IV - Intra-Regional Trade

Summary

Historically, primary commodities from the region have been exported to developed country markets. Countries such as India, Pakistan, Sri Lanka and Malaysia were under Western domination till the end of World War II, and they were suppliers of cheap raw materials to the colonial masters. This trade pattern continued even after their independence. Even now a good proportion of the region's primary commodities are exported to them. The only new additions are Japan and the newly industrialized countries. However, as the economic upheavals during the last two decades would have shown, reliance on only the traditional developed markets may be disadvantageous.

An alternative is to concentrate on trade among primary commodity producer countries themselves. Countries of South Asia and ASEAN taken as a unit comprise a huge market. Their total population of about 1.33 billion in 1987 makes it a viable unit for concentrated marketing activities. Moreover, the populations of most of these countries are increasing. Although per capita GNP of some countries such as Bangladesh and Bhutan are low. with the ongoing development plans, they are expected to increase. Their income elasticity of demand for most primary commodities except for essentials such as rice is high. In other words, demand for the commodities is expected to grow fast as incomes increase. The close proximity of these countries could result in transport being cheaper and quicker. Moreover, consumer habits and tastes in these countries are uniform. The sophisticated packaging and health requirements which exporters need to comply with in developed markets are relatively unknown here. Hence countries in the region could realize these advantages inherent among themselves and endeavour to increase trade. Increased trade could be either bilateral or multilateral. Bilateral deals and special trading arrangements for primary commodities or otherwise are nothing new to these countries. Therefore, as a matter of policy, at the highest levels of government, they could grant priority to primary commodity trade between regional countries.

However, present trade in primary commodities among countries in the South Asia-ASEAN region is not at encouraging levels.