are also estimated. The chapter<br />
further highlights the extent of increase in trade by<br />
removal of tariffs and non-trade barriers.<br />
Chapter 6 uses GTAP analysis to estimate the<br />
impact of different scenarios of SAFTA. The impact is<br />
analysed on exports, imports, output change,<br />
employment change and welfare change. Sector-wise<br />
impact analysis is also undertaken and sectors where<br />
each member-country will lose or gain are identified.<br />
Chapter 7 estimates the costs of SAFTA in terms of<br />
revenue loss to each member country. SMART simulations<br />
have been used which also indicate the extent of<br />
consumer welfare gain or loss. Chapter 8 analyses<br />
impact of deepening of SAFTA by inclusion of investments.<br />
Impact of regional cooperation through SAFTA<br />
on inward foreign direct investments (FDI) has been<br />
estimated. Chapter 9 provides results with respect to<br />
quantification of benefits from transport facilitation<br />
1<br />
The point is important, because it has also been argued that to the extent that the New Regionalism in Latin America and<br />
elsewhere is significantly about these deeper aspects of integration, the traditional analysis of costs and benefits of RTAs,<br />
which focus mainly on barriers at the border, while ignoring differences in national institutions and domestic regulations, is<br />
seriously deficient.