The Uruguay Round and South Asia : an overview of the impact and opportunities

South Asia remains less liberal in trade policy than East Asia, including China. The Uruguay Round's most dramatic effect on South Asia will be the removal of non tariff barriers on the region's exports to the rest of the world. The proportion of South Asian exports to the OECD under non tariff barrier coverage will be reduced drastically, from 47 percent to only 6 percent.Majd examines the impact of the Uruguay Round on four South Asian countries with similar trade structures: Bangladesh, India, Pakistan, and Sri Lanka.These countries are major exporters of textiles and clothing and some agriculture. Their manufacturing sectors, especially textiles and clothing, would seem to be the main beneficiaries of the Round. The impact on agriculture should be modest.The Round improves market security for both exporters and importers, but these countries must do much more to adjust their domestic policies to the realities of the post Round global environment. There must be further liberalization and more integration with both the region and the world.The trade regimes of the four countries are a mixed bag. All have launched major trade reform away from an inward orientation. They have liberalized trade by removing quantitative restrictions and reducing tariffs, but the degree of liberalization varies.India has done a lot to open up its economy but has not moved forcefully enough to remove restrictions on most imports of consumer goods. Pakistan retains heavy restrictions of many imports but is reducing tariff rates and their dispersion. Quantitative restrictions on imported inputs impede efficiency in Bangladesh textile and pharmaceutical industries. Sri Lanka's trade regime is the most liberal in the region, but anomalies still exist in incentives.Binding tariffs in the four countries must be greatly reduced before these countries can benefit from the Round's disciplines in agriculture.The dismantling of the Multifiber Agreement will increase South Asia's output of textiles by 17 percent, and their exports of textiles by 26 percent. Output on clothing will increase ninefold, and exports more than twentyfold. The region may also benefit from the more liberalized post Round markets for semi manufacturing exports.In general, negotiations about new issues trade in services, trade related aspects of intellectual property rights, and trade related investment measures < will affect South Asia in different ways. The impact on the movement of labor, in which the region has a comparative advantage, seems to be more effective than in other areas. More disciplined rules to protect intellectual property rights and more transparency about investment and competition policies will benefit the region in the longer run.This paper a product of the International Trade Division, International Economics Department is part of a larger effort in the department to monitor and advise on the regional aspects of trade policy. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jennifer Ngaine, room R2052, telephone 2024737947, fax 2026761341, Internet address [email protected] (44 pages). The full report is available on the World Bank FTP server