Should Bangladesh Join a Regional Free Trade Area?

Abstract

Suppose a regional preferential trading agreement (PTA) is to be formed and a particular country is invited to join. Should it do so? This question arises for Bangladesh in relation to a proposed PTA based upon the BIMST-EC country grouping of Bangladesh, India, Myanmar, Sri Lanka and Thailand. This paper examines the case for Bangladesh joining such a PTA. It is concluded that the net gains from doing so would be very small. There are two reinforcing aspects to this point. The first is the relatively small levels of intra-regional trade between Bangladesh and the other BIMST-EC countries. Although these trade volumes would almost certainly increase under a PTA, they may not do so sufficiently to make the benefits economically significant. The second aspect is that the pattern of trade between Bangladesh and the other BIMST-EC countries suggests that they are not natural trading partners. The trade-creating effects that generate net benefits may be especially small. There may be other strong reasons for forming a PTA among these countries, resting mainly on political considerations, but significant trade-related gains should not be expected.