HOME

TheInfoList



OR:

The South Asian Free Trade Area (SAFTA) is a 2004 agreement that created a
free-trade area A free-trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and ...
of 1.6 billion people in
Afghanistan Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...
,
Bangladesh Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the eighth-most populous country in the world, with a population exceeding 165 million people in an area of . Bangladesh is among the mos ...
,
Bhutan Bhutan (; dz, འབྲུག་ཡུལ་, Druk Yul ), officially the Kingdom of Bhutan,), is a landlocked country in South Asia. It is situated in the Eastern Himalayas, between China in the north and India in the south. A mountainou ...
,
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
, the
Maldives Maldives (, ; dv, ދިވެހިރާއްޖެ, translit=Dhivehi Raajje, ), officially the Republic of Maldives ( dv, ދިވެހިރާއްޖޭގެ ޖުމްހޫރިއްޔާ, translit=Dhivehi Raajjeyge Jumhooriyyaa, label=none, ), is an archipelag ...
,
Nepal Nepal (; ne, :ne:नेपाल, नेपाल ), formerly the Federal Democratic Republic of Nepal ( ne, सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in S ...
,
Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's fifth-most populous country, with a population of almost 243 million people, and has the world's second-lar ...
and Sri Lanka with the vision of increasing economic cooperation and integration. One of the major goals was to reduce customs duties of all traded
goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not t ...
to zero by 2016. SAFTA required the
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
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 in 2012, the 20-percent duty was reduced to zero in a series of annual cuts. The least developed countries in the region had an additional three years to reduce tariffs to zero. India and Pakistan ratified the treaty in 2009, whereas Afghanistan, as the eighth member state of the SAARC, ratified the SAFTA protocol on 4 May 2011.


History


SAPTA

The establishment of an Inter-Governmental Group (IGG) to formulate an agreement to establish a South Asian Preferential Trade Arrangement (SAPTA) by 1997 was approved at the sixth summit of the SAARC, held in Colombo in December 1993.


SAFTA

The agreement was signed in 2004 and came into effect on 1 January 2006, with the desire of the member states of the SAARC (Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions. The agreement was reached on 6 January 2004, at the 12th SAARC summit. The SAFTA agreement came into force on 1 January 2006, and is operational following the ratification of the agreement by the eight governments. The basic principles underlying the SAFTA are as follows: # ''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; # negotiation of ''tariff reform'' step by step, improved and extended in successive stages through periodic reviews; # recognition of the special needs of the Least Developed Contracting States and agreement on ''concrete preferential measures'' in their favour; # inclusion of all products, manufactures and commodities in their raw, semi-processed and processed forms. In 2011,
Afghanistan Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...
joined the SAFTA. The purpose of the SAFTA is to encourage and elevate common contract among the countries such as medium and long-term contracts. Contracts involving trade operated by states, supply and import assurance in respect of specific products etc. It involves agreement on tariff concession like national duties concession and non-tariff concession. The main objective of the agreement is to promote competition in the area and to provide equitable benefits to the countries involved. It aims to benefit the people of the countries by bringing transparency and integrity among the nations. The SAFTA was also formed in order to increase the level of trade and economic cooperation among the SAARC nations by reducing the tariff and barriers and also to provide special preference to the Least Developed Countries (LDCs) among the SAARC nations. to establish a framework for further regional cooperation. SAARC also maintain free trade agreement among member nations.


Instruments

The following are the instruments involved in the SAFTA: *Trade liberalisation programme *
Rules of origin Rules of origin are the rules to attribute a country of origin to a product in order to determine its "economic nationality". The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tari ...
*Institutional arrangements *Consultation *Safeguard measures *Any other instrument that may be agreed upon.


Trade liberalisation programme

According to the trade liberalisation programme, contracting countries must follow the tariff reduction schedule. There should be a fall to 20% tariff from the existing tariff by the non-Least Developing Countries and 30% reduction from the existing tariff by the Least Developing Countries. But trade liberalisation scheme is not to be applied for the sensitive list because this list is to be negotiated among the contracting countries and then to be traded. Sensitive list will involve common agreement among the contracting countries favouring the least developed contracting countries. The SAFTA Ministerial Council (SMC) will be participating to review the sensitive list in every four years with a view of reducing the list.


Sensitive list

A sensitive list is a list with every country which does not include tariff concession.
Bangladesh Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the eighth-most populous country in the world, with a population exceeding 165 million people in an area of . Bangladesh is among the mos ...
has 1,233 products on the sensitive list for the Least Developing countries and 1,241 for the non-Least developing countries under the SAFTA. Bangladesh will reduce the sensitive list by 246 items for the least developed countries (LDCs) and 248 for the non-LDCs. India has 25 items on the sensitive list for the LDCs and 695 for the non-LDCs. Manmohan Singh, then Indian Prime Minister, announced in September in Dhaka that he will reduce the Sensitive List by 46.
Bhutan Bhutan (; dz, འབྲུག་ཡུལ་, Druk Yul ), officially the Kingdom of Bhutan,), is a landlocked country in South Asia. It is situated in the Eastern Himalayas, between China in the north and India in the south. A mountainou ...
has 150 items for both the LDCs and non-LDCs and has no plan of shortening its list.
Nepal Nepal (; ne, :ne:नेपाल, नेपाल ), formerly the Federal Democratic Republic of Nepal ( ne, सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in S ...
has 1,257 for the LDCs and 1,295 for the non-LDCs. Nepal has reduced its list by 259 from its previous list of 1295. Now it's 1036, said joint secretary at Ministry of Commerce and Supplies. The
Maldives Maldives (, ; dv, ދިވެހިރާއްޖެ, translit=Dhivehi Raajje, ), officially the Republic of Maldives ( dv, ދިވެހިރާއްޖޭގެ ޖުމްހޫރިއްޔާ, translit=Dhivehi Raajjeyge Jumhooriyyaa, label=none, ), is an archipelag ...
has 681 for all seven SAFTA nations.
Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's fifth-most populous country, with a population of almost 243 million people, and has the world's second-lar ...
had 1,169 in its sensitive list but has cut its sensitive list by 20% to 936. Sri Lanka has 1,042 and
Afghanistan Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...
has 1,072 items on the negative list.


Misuse of the SAFTA

Traders use the SAFTA to reroute palm oil through Nepal into India. The Solvent Extractors’ Association of India (SEA), the apex body of the vegetable oil trade, has called upon the government to look for ways to end indirect sourcing of palm oil and soyoil from Nepal under cover of the South Asian Free Trade Agreement (SAFTA). This indirect route helps Malaysia reroute palm oil through Nepal to offset Indian government's move to stop imports of Malaysian palm oil after Prime Minister Mahathir Mohamad's stand against the abrogation of special status to Kashmir. Palm oil accounts for nearly two-thirds of India's total edible oil imports. India buys palm oil from Indonesia and Malaysia, while soyoil is imported mainly from Argentina and Brazil. The country sources sunflower oil from Ukraine.


See also

* Asia Cooperation Dialogue *
Asian Clearing Union The Asian Clearing Union (ACU) was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The primary objective of ACU, at the time of its establishment, was to se ...
* Asia-Pacific Trade Agreements Database *
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is an international organisation of seven South Asian and Southeast Asian nations, housing 1.73 billion people and having a combined gross domestic pro ...
(BIMSTEC) *
Free-trade area A free-trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and ...
* Indian Ocean Rim Association for Regional Cooperation *
Market access In international trade, market access is a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or req ...
* Mekong-Ganga Cooperation *
Rules of origin Rules of origin are the rules to attribute a country of origin to a product in order to determine its "economic nationality". The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tari ...
* SAARC Consortium on Open and Distance Learning *
South Asian Association for Regional Cooperation The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of states in South Asia. Its member states are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan ...
(SAARC) * South Asian Economic Union *
South Asian Federation of Accountants The South Asian Federation of Accountants (SAFA) is a forum of professional accounting bodies in the South Asian Association of Regional Cooperation The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernment ...
*
South Asian Football Federation South Asian Football Federation (SAFF), founded in 1997, is an association of the football playing nations in South Asia and is part of the larger Asian Football Confederation. The members of the association are Bangladesh, Bhutan, India, Mal ...
*
Tariff A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and pol ...


References


Further reading

* *


External links


SAARC South Asian Free Trade Area (SAFTA)SAFTA TextWorld Bank, Data and Analysis on Trade and Regional Integration in South AsiaTowards Unity: SAFTA TreatySAARC proposes South Asian Economic Union, condemns terrorismSouth Asian Economic Union – a growing reality that can change the world
{{South Asian Association for Regional Cooperation Free-trade areas Trade Area Trade blocs Free trade agreements Free trade agreements of India Free trade agreements of Pakistan Economy of Afghanistan Economy of Bangladesh Economy of Bhutan Economy of the Maldives Economy of Nepal Economy of Sri Lanka 2004 establishments in Asia 2006 introductions