This paper attempts to explore the impact of economic integration among the macro economic structure of seven SAARC member countries—Pakistan, India, Bangladesh, Srilanka, Nepal, Maldives and Bhutan during 1989-2001. The paper basically focuses on the free trade agreements which encourage economic integration and trade liberalization process among SAARC countries. It also investigates the scope of SAARC by providing substantial evidence, which shows the benefits of intra regional trade expansion. The opportunities of investment are also different as the tax and non tax structure of these countries are entirely different. So there is considerable scope for trade expansion among SAARC countries based on comparative advantage. In addition to that an arrangement is also expected through which SAARC can deal with the world's major trading blocks as a composite unit in order to maximize the gains of trade and enhance their bargaining power with respect to other countries and economic blocs. Regional economic co-operation can help in optimum utilization of capabilities and resources available in the member states, reduction and dependence on external world, opening up avenues of industrialization for small countries and strengthening of negotiating capabilities with the rest of the world.
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