This paper draws on recent field work within South Asia and an extensive review of secondary data to examine the dynamics of cross border trade and investment in South Asia, exploring the potential for, and obstacles to, such trade through the lens of a sector that is salient throughout South Asia: Textiles and Clothing. Despite the growing
competitiveness of this sector in the SAARC region, there is very little regional interlinkage within South Asia’s textile and clothing industry. Currently less than 4% of SAARC’s global T&C exports are traded within the region. There is growing evidence of widespread substitution of South Asia by East Asia as the sourcing hub of fabric and
accessories by the region’s major clothing exporters. Over 80% of the fabric needs of Bangladesh and Sri Lanka, for example, come from outside the region even though India
and Pakistan are net exporters of textiles.