South Asian Free Trade Area
Encyclopedia
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.
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.
, 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:
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...
, Bhutan
Bhutan
Bhutan , officially the Kingdom of Bhutan, is a landlocked state in South Asia, located at the eastern end of the Himalayas and bordered to the south, east and west by the Republic of India and to the north by the People's Republic of China...
, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, Maldives
Maldives
The Maldives , , officially Republic of Maldives , also referred to as the Maldive Islands, is an island nation in the Indian Ocean formed by a double chain of twenty-six atolls oriented north-south off India's Lakshadweep islands, between Minicoy Island and...
, Nepal
Nepal
Nepal , officially the Federal Democratic Republic of Nepal, is a landlocked sovereign state located in South Asia. It is located in the Himalayas and bordered to the north by the People's Republic of China, and to the south, east, and west by the Republic of India...
, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
, Afghanistan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
and Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...
. The pact would effectively create a free-trade bloc
Trade bloc
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, are reduced or eliminated among the participating states.-Description:...
among the seven countries of South Asia
South Asia
South Asia, also known as Southern Asia, is the southern region of the Asian continent, which comprises the sub-Himalayan countries and, for some authorities , also includes the adjoining countries to the west and the east...
.
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
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called 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.
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) was signed on 11 April 1994 and entered into force on 7 December 1995, with the desire of the Member States of SAARC (IndiaIndia
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
, Nepal
Nepal
Nepal , officially the Federal Democratic Republic of Nepal, is a landlocked sovereign state located in South Asia. It is located in the Himalayas and bordered to the north by the People's Republic of China, and to the south, east, and west by the Republic of India...
, Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...
, Bangladesh
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...
, Bhutan
Bhutan
Bhutan , officially the Kingdom of Bhutan, is a landlocked state in South Asia, located at the eastern end of the Himalayas and bordered to the south, east and west by the Republic of India and to the north by the People's Republic of China...
and the Maldives
Maldives
The Maldives , , officially Republic of Maldives , also referred to as the Maldive Islands, is an island nation in the Indian Ocean formed by a double chain of twenty-six atolls oriented north-south off India's Lakshadweep islands, between Minicoy Island and...
) 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:
- 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.