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At present, South Asia has a low degree of regional integration – particularly among its largest members – and the existence of relatively high trade barriers. The share of origin trade in the region has increased over the past decade, but remains lower than that of ASEAN. While Bangladesh, India and Pakistan support 5% of their exports and 21.2% of their imports with regional partners, the smaller members (Bhutan, Nepal, Maldives and Sri Lanka) are more dependent on local trade relations, with an average of 20% and 9% on average for imports and exports8. , india has reduced its average customs level by about 20 percentage points over the past eight years. However, there is considerable scope for liberalization, as the seven countries continue to put in place tariff barriers that are higher than ASEAN and more3. In the literature, it is also common to use exports or all bilateral trade (exports and imports). The RTA negotiations generally involve the communication of divergent interests between Member States and the simulations show that the decision on new trading partners is no exception (Table 2). For some of these countries (notably Bhutan and Nepal), regional trade is their main trading channel and SAFTA represents the largest increase in trade flows they could expect from an IPA menu. Due to the unusual importance of asean countries, the Maldives is an interesting case for their trade flows and would experience the largest increase in trade flows from an expansion to this bloc. If a country`s objective was to minimize trade imbalances, SA-NAFTA would be supported by Bangladesh, Sri Lanka and the Maldives; SAFTA would be preferred by India and Pakistan. SAFTA exports have experienced a strong upward trend since the launch of the Trade Liberalization Programme (TLP). Since the launch of the SAFTA trade liberalisation programme (July 2006), the total value.b of Member States` exports under the SAFTA programme has reached about $3 billion on 20 September 2013.

Nevertheless, intra-SAARC trade flows under SAFTA are well below potential. To ensure the proper functioning of the SAFTA, customs declarations relating to the implementation of the trade liberalisation programme (TLP) are drawn up in accordance with the timetable agreed by the Member States. While the reduction in the size of sensitive lists is important to increase the amount of regional trade, efforts are being made to remove products from sensitive lists that are export interests to ASAC Member States for trade in South Asia. The variation in customs revenues (negative in all ATRs) would probably be far from uniform. Given the sharp increase in South Asian imports from NAFTA, an agreement would have the second least significant impact on customs revenues. On the other hand, the apparent indifference to tariff changes on plus 3 products supports the conclusion that extending an agreement to China, Hong Kong SAR, Japan and Korea would, on average, result in the greatest customs losses for the region. In summary, each of these hypothetical SAFTA « enlargements » is a trade-key trade-in-trade agreement, customs revenues and the trade balance. SAFTA would, as currently agreed, result in the lowest losses in customs revenue, but at the cost of the smallest expansion in trade flows. The size of the variables added indicates a potential distortion of selection and, indeed, the results argue that pairs of countries offering full distribution trade are significantly below average (Table I.2).

While these effects on trade volume need further study, it is important to note that the sensitivity of these quantities to tariff reductions in each block is not significantly affected.