By Shankar Acharya
Indeed, today is the world of economic liberalisation and globalisation. Trade is, thus, the most important and powerful engine of economic development. Poverty alleviation, accelerated economic co-operation, social sector development, tourism, and people-to-people contact are some of the core areas of regional economic integration, which can bring prosperity to the people and nations of the region.
SAFTA is set to bring the aforesaid economic activities among the member states in the future. The contracting states, except Nepal, had agreed to reduce tariffs under the trade liberalisation programme (TLP) on July 1, 2006. Nepal did so a month later on August 1. Tariff reduction under the first phase of SAFTA is 20% by all non-LDC members, and will be 30% by the LDC members within two years of the TLP.
Trade
SAFTA came into existence with the aim of reducing tariffs for intra-regional trade among the seven SAARC members. India and Pakistan are to implement it by 2013, Sri Lanka by 2014, and Bangladesh, Bhutan, Maldives and Nepal by 2015. The tariff reduction until the December 31, 2015 would be 0-5% by all the contracting states. But the member states have yet to notify of the tariff reduction.
It is now time to review the implementation of SAFTA. The Framework Agreement of SAFTA has indicated that the SAFTA Committee of Experts shall meet at least once every six months or more often as and when considered necessary by the contracting states.
Presently, SAFTA has only seven members, including three Non-Least Developed Contracting States (Non-LDCs) and four Least Developed Contracting States (LDCs). But, the Islamic Republic of Afghanistan will become a new member of SAARC and SAFTA Agreement also. Hence, the committee of experts had discussed about its membership and obligations to implement the SAFTA within a time bound framework.
Para-tariff and Non-tariff measures are the most important factors hindering trade among the member states. Thus, the member states have notified that type of barriers through the SAARC Secretariat to each of the contracting parties. The successful implementation of SAFTA will depend on removing the para-tariff measures (PTMs) and non-tariff measures (NTMs) imposed by the member states.
The contracting states have to be liberal with each other in sharing the benefits equally and reducing the non-tariff measures/barriers. In the meantime, the lists of measures taken by the member states have been seen at the larger areas. It is being played the inverse situation on the free trade area.
So, the meeting was near the compromise, and it would be better and fruitful, if the member states focused on timely removal of these trade barriers by all member countries. Further, the meeting had been productive, because the member states agreed to provide the information relating to the NTMs and PTMs being currently applied by them on their imports.
The sensitive list is a main provision in the SAFTA agreement. It is a means of restricting products from other member countries from entering one's country through tariffs. The issue of sensitive list saw heated among the contracting parties during the meetings of the Committee of Experts (CoE). In the SAFTA sensitive list, member states include potential export items such as agriculture products, tea, ghee, diary products and handicrafts.
The Agreement provides for periodic reviews of the Sensitive Lists. In order to protect relevant domestic industries, it has also been agreed that the non-LDC members may have two lists- one for the non LDCs and the other for the LDCs. India's sensitive list for the LDCs has 763 items, while it has kept 884 items for the non-LDCs.
Nepal's final indicative list for the non-LDCs has 1,335 items while the list for LDCs has 1,299 items. Bangladesh has kept 1,254 items in its sensitive list for the non-LDCs and 1,249 items for the LDCs.
Similarly Pakistan has kept a single list of 1,183 items for both the non-LDCs and LDCs. Sri Lanka has kept 1,065 items in its single sensitive list. and Bhutan's single sensitive list contains 167 items. The Maldives has put 671 items in its sensitive list for all. Indeed, we are moving the free market regime to obtain the benefits and to increase the intra-regional trade volume within the region. So, we have to more liberal and with the help of reduced sensitive items and we should put more products in the open market baskets. It is being observed that the sensitive list shall be reviewed in the forthcoming meeting. Furthermore, this meeting had discussed quantitative restriction (QR) under Article 7(5) of SAFTA Agreement.
SAFTA Agreement has mentioned a separate Article on working procedure about the dispute settlement mechanism for smooth operation of SAFTA. The meeting drew the attention of the delegation of all members viewing on establishment of a panel of specialists under Article 20(8) of the SAFTA Agreement.
Currently, SAFTA Agreement has covered only Trade in Goods among the member states. Trade on services is the emerging issue in the South Asian Trade. Therefore, the meeting has discussed and gave a fertile attention for study on incorporating Trade in Services in SAFTA Agreement.
SAARC Regional Multimodal Transport Study (SMRTs), with funding from Asian Development Bank has been completed. The Second Ministerial Council Meeting considered the report of the second meeting of the SAFTA COEs. In addition, It had also discussed the status of SMRTs report.
India and Pakistan are the biggest player of the SAARC nations. But, they have a great unsolved political issue that is hindering several economic sectors of both countries. Formal trade between the two countries is very low, but informal trade is very high due to the political aspect. Pakistan has ratified the SAFTA Agreement, but it has mentioned 'Pakistan does not like to give the Most Favoured Nation (MFN) treatment to India' only. The trade liberalization process under SAFTA mostly depends on Indian interest because SAARC regional imports are dominated mostly by exports from India, which accounts for nearly 90 per cent of its regional trade. While the region absorbs five per cent of India's total exports, only one per cent of India's imports come from the region.
Finally, SAFTA has been running since last year. The implementation of SAFTA is a crucial issue of the region. In the intra-regional trade among the countries is only 4 percent. So SAFTA provides tremendous opportunity to boost trade among the member states.
Consensus
South Asian Association for Regional Cooperation (SAARC) organized the Second SAFTA Committee of Experts (COEs) and the Second Ministerial Council (MC) meeting on 24-26, February 2007 in Kathmandu. These meetings had discussed the various issues including Non-tariff, para-tariff barriers and Non-compliance of SAFTA Agreement by Pakistan. The heads of the Indian and the Pakistan delegation have agreed to build a positive consensus to hold a bilateral meeting between the two countries before the next SAFTA COEs. This compromise position had created harmony at the meeting. It will create a congenial environment amongst all members for the successful implementation of SAFTA, because the success of SAARC will depend on the effective achievement of SAFTA.
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