ABSTRACT
For many years after their independence the trade policies of the South Asian countries were inward-looking and highly interventionist.1 Trade liberalization started in Sri Lanka during 1977 with a sharp devaluation and a series of sweeping trade policy reforms. Gradual reform got under way in the rest of South Asia about 10 years later during the second half of the 1980s, and continued into the 1990s. During this period most QRs were removed, tariffs reduced and exchange rate regimes liberalized. In India, Pakistan, Sri Lanka and Nepal this process continued from the second half of the 1990s and during the first five or so years of the 2000s, albeit unevenly and with backtracking episodes along the way. In Bangladesh, however, a major reversal of its earlier trade liberalization started in 1997 and continued during the first decade of the 2000s. The main features of the trade policies of the South Asian countries are fairly well docu-
mented in existing literature until about 2005, but less is known about the years after 2005. This period is of special interest as it includes the post-2003 world economic boom, the global financial and economic crisis of 2008, and the dramatic spikes, collapses and partial recoveries of the world prices of crude oil and many mineral and agricultural commodities that occurred during 2007-10. In all the South Asian countries industrial trade policies differed in many ways from agricultural trade policies, and this was especially apparent during this period. In India, a long-run liberalizing trend in its industrial trade policies that started in the second
half of the 1980s was not derailed during the global crisis years. Subject to some important caveats, by 2007 and still in 2010 India’s manufacturing sector was open to imports over low tariffs, highly competitive by world standards, and increasingly export oriented. But from the beginning agricultural trade policies were left out of the reform process, and this became especially apparent during 2007-9 when many major ad hoc changes were made in response to domestic political objectives. By contrast with India’s liberal stance on industrial trade policies, during the 2007-9 crisis years
earlier liberalizing reforms affecting both industry and agriculture were badly set back in Sri Lanka, Bangladesh and Pakistan. This change was most extreme in Sri Lanka, which reversed twenty years of moderately open trade policies and in the course of a few years emerged with some of the world’s most protective import policies. Bangladesh continued and broadened its policies of very high tariff protection for selected import substitution consumer good industries that had started in about 1997. Pakistan’s trade liberalization process also went backwards during the
crisis years, but less than in Sri Lanka and Bangladesh, and subject to the potential (but yet to be evaluated) trade liberalizing effects of a bilateral FTA signed with China in 2006. The next section discusses some aspects of their trade policies that are relevant for all the
South Asian countries and the following section then outlines the main trade policy developments that have occurred in India since the mid-1980s. Brief summary accounts follow of how trade policies have evolved in Pakistan, Bangladesh, Sri Lanka and Nepal over the same period, paying special attention to the changes made during the 2007-9 crisis years. The final section concludes with some speculations about likely future developments.
