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Submitted by Wahiduddin Mahmud on

A timely article. The way forward for SAFTA does not lie in continued bargaining about which items to be excluded or included in the free trade lists; it will require above all creating a mindset for sacrificing narrow short-term business interests for a greater good. Any effective free trade arrangement is meant to create greater regional trade opportunities for industries which have comparative advantage within the region at the cost others which does not. An arrangement that wants to appease each and every business interest is liable to create only harmful “trade diversion” (replacement of lower-cost imports from rest of the world by higher-cost regional imports) rather than beneficial “trade creation” (expanded trade within the region based on comparative advantage of the regional trade partners). Given the asymmetric large size of the Indian economy within SAFTA, the other regional partners are more likely to have comparative advantage in the Indian market in particular items of the supply chains of an industry rather than in the entire industry. Allowing free trade, for example, in the supply chains in the textile industry – from raw cotton to ready-made garments – will be a good step in strengthening a “trade-creating” SAFTA.