ABSTRACT
The competitive rather than complementary nature of products produced in South Asia has severely inhibited intra-regional trade. Consequently, traditional notions of trade, based on competition, have paralyzed the political will to improve intra-regional trade and investment. This chapter explores the prospects of improved regional cooperation in South Asia with the emergence of new trends in trade and investment, especially in an era of creating global production networks. In doing so, the case study of European enlargement following the Cold War is used for comparison. The comparison is especially pertinent because of the economic power asymmetry that existed between the core-EU and newly acceding countries, similar to that of India and its neighbours. Based on this observation, it is argued that a regional aid for trade strategy can provide coherence in directing resources towards investments that are regionally focussed and mutually beneficial. In doing so, the economic power asymmetry between India and its neighbours can be addressed in a positive manner through the emergence of regional production networks.
