Intra-regional trade
We estimate trade gains from regional integration with a focus on collective programs
in capacity building within South Asia according to the simulation method used in
Otsuki (2011). This simulation method predicts trade gains to the region as a whole, as
well as gains to each country by projecting the assumed change in trade facilitation
indices to trade gains based on the estimated parameters. The trade gains to a country
can be decomposed into the trade gains from improvements by the country alone
(unilateral action) and trade gains from improvements by trading partners (partners’
action). In this sense, it can be said that the total trade gains come from collective
actions by a country and its trading partners.
The average performance of the entire world is set as a goal for the South Asia
region. We will set the target level at half the global average. Table I indicates that the
total estimated trade gains from capacity building in all four categories of trade
facilitation are approximately $1,079 million in 2007 and $1,475 million in 2010; this is
almost a 21 and 17 percent rise in total intra-regional trade in South Asia, respectively.
The projected trade gains from both unilateral and partners’ capacity building
are significant. The country with the largest projected trade gains in South Asia is
India and is $726 million. Capacity building in the regulatory environment contributes
the most to those gains. Sri Lanka gains the most from other South Asian countries’
capacity building relative to gains from its own actions. This is because Sri Lanka has
relatively high scores in the indicators, which suggests more limited improvement
needed to reach global levels.