In 1995, South Asia initiated a process of regional trade liberalization under the framework of the South Asian Preferential Trade Agreement (SAPTA), allowing three rounds of trade negotiations to be completed by 1998. Despite the apparent progress made in pushing ahead with SAPTA negotiations, the actual trade impact on the region’s economies remains nebulous; the trade coverage of SAPTA concessions have been limited while other non-tariff barriers and bureaucratic hindrances have constrained countries from benefiting from the agreement. Political tensions in the region have only served to undermine the agenda in economic cooperation. The slow progress in achieving tangible results has, inevitably, focused attention not only on the future of SAARC, but also on the feasibility of achieving positive results in the area of trade cooperation. This study focuses primarily on the following: to clarify the theoretical underpinnings that favour regional trade cooperation; to detail the achievements of SAPTA to date in terms of trade concessions granted across countries; to assess the impact of SAPTA on Sri Lanka’s export and import trade; to examine prospects for regional cooperation in South Asia in light of a shift towards bilateralism in the region; to examine and compare concessions exchanged under SAPTA and the Indo-Lanka Free Trade Agreement (ILFTA); and to outline alternative measures open to negotiators to accelerate liberalization under SAPTA.