Impacts of South Asian Free Trade Agreement on global value chains’ participations in South Asia: A structural gravity trade model analysis

Batool Bushra and Hiroyuki Taguchi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study aims to examine the impacts of South Asian Free Trade Agreement (SAFTA) on global value chains (GVCs)’ participations in South Asian economies (Bangladesh, India, and Pakistan), by applying a structural gravity trade model and using the Trade in Value Added database (TiVA 2023) of the Organization for Economic Cooperation and Development (OECD). The study contributes to the literature by enriching the evidence on the nexus between SAFTA and GVCs in South Asia, whereas previous works have rarely addressed the issue. The study found that the SAFTA has facilitated the GVC backward participations in terms of the increases in the foreign value added (FVA) inputs from India in the exports of Bangladesh and Pakistan and the FVA input from Pakistan in Bangladesh’s esports. The policy implication is that there should be much room to explore the GVC activities in South Asia because the other bilateral GVC linkages have been still sluggish.

Keywords: South Asian Free Trade Agreement (SAFTA); global value chains (GVCs); GVC backward participations; structural gravity trade model; the Trade in Value Added database (TiVA 2023) (search for similar items in EconPapers)
JEL-codes: F13 F14 O53 (search for similar items in EconPapers)
Date: 2025
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