Did the WTO Promote Growth, Trade and Foreign Direct Investment in South Asia?


Many developing countries joined the WTO with the hope that using the platform will boost trade and thus will catch-up on the developed countries. South Asian countries were the founding member of the WTO and there were great expectations from the WTO in the region. Therefore, it is important to check whether joining the WTO has any impact on trade in South Asia or not? Using fixed effect simultaneous equation model in this paper, we examined the impact of the WTO on key macro-economic variables, i.e., export, import, FDI and growth in South Asia. Based on the empirical evidence, the paper concludes that the impact of joining the WTO on key macroeconomic variables in South Asia is not up to the mark. Joining the WTO did not contribute to any of the main macroeconomic variables of the region, i.e., imports, GDP and FDI. Interesting, the WTO did not play any role in promoting exports in the region either. This shows that the WTO membership is not a guarantee for economic success. The findings of the paper also suggest that rather than relying on an organization erected to support the policy initiative of developed countries, such as the WTO, the developing countries in South Asia need well designed reforms at home to boost their economic performance and promote trade.

Keywords: WTO, Growth, Trade, FDI Inflows, Panel Estimation.

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