JBS Vol 25. Num 1. 2023. Article 3 - A Note on Intra-RTA Trade Ratio and South Asian Regional Integration

There is scant theoretical support for a robust positive relationship between economic growth and regional trade. The existing empirical evidence is also mixed and inconclusive. There is much difference in the intensity of economic integration of the countries in various regional trade areas (RTAs). The Intra-RTA trade ratio is often used as an index of the intensity of regional economic integration among the member countries of an RTA. This note demonstrates that it is not an unambiguous or reliable indicator of the intensity of regional integration for an entire RTA or each individual member country of a given RTA. Hence, much caution is needed when using this ratio to support or advance important trade and economic policies such as greater regional integration. It is not advisable to deploy scarce resources for such uncertain projects when more productive development alternatives may need financing.