Nominal and per capita GDP was derived from the IMF`s global economic outlook and the World Bank`s global development indicators database. Distance data were obtained by Haveman (2006) or calculated directly with the great circle distance method. Although the data set had the potential for 18,252 observations, information on tariffs and import flows is subject to scarce information (Anderson and van Wincoop, 2004, provide an overview of trade and trade barrier restrictions). The number of complete observations available is 3,739.22 The GTAP database used in the document includes Bangladesh, India and Sri Lanka as individual countries and an aggregator called Rest Von South Asia. 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. The paper focuses on the impact of SAFTA`s BPL program. The estimates presented here therefore provide a partial view of the overall impact of SAFTA.
However, by focusing on this homogeneous and directly quantifiable component, it is possible to compare this agreement with other hypothetical IFCs and assess the benefits of SAFTA over the alternative of looking outside the region to conclude trade agreements. Although the initial reduction in tariffs by the TLP is small, achieving the medium-term objectives of the agreement would require substantial reductions, particularly from Bhutan and the Maldives. Overall, the initial requirement to have tariffs of less than 30% (LDCs) and 20% for non-LDCs by 2008 would have a minor impact. However, the final target of a maximum tariff level of 5% will mean a reduction in the average tariff rate of between 2 and 3 percentage points for Sri Lanka and Pakistan to 16 to 18 points for Bhutan and the Maldives (i) THE SA-NAFTA would likely lead to the lowest revenue loss, i. with the exception of India and Pakistan; and (ii) its effects would be heterogeneous, ranging from 0.01% of GDP for Bhutan to 0.2% for the Maldives. Such an uneven distribution of revenues is far from the existence of an exclusive agreement with NAFTA, since SAFTA`s TLP, as currently designed, produces the most diverse effects. Generally called CGE (Computable General Equilibrium) or GTAP. The latter refers to the use of GEMPACK programming language in the model and data source solution.
See www.gtap.agecon.purdue.edu/. The most recent examples are the World Bank (2004). Regional trade agreements refer to a treaty signed by two or more countries to promote the free movement of goods and services beyond the borders of its members. The agreement contains internal rules that Member States comply with each other. As far as third countries are concerned, there are external rules to which members comply. Two basic specifications of the gravitational equation are included in equations 1 and 2.