South Asian Free Trade Area

The South Asian Free Trade Area or SAFTA is a pact signed in 6 January 2004 that would gradually eliminate most tariffs and other trade barriers on products and services passing between the Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Afghanistan and Sri Lanka. The pact would effectively create a free-trade bloc among the seven countries of South Asia.

The SAFTA agreement came into force on 1 January 2006 and is operational following the ratification of the agreement by the seven governments. SAFTA requires the developing countries in South Asia (India, Pakistan and Sri Lanka) to bring their duties down to 20 percent in the first phase of the two year period ending in 2007. In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia (Nepal, Bhutan, Bangladesh, Afghanistan and Maldives) have an additional three years to reduce tariffs to zero. India and Pakistan ratified the treaty in 2009, whereas Afghanistan as the 8th memberstate of the SAARC ratified the SAFTA protocol on the 4th of May 2011.^[1]

SAFTA’s main provisions called for the gradual reduction of tariffs, customs duties, and other trade barriers between the seven members, with some tariffs being removed immediately and others over periods of several years. SAFTA ensured eventual duty-free access for a vast range of manufactured goods and commodities traded between the signatories.

History

The Agreement on SAARC Preferential Trading Arrangement (SAPTA)^[2] was signed on 11 April 1994 and entered into force on 7 December 1995, with the desire of the Member States of SAARC (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions.

The establishment of an Inter-Governmental Group (IGG) to formulate an agreement to establish a SAPTA by 1997 was approved in the Sixth Summit of SAARC held in Colombo in December 1991.

The basic principles underlying SAPTA are:

1. overall reciprocity and mutuality of advantages so as to benefit equitably all Contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems;
2. negotiation of tariff reform step by step, improved and extended in successive stages through periodic reviews;
3. recognition of the special needs of the Least Developed Contracting States and agreement on concrete preferential measures in their favour;
4. inclusion of all products, manufactures and commodities in their raw, semi-processed and processed forms.

References

External links

• SAFTA Text
• World Bank, Data and Analysis on Trade and Regional Integration in South Asia
• Towards Unity: SAFTA Treaty
• SAARC proposes South Asian Economic Union, condemns terrorism
• South Asian Economic Union – a growing reality that can change the world