Among the possibilities are regional value chains that could create large gains in terms of higher value additions to exports, technologies transfers and employment generation. Opportunities for regional trade abound and there are numerous policy initiatives that could be taken to help spur trade and investment in and between the two regions. The empirical results indicate that, under existing trade patterns, the potential value of trade in the two regions is nearly twice as large as the actual level. The analysis also includes a gravity model to gauge the effect of economic growth, distance and price, non-price and structural determinants of regional trade. The second refers to price, non-price and structural determinants that tend to affect all products traded between countries. The first set refers to disaggregated or product-level characterizations of trade affecting competitiveness and complementarities between trading partners within and between the regions. Trade enhancing channels are divided into two broad categories. The present study explores opportunities and challenges for intra- and inter-regional trade in the Central and South Asia areas by analyzing a wide range of channels impacting trade. Intra-regional trade in Central Asia is less than 5 percent and that of South Asia is 1.5 percent of trade with all countries. Even within the regions, trade among countries remains low. Using different measures of trade, we estimate that inter-regional trade is only between 0.2 and 4 percent of total trade to all destinations. Yet today’s trade between the two regions remains low and significantly below regional trade in Africa, the Middle East, Latin America and Southeast Asia. There have nearly always been movements of goods and people between the regions, which in turn have linked their cultural and religious ties and impacted political relations. The Central and South Asia regions have a long history of trade relations.
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