South Asian Free Trade Area
The South Asian Free Trade Area is a 2004 agreement that created a free-trade area of 1.6 billion people in Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan 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 to zero by 2016. SAFTA required the developing countries in South Asia to bring their duties down to 20 per cent 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 to formulate an agreement to establish a South Asian Preferential Trade Arrangement 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 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.
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 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 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
- Institutional arrangements
- Consultation
- Safeguard measures
- Any other instrument that may be agreed upon.