Regional trade and economic integration in South Asian political economy perspective: implications for Southeast Asia Open Access

Regional trade and economic integration have been pivotal in driving economic growth and development across Asia. While Southeast Asia has made significant strides through initiatives like the Association of Southeast Asian Nations (ASEAN), South Asia’s progress has been comparatively modest. The South Asian Association for Regional Cooperation (SAARC) has faced challenges in fostering deep economic ties among its member nations, resulting in intra-regional trade accounting for only about 5% of the region’s total trade, in contrast to ASEAN’s 35% (World Bank, 2016). This disparity underscores the potential benefits that enhanced integration in South Asia could bring, not only to its economies but also in strengthening links with neighbouring Southeast Asia.

Strengthening economic ties between South and Southeast Asia presents opportunities for mutual growth and development. Enhanced connectivity can facilitate increased trade flows, attract foreign direct investment, and promote participation in global value chains. For instance, the World Bank highlights that deepening integration between these regions can expand trade and promote digitization and environmental protection in South Asia (World Bank, 2022). Moreover, initiatives like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) aim to bridge South and Southeast Asia, fostering collaboration across various sectors. By addressing existing barriers and leveraging complementarities, both regions can achieve more robust and inclusive economic growth.

South Asia, comprising Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, Sri Lanka, and Afghanistan, is collectively part of the South Asian Association for Regional Cooperation (SAARC). Covering about 5.2 million square kilometres—roughly 11.7% of Asia or 3.5% of the world’s land area—the region launched the SAARC Preferential Trade Agreement (SAPTA), later evolving into the South Asian Free Trade Area (SAFTA) in 1995 and 2006. These agreements aimed to liberalize trade by reducing tariffs, initially by 20% and eventually to zero. Yet, South Asia lags in regional integration, with far fewer free trade agreements compared to East Asia’s 133 FTAs. Research consistently shows low intra-regional trade, hindered by weak trade facilitation, inefficient customs and border procedures, inadequate transport infrastructure, and high transaction costs. Persistent mistrust limited comparative advantages, and poor connectivity further constrains regional economic cooperation.

South Asia faces complex security challenges and persistent inter-state tensions rooted in historical and political contradictions. These political disputes often hinder regional cooperation, preventing economic interests from taking precedence (UNCTAD). This study examines general and bilateral trade patterns among South Asian countries between 2000 and 2024, highlighting how political hostility continues to obstruct cross-border commerce. It also explores the evolution of trade ties in Southeast Asia, drawing comparisons while addressing intra-regional conflicts and growing financial dependencies on China (Guotu & Wangbo, 2010). SAARC can get proper directions from ASEAN, which was established in 1967 (Chaudhary, 2022).

This study aims to identify the existing bilateral intra-regional trade tightness among South Asian countries, examining the key barriers and structural limitations that hinder effective trade integration. It further seeks to explore the influence of political economy dynamics on regional trade issues, including how domestic and international political factors shape trade relationships. Based on these findings, the research will develop policy recommendations to enhance trade cooperation and integration among South Asian nations. I will also examine how the South Asian experience holds implications for Southeast Asian countries.

The present study has followed a mixed approach (both qualitative and quantitative). For measuring trade tightness among South Asian countries, the following equation has been used. Wij refers to the trade tightness of country i with its trading partner, country j; Xij are the exports of country i to country j; Xi are the total exports of country i; Yj is country j’s total imports; and Yw is total global imports.

According to Hu (2017), the trade tightness index could be used to analyse cooperation with Eurasian Economic Cooperation (EEC) countries. Researchers used the trade connectivity index, which refers to the level of trade relations between countries; the highest is 100, while the lowest is zero.

The trade data including, the export and import of selected countries, has been used in this study for analysing data. All data has been collected from the UNcomtrade database and World Integrated Trade Solutions (WITS) databases. All the South Asian countries, namely Afghanistan, Bangladesh, Bhutan, India, Pakistan, the Maldives, Nepal, and Sri Lanka, are sample of this study.

In Figure 1 we have illustrated the general trade links between the South Asian countries (Bangladesh, India, Pakistan, Sri Lanka and the Maldives). The South Asian countries generally exhibit varying degrees of trade complementarities. Some countries, such as Sri Lanka, India, Bangladesh, Pakistan and the Maldives, have trade linkages of less than 0.5%. On a scale of 0 to 100, this is a very low value. Nevertheless, Bhutan has the highest value of all South Asian countries at 4. However, the country’s trade is declining by 1.89%. If a sub-region has better trade connectivity, then it has lower rationality for international trade, but if it has lower intra-regional connectivity, then it might be possible and to some extent obvious to participate in international trade.

Nepal, Bhutan, and Afghanistan are excluded from the figure due to missing or outlier trade data. However, our calculations indicate that these countries maintain overall trade linkages of over 3.7% with other South Asian nations. This aligns with existing literature; a recent SAARC report notes Bhutan’s comparatively strong regional trade ties, while Afghanistan and Nepal show above-average trade complementarities within South Asia. Nevertheless, country-level variations persist and are discussed in the subsequent analysis.

As shown in Table 1, these countries have relatively few trade agreements. India stands out with stronger trade linkages and formal agreements across the region. Since SAARC’s establishment in 1985, efforts have been made to foster economic integration. This began with SAPTA, leading to SAFTA, and included commitments to reduce tariffs and build a customs union. India agreed to lower tariffs on 106 out of 226 products, while Pakistan provided concessions on 35 tariff lines. The region envisioned deeper integration by harmonising economic policies, dismantling trade barriers, and progressing toward a political union. A phased tariff reduction plan aimed to bring tariffs below 5% across all member states by 2018 (Batool & Javaid, 2018), though progress has been uneven due to political and structural constraints.

Regional trade and economic integration in South Asia have been shaped significantly by political economy factors, ranging from historical grievances and territorial disputes to asymmetrical power dynamics. While economic complementarities and geographic proximity should logically drive intra-regional trade, the region remains one of the least integrated in the world. Intra-SAARC trade remains around 5%, compared to 26% within ASEAN (ADB, 2022). This contrast presents a compelling basis for comparison between South and Southeast Asia, highlighting how political economy considerations have led to divergent outcomes.

In South Asia, regional integration initiatives such as SAARC, SAPTA, and SAFTA have largely underperformed due to mutual distrust, power asymmetry (particularly India’s hegemonic position), and frequent political tensions, especially between India and Pakistan (Kelegama, 2004). In contrast, Southeast Asia’s ASEAN has demonstrated stronger institutional cooperation, effective multilateralism, and pragmatic diplomacy that have fostered deeper integration. For instance, initiatives like the ASEAN Free Trade Area (AFTA) and the ASEAN Economic Community (AEC) have helped reduce tariff barriers and promote supply chain connectivity across member states (Nesadurai, 2003).

The success of ASEAN lies partly in its norm of “non-interference” and consensus-based decision-making, which has facilitated cooperation even among politically diverse regimes (Acharya, 2001). South Asia, however, suffers from the politicisation of trade and deep-rooted historical animosities that spill over into economic relations. For example, Pakistan’s suspension of trade with India in 2019 due to the Kashmir dispute illustrates how political tensions disrupt economic cooperation (Hossain & Duncan, 1998).

Nonetheless, there are signs of convergence. Cross-border infrastructure projects such as the BBIN Motor Vehicle Agreement (Bangladesh, Bhutan, India, Nepal) and port development in Bangladesh (e.g. Chittagong and Mongla) are examples were sub-regional cooperation mimics ASEAN’s pragmatic, connectivity-focused model (Rahman, Moazzem, Chowdhury, & Sehrin, 2014; Rahman, Bari, & Eusuf, 2014). These efforts suggest that South Asia could benefit from adopting elements of the ASEAN model, particularly depoliticising trade, enhancing institutional capacity, and promoting trust-building measures.

For decades, trade has served as a key instrument for development, prompting countries to form Regional Cooperation Agreements (RCAs) to advance political, economic, and social goals. These agreements are influenced by public preferences, interest group pressures, and theoretical perspectives. From a power-centred view, states pursue RCAs to enhance national security and strategic interests. In contrast, institutionalist approaches emphasize economic integration to address collective action problems and international challenges (Desai, 2010).

Economists argue that comparative advantage, not just geographic proximity, drives regional integration, alongside cultural cohesion, trade infrastructure, and cost structures (Andrei, 2012). In South Asia, limited intra-regional trade persists due to political barriers and poor facilitation. Trade liberalisation, often seen as a tool for growth, aims to remove tariff and non-tariff barriers, potentially increasing a country’s trade-to-GDP ratio by 5% points (Acharya, 2015). However, scholars remain divided: while liberalisation can enhance trade volumes, it may not lead to diversification (Ali & Talukder, 2009), and its benefits can be offset by trade diversion (Magee, 2008). For developing nations, liberalisation also raises concerns about unequal treatment by industrialised economies, which leverage structural advantages and voting power to shape trade flows.

In this context, regionalism may offer more equitable outcomes. Bilateral and regional trade agreements can generate stronger and more inclusive trade gains (Low, 2004). Batool and Javaid (2018) outlined the sequential phases of regional economic integration, relevant to South Asia’s evolving trade architecture. The SAARC initiative to establish the South Asian Free Trade Area (SAFTA) aimed to reduce intra-regional trade barriers and decrease reliance on industrialised partners (Sultana & Asrat, 2015). Yet, despite such efforts, intra-SAARC trade remains around 5%, constrained by complex regulations, political tensions, and structural inefficiencies (Kher, 2012; Sultana & Asrat, 2015).

Trade policy in South Asia is closely tied to foreign policy and national security considerations, with liberalisation and protectionism shaped by both economic self-interest and broader social imperatives. As outlined in Figure 3, these dual perspectives—strategic economic interests and collective social concerns—form the basis for countries’ trade policy decisions.

Efforts to promote regional economic integration in South Asia have led to the formation of SAARC, SAPTA, and subsequently SAFTA, aiming to reduce trade barriers and establish a free trade area. A two-tier tariff structure was introduced to facilitate this process, marking a step toward a potential customs union. Figure 2 illustrates the stages of integration, which, according to Batool and Javaid (2018), include harmonising policies, removing trade barriers, and ultimately achieving political union. However, regional conflicts, mistrust, and divergent national interests have hindered deeper integration and limited SAARC’s effectiveness in advancing economic cooperation.

Despite being part of the same regional bloc, South Asian countries remain politically and economically fragmented. Historical legacies, such as the formation of India and Pakistan from the Lahore Resolution and the emergence of Bangladesh in 1971, have left enduring political tensions. These divisions, coupled with the influence of domestic interest groups, have driven protectionist trade policies. Only Sri Lanka has consistently pursued liberal economic reforms, while others began gradual liberalisation in the 1980s. Yet, regional politics continue to exert a strong influence, often overriding economic rationality and sustaining protectionist tendencies (Hossain & Duncan, 1998). The limited academic literature on intra-regional trade highlights significant challenges but also opportunities for greater cooperation. This study first examines the current state of trade among SAARC countries, then explores potential pathways and persistent obstacles to fostering stronger economic integration in South Asia.

Bangladesh has a central relationship with all the member states of South Asia. Since its independence in 1971, Bangladesh has pursued a foreign policy based on friendship with all and malice towards none. Despite its excellent geographical location with access to the sea and waterways, trade with other countries in the region remains insignificant. Moreover, some notable obstacles have crystallised:

1. Trade protectionism (several trade items like agriculture products, packing materials, and textile items).

2. Monopoly trader (Bangladesh Petroleum Cooperation is the only organization)

3. Several restrictions come from religious, cultural, health, and environmental growth.

4. Port access is restricted.

5. Lack of non-automatic licensing (Rahman, Moazzem et al., 2014; Rahman, Bari et al., 2014)

Table 2 shows that Bangladesh has very low trade tensions with South Asian countries. The data shows that overall trade tensions between all South Asian countries and Bangladesh are very low. Table 3 shows that India has excellent trade relations with all South Asian countries. According to the Asia Regional Integration Centre database, India has bilateral agreements with all South Asian countries. In addition, the country has enhanced connectivity with this region through several multilateral agreements such as the Asia-Pacific Trade Agreement (APTA), BIMSTEC (the Bay of Bengal Initiative for Multilateral Scientific and Technical Cooperation) and others.

Bangladesh has a 17.3% trade share with South Asian countries. The UNCOMTRADE database indicates that in 2013, Bangladesh’s export share was less than 2% points, while its import share was 20.4%. The rest, 67.4%, is in other regions covering the European Union (EU), the United States (US), Japan, China, and the Republic of Korea. The Bangladesh government has initiated some potential measures to accelerate intra-regional trade as follows:

The BIMSTEC Free Trade Agreement (Bangladesh, India, Myanmar, Sri Lanka, and Thailand Economic Cooperation) would enhance access to ASEAN (Association of Southeast Asian Nations) markets. Port development in Chittagong and the construction of new roads is expected to reduce freight and transit costs. Agreements have been made to use the Mongla and Chittagong seaports for trading goods between India and Bangladesh. Eventually, these ports are also intended to serve Nepal and Bhutan. Connectivity improvements such as the Akhaura-Agartala link roads and the Radhikapur-Birol railway will help reduce trade barriers. In addition, enhancing the capacity of the Bangladesh Standard Testing Institute (BSTI) and eliminating existing non-tariff barriers remain important priorities. A joint statement has been signed among Bangladesh, India, and Bhutan to develop road connectivity through Dalu-Nakugaon, Gobraska, and Koraituli in Haluaghat, located opposite Ghosupara in India (Rahman, Moazzem et al., 2014; Rahman, Bari et al., 2014). Bhutan relies on India for 93.69% of its trade, while Bangladesh relies on it for 4.12%. Furthermore, India and Bangladesh are two of Bhutan’s top five trading partners. Nepal can get access in Bangladesh, where India is allowed to use 200 m to the zero point at Banglabandh at the Banglabandh-Phulbaria LCS. In addition, Bangladesh is also trying to facilitate Mongla Port’s access to Nepal for trading goods (Rahman, Moazzem et al., 2014; Rahman, Bari et al., 2014).

In 1948, intra-regional trade in South Asia accounted for 19% of total trade (Kumar & Singh, 2009). India, with a long-standing comparative advantage—particularly in textiles even before the European Industrial Revolution (Riello & Roy, 2009)—has historically dominated trade flows within the region. Today, India exports a range of goods, including intermediate and consumer goods, textiles, garments, and chemicals, to most SAARC countries. While South Asia constitutes only 0.83% of India’s imports, it absorbs 6.88% of India’s exports. Despite this, India imposes 37 tariffs on regional goods, higher than for Europe (2), Central Asia (9), and East Asia and the Pacific (33) (WITS, 2023).

India’s geopolitical influence, rooted in historical and geographical factors, significantly shapes regional trade dynamics. The emergence of China’s Belt and Road Initiative (BRI) has prompted India to reinforce its regional engagement, although initiatives such as the BCIM (Bangladesh-China-India-Myanmar) corridor remain largely unrealized.

Table 3 indicates India’s strong trade ties with Nepal, Sri Lanka, and Bangladesh, all of which import diverse goods ranging from food and raw materials to garments. Sri Lanka has particularly robust trade with the Maldives, peaking at an index value of 79.89 in 2015. Pakistan maintains its strongest trade relationship with Afghanistan, although it shows a trade deficit with most South Asian partners.

Nepal demonstrates relatively high trade integration with India, Bangladesh, and Afghanistan, peaking with Afghanistan in 2014 before a sharp decline in 2016. Bhutan’s trade integration with India is notably strong, reaching an index of 66.42 in 2010. In contrast, Bhutan’s trade with the Maldives and Pakistan remains minimal. Bangladesh maintains positive trade relations with Nepal, with the trade shortfall index declining to 3.12 in recent years and improving to 91.67% by 2017.

Table 4 shows the intra-regional trade intensities of Nepal and Sri Lanka among the South Asian countries. We can find major changes in trade intensities between Nepal and India in bilateral trade intensities. Which has decreased over time. On the other hand, with Bangladesh, the trade intensities increased over time despite the sudden drop in 2022.

Table 5 represents the trade intensities between Sri Lanka and other South Asian Countries. We find that it has a very close relation with the Maldives. On the other hand, with Bangladesh also the index recorded above 6.

Nepal has signed several bilateral and multilateral trade agreements, including with regional initiatives such as BIMSTEC and the Nepal-Pakistan Free Trade Agreement, though these remain inactive. Active agreements include SAFTA and the India-Nepal Trade Treaty (ARIC, 2015). Since the 1990s, Nepal has promoted trade liberalisation, applying for GATT and WTO membership, gaining observer status in 1995. A comprehensive economic reform programme was launched in 2002 to stabilise the macroeconomy and promote sustainable growth. As a landlocked country, Nepal is heavily reliant on India for trade. Although trade volumes with India have grown, there remains a persistent trade imbalance (Shrestha, 2003). To address this, India has reduced tariffs and provided duty-free access to several Nepalese exports.

Sri Lanka, an island nation bordering India and the Maldives, maintains significant trade relations with both countries, particularly the Maldives, as indicated in Table 5. With strong sectors in tourism, commodities, and the world’s largest solid tyre industry, Sri Lanka holds considerable trade potential. However, its long-standing reliance on protectionism and debt monetisation has led to structural economic vulnerabilities. Excessive money printing contributed to inflation and macroeconomic instability. Recent economic crises have forced the country to seek assistance from the IMF and external donors, particularly to manage debts incurred through Chinese loans (Economy of Sri Lanka, 2023).

Pakistan, the second-largest country in South Asia by area, has adopted several trade policy reforms to support globalisation. Sharing borders with Afghanistan and Central Asian countries, Pakistan holds strategic trade potential. Trade with Afghanistan has increased significantly, as shown in Table 6 (Masood, Khurshid, Haider, Khurshid, & Khokhar, 2022). However, persistent political tensions continue to disrupt regional trade flows. While Pakistan connects to landlocked Central Asia, India’s geographic advantage—bordering most South Asian countries—enhances its regional trade capacity. To foster economic integration, several countries have reduced tariffs and pursued liberalisation. Empirical studies confirm that tariff reductions, coupled with GDP growth, positively influence regional trade expansion (Masood et al., 2022).

Mutual trust serves as the foundation of all sustainable trading relationships. It facilitates the expansion of trade, which in turn fosters deeper interdependence, institutional cooperation, and regional harmony. Polachek (1980) argues that close trade ties between countries—such as those observed between Pakistan and several South Asian partners—enhance mutual understanding, reduce misconceptions, and ultimately build greater trust among neighbouring states. However, in South Asia, this virtuous cycle between trust and trade has been disrupted by longstanding historical conflicts, power asymmetries, and structural inequalities among economies. These factors have limited the region’s ability to capitalise on its geographic proximity and complementary resource endowments (Rasul, 2009).

The erosion of trust in South Asia is deeply rooted in unresolved political disputes, border tensions, and a legacy of colonial partition. To analyse prospects for deeper regional integration, it is necessary to adopt a political economy lens. Raihan (2016) identifies three interlinked drivers of regional integration: economic, political, and extra-regional. Economic drivers include the reduction of tariff and non-tariff barriers, synchronized growth strategies, cross-border investment, and harmonised trade policies. However, economic convergence requires supportive political drivers, shaped by institutional and actor-based dynamics.

These political-economic drivers encompass a range of stakeholders—including SAARC institutions, national governments, private sector actors, civil society organisations, and media—who collectively influence regional governance. Additionally, regional public goods such as cross-border infrastructure, shared historical trajectories, and geographical contiguity play a critical role in shaping the broader context within which regional institutions evolve. Strengthening these elements is essential for rebuilding trust, enabling policy convergence, and unlocking the full potential of regional integration in South Asia.

Table 7 depicts major successful regional organizations, including their intra-regional trade share and trade intensity index. We can see here that several regional conflict issues are visible. Despite having major regional conflicts, these regional organizations have a rising trade index. SAARC countries could follow these countries to unveil the opportunities of regional trade.

Bangladesh and India share a strategically significant yet complex geopolitical relationship. Bangladesh’s economic liberalisation in 1982 facilitated increased trade flows, particularly with India. Owing to India’s comparative advantage in several sectors, Indian goods rapidly penetrated the Bangladeshi market, leading to a persistent trade deficit for Bangladesh. While economic ties remain robust, longstanding issues—such as water sharing, border tensions, and non-tariff barriers—continue to strain bilateral relations.

India also faces contentious trade dynamics with Nepal and Sri Lanka. Despite the 1950 Treaty of Peace and Friendship between India and Nepal, the relationship has been marred by political sensitivities, particularly around issues of sovereignty and national security. Although the 1991 bilateral trade treaty aimed to enhance economic cooperation, recent reports highlight barriers imposed by Indian customs on Nepali goods, undermining treaty objectives.

India-Pakistan relations represent the most significant impediment to regional integration in South Asia. Rooted in the 1947 partition and the two-nation theory, bilateral ties have been consistently strained by political animosity and mutual distrust (Abbasi, 2015). The Kashmir conflict further deteriorated trade relations, leading Pakistan to suspend trade with India. Disputes over the Wagah-Attari border, used for land trade, also constrain broader regional connectivity, notably with Afghanistan.

While regional trade blocs such as the European Union (67%), NAFTA (62%), and ASEAN (26%) show strong intra-regional trade, South Asia lags behind. According to the World Bank (2007), intra-regional trade in South Asia fell from 19% in 1948 to just 2% by 1967 due to protectionist policies and political divisions.

China’s Belt and Road Initiative (BRI) has introduced a new geopolitical dynamic, with potential to reshape trade patterns and regional alignments. Given India’s dominant position in terms of GDP, population, and trade agreements, it functions as a regional hub. However, China’s growing influence may catalyse competitiveness and complementarity across South Asia, potentially fostering new avenues for cooperation—provided geopolitical tensions are effectively managed.

The article on regional trade among South Asian countries offers essential insights that are also relevant to Southeast Asia, particularly regarding the potential for enhanced economic integration in this region. Several important points emerge from the article that have broader implications for understanding the dynamics of trade and economic cooperation within Southeast Asia.

The article’s analysis reveals that South Asia exhibits low levels of intra-regional trade despite numerous trade agreements, such as SAFTA (South Asian Free Trade Area). This finding is particularly relevant when comparing the challenges of Southeast Asia, which shares some of the same political economy characteristics. The low trade tightness index (below 0.5 in South Asia) highlights the need for better cooperation and policy harmonization across borders, which is a critical area of focus for Southeast Asia as well. Although Southeast Asian countries have advanced regionalism through ASEAN (Association of Southeast Asian Nations), intra-regional trade remains below its potential due to political and economic barriers, as highlighted by Croissant and Trinn (2009) and Buszynski Leszek (1987).

A key takeaway from the article is that political relationships, or the lack thereof, greatly influence trade relations. The research found that countries with better political relations, such as India and Sri Lanka, tend to have stronger trade ties. On the other hand, longstanding political hostilities between countries like India and Pakistan significantly hinder trade relations. Southeast Asia faces similar challenges. Countries in this region have had to navigate historical tensions, such as territorial disputes in the South China Sea, which can adversely affect trade cooperation. As highlighted by Streltsov (2023), Southeast Asian nations like Vietnam and the Philippines face challenges like those between India and Pakistan, where historical conflicts impede deeper integration.

The article stresses that infrastructural shortcomings, such as inefficient border management and transportation networks, contribute to low intra-regional trade in South Asia. This issue is not unique to South Asia but is also pertinent to Southeast Asian economies. While infrastructure development has improved in Southeast Asia in recent years, challenges such as poor port connectivity and logistical bottlenecks remain. Southeast Asia, in contrast, has made strides through initiatives like the Master Plan on ASEAN Connectivity, but further efforts are needed to overcome the infrastructural barriers that slow the region’s integration.

The concept of comparative advantage, as discussed in the article, is essential for understanding regional trade dynamics. According to Ricardo’s theory, countries benefit from trade when they specialize in industries where they have a comparative advantage. South Asian countries, however, suffer from low intra-regional trade due to their failure to fully exploit comparative advantages. This issue is echoed in Southeast Asia, where countries like Vietnam and Thailand have established comparative advantages in electronics and agriculture, respectively, but intra-regional trade can still be improved. As Batool and Javaid (2018) suggest, enhancing comparative advantages and fostering economic specialization can drive deeper integration.

The article highlights the limited success of regional trade agreements in fostering greater economic cooperation in South Asia. Despite agreements like SAFTA and SAPTA, intra-regional trade remains low. Similarly, in Southeast Asia, while the ASEAN Free Trade Agreement (AFTA) has laid a foundation for economic integration, the full potential of such agreements has not yet been realized. ASEAN’s trade share within the region stands at 26%, a far cry from the European Union’s 67% (Mazrui, 2003). This suggests that despite progressive agreements, Southeast Asia, like South Asia, needs to focus on ensuring that these agreements are better implemented and that non-tariff barriers are reduced.

The article also discusses the role of extra-regional factors, particularly how external factors, such as China through its Belt and Road Initiative (BRI), influence regional trade dynamics. In Southeast Asia, China plays a similarly significant role, being both a major trading partner and a key investor in regional infrastructure projects. This involvement has the potential to reshape regional economic integration, as Chinese investment accelerates infrastructure development that can support increased trade. However, the involvement of an external power also raises concerns about economic dependence and the potential for unequal trade benefits (Low, 2004).

Political Stability and Cooperation: Political will and stable relations between nations are essential for boosting intra-regional trade. Southeast Asian leaders must continue to prioritize diplomatic initiatives and resolve lingering territorial and political disputes to create a conducive environment for economic cooperation (Rahman, Moazzem et al., 2014; Rahman, Bari et al., 2014). Infrastructure Development: Investing in infrastructure, particularly in logistics and port connectivity, is crucial for enhancing regional trade. Projects like ASEAN’s infrastructure development plans need continued support and expansion to address these bottlenecks (Sultana & Asrat, 2015).

Reducing Non-Tariff Barriers: While tariffs have been significantly reduced, non-tariff barriers remain a challenge. Policymakers should focus on standardizing regulations, improving customs procedures, and reducing bureaucratic hurdles to facilitate trade. Fostering Comparative Advantage: Southeast Asian countries should build on their comparative advantages by promoting industries where they have a competitive edge. For instance, Vietnam’s electronics sector and Indonesia’s natural resources could drive regional trade if complemented by policies that encourage specialization (Ali & Talukder, 2009). Regional Cooperation Beyond ASEAN: Much like the article suggests for South Asia, Southeast Asia could benefit from strengthening extra-regional partnerships. Engaging with countries beyond the ASEAN bloc, such as in South Asia or East Asia, could help expand trade and economic opportunities (Hu, 2017).

Researchers have found that trade policy can influence the design of regional co-operation and foreign policy (Baldwin, 1989). Figure 3 shows that countries prepare their respective trade policies and decide whether to follow protectionism or liberalization. Hegemonic relations could also be liberalized through open economic policies. The following recommendations could be implemented to restore the economic integration of South Asia.

Decentralization of trade with neighbouring countries could minimize the central power of a single country. Suppose the South Asian countries start using the Indian Ocean to co-operate with Southeast and Central Asian nations. To reduce the free rider motivation among several countries, it is important to announce clearer trade gains from liberalisation. Countries in the region should also strengthen their standard-setting institutions to ensure that certified products do not face non-tariff barriers. Building comparative advantage should be prioritised, as trade gains largely depend on it, as highlighted by David Ricardo. Enhancing the negotiation skills of trade managers can further accelerate trade benefits. Overall, regional countries should prioritise intra-regional trade cooperation, which requires addressing and controlling hegemonic relations between states. Protectionism remains a common practice among South Asian countries, largely due to their labour-intensive economies. With high import ratios, governments tend to adopt conservative social welfare approaches. In the interest of social welfare, tariffs are often imposed on foreign goods. Additionally, as majority voting mechanisms are prevalent, income redistribution is not always viewed as a desirable policy.

Table 6 reveals that interstate conflicts are widespread across regions, involving issues such as territorial disputes, historical grievances, and internal violence. While regional organisations often play a role in negotiating these disputes, other regions still maintain higher inter-regional trade shares and greater trade intensity. South Asian countries could benefit from adopting similar negotiation and conflict mitigation strategies to strengthen their own regional trade relations.

According to David Ricardo’s research on regional trade, the comparative advantages of individual countries are most important. The South Asian region comprises eight countries. Among them, the majority of countries are engaged in garment production (WITS). Despite the signing of agreements between the countries, intra-regional trade connectivity is very low. Theorists emphasise three drivers of regional trade: political, economic and extra-regional. The current study has also identified the relevance of these ideologies. Compared to other regional groups, this region has a relatively small number of regional agreements. Nevertheless, even these regional agreements are not sufficient to accelerate intra-regional trade due to various political, economic and extra-regional factors. With reference to this study, measures should be taken to reduce such problems and promote intra-regional trade among South Asian countries. The findings from the study on South Asian trade integration underscore several key lessons for Southeast Asian countries. While both regions face similar challenges, Southeast Asia has the advantage of more established regional institutions like ASEAN. However, the potential for deeper integration remains untapped, and regional cooperation must evolve to overcome political, infrastructural, and economic barriers.