The Trade Effects of a South Asian Customs Union: An Expository Study

Abstract

The paper estimates the static trade effects of a customs union comprising Bangladesh, India, Nepal. Pakistan and Sri Lanka. Although these effects arc found to vary between countries, for the region as a whole the trade-creation effects appear to be greater than the trade-diversion effects. Despite their smallness, the direct ion of the change indicated by the static results seems encouraging to possible attempts at the formation of a customs union among South Asian countries.