Positive & Negative Impact of Safta on Bangladesh

Topics: International trade, Free trade, South Asia Pages: 6 (1862 words) Published: December 18, 2012
6. 0. Positive Impact of SAFTA in Bangladesh

I. Increases Bangladesh’s Trade Volumes with SAARC
The volumes of imports from SAARC countries as well as the exports of Bangladesh to SAARC countries from fiscal year 1997/98 until fiscal year 2007/08 is provided in following (Table-1) and graphically illustrated in Figure 1. Clearly, as part of the overall increase in trade volumes, Bangladesh’s exports to SAARC countries have grown moderately and Bangladesh’s imports from SAARC countries have increased significantly, both in nominal terms.

Table: 1-Bangladesh's Exports & Imports with SAARC Countries & Rest of the World (In million of US$, unless otherwise indicated)

The first important observation is that SAARC plays a very marginal role in Bangladesh’s exports. The share of Bangladesh’s exports to SAARC amounts to less than 4 percent of Bangladesh exports to the rest of the world. The shares are slightly more significant for imports, amounting to just below 12 percent for fiscal year 2007/08, but are still not as high as one might have expected. Second, the shares of imports and exports have grown only marginally over the ten year period: a) for exports from 2.4 percent to 3.3 percent, b) for imports from 13.8 percent to 18.1 percent, and c) for the sum of exports and imports from 9.1 percent to 11.6 percent.

II.Employment Opportunity and Poverty Reduction
If the markets are opened and prices are determined by the demand and supply factors, then the consumer stands to gain supremely as he would get the best prices. Since the demand would be more given that the number of consumers is greater than the number of producers, the supply would also increase or would encourage new producers from entering the market. This would mean that more people would be employed as factors of production will also be needed. Since more number of people will be employed, the standard of living and the over all levels of poverty will decrease in its absolute sense.

III. Free Market Economy Members
Due to absence of trade barriers, any producer can enter the market to supply the good as long as he has the factors of production, this means that the market will be a perfectly competitive one and the prices will have to match up to the other producers. This in return will result in no one producer having monopoly and no producer will be able to exploit the consumer by charging extremely high prices.

IV. Producer-Consumer Merits

SAFTA as the free trade area will encourage producers to enter the market, the consumer will be ultimately benefited as there would be a wide variety of choice from which he can choose.

V. Strengthen National Economy
The overall increase in production and general welfare also boosts the economy of the nation. It is a well established fact that the increase in trade has also led to better relations between nations of the SAARC Countries.

7.0. . Negative Impacts of SAFTA on Bangladesh on the Context of some Factors Some qualitative and quantitative assessments of SAFTA and its implications on the Bangladesh economy and the result is that there are conflicting arguments on the success of SAFTA as well as on whether Bangladesh would stand to gain from SAFTA. The rigorous economic analysis tends to come to the conclusion that Bangladesh may not be able to gain much within the existing ‘trade in goods’ based agreement and that the possibility of a large trade diversion for Bangladesh under the full implementation of the existing SAFTA agreement is high.

I. Trade Restrictions
There are various trade restrictions that can help to understand why SAFTA has not increased trade as might be desired among its members. First of all, there remain some tariff rates within SAFTA, which are higher than in any other RTAs. Second, there are many non-tariff barriers and many problems arise for these.

II. Lack of Trust
There is a lack of trust among the SAARC businessmen. While little is...
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