SAFTA SEALED

Trade amongst 7 members can jump to $14 billion in two years

ECONOMY BUREAU
Posted online: Friday, December 02, 2005 at 0058 hours IST

NEW DELHI, DEC 1: Ushering in a new era in the history of South Asian cooperation, the seven-member Saarc has finalised the South Asia free trade area (Safta) on Thursday.
According to an official release, commerce minister Kamal Nath, who is in Brussels, indicated this on receiving intimation from Kathmandu where the committee of experts (CoE) was huddled in a meeting to iron out last-minute glitches.

Safta, an agreement between Saarc countries India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, was signed during the 12th Saarc Summit in Islamabad last year, is scheduled to come into force on January 1, 2006. It will be fully operational by 2016.

The pact holds huge potential for intra-regional trade growth as over 90% of the imports by South Asian countries are being sourced from outside the region and a major part of exports of South Asia are made to countries that are not part of the group.

The total intra-regional trade amongst Saarc countries is less than $ 7 billion today as against the total volume of the combined international trade of $350 billion in the region.

India, which is the largest of the seven member countries, stands to gain significantly from the pact. Its total trade with Saarc countries increased over 8% to $ 5.2 billion in 2004-05. Benefits accruing to India would keep multiplying in the next ten years of the agreement’s implementation, trade experts said.

India’s enthusiasm could be gauged by Prime Minister Manmohan Singh’s recent statement in which he said the agreement would lead to growth in intra-regional trade from $ 6 billion to $ 14 billion within two years of its existence.

While it will take some time to resolve complex issues relating to tariff compensation mechanisms, huge negative list of products to be kept outside the agreement and exemptions for a substantial number of products from the strict rules of origin (ROO), these cannot undermine the huge opportunity the FTA holds for the region.

As regional trade expert Ram Upendra Das from RIS points out, “If everything goes well, the FTA could also result in enhanced investment flows within the region despite the fact that it is a strictly goods agreement.”

With unity ultimately leading to strength, a proper implementation of Safta could lead to greater recognition of the region in the global arena and lend it a more effective voice on international issues



For non-LDCs (India, Pakistan, Sri Lanka)
• In first two years (Jan 2006-Jan 2008) tariffs
to be reduced to 20%
• India, Pak to reduce tariffs to 0%-5% in next five years (by Jan 2013)
• Sri Lanka to reduce tariffs to 0%-5% in next six years (by Jan 2014)
• To reduce tariffs for LDCs to 0%-5% in three years (by Jan 2011)
For LDCs (Bangladesh, Nepal, Bhutan, Maldives)
• In first two years (Jan 2006-2008) tariffs to be reduced to 30%
• To reduce tariffs to 0%-5% in eight years (Jan 2008-Jan 2016)


CONCERNS
• Tariff compensation for LDCs may remain a sticking point
• Customs procedures could hamper trade growth
• High value goods in negative lists could dilute benefits
• Product specific deviations for agreed ROO may lead to inflow from third countries

EXPECTATIONS
• Trade within the region to increase several-fold
• Agreement could lead to enhanced investment flows
• Trade growth to be more symmetric
• Positive signal to global community on South Asian unity


Financial Express

Fibre2Fashion

Forbes

This is exellent news. Now we will have access to a billion plus consumers. Plus cheper imports will reduce the cost burden to the people. Some of our industries may face hardship, but that is more then compensated by increase in exports and reduced inflation

Pakistan would keep playing the delay tactics on trade if INDIA keeps doing the same with Kashmire and other problems. As Shahukat said no full trade with Indian unless Kashmire issue is solved.

How does the SAFTA agreement benefit Pakistan? Wont it destroy local industry and small business. Wont this allow India to dominate the South Asian market? What about China's inclusion in the SAARC group.

There is no way Pakistan would sign up to anything vis-s-vis India where the total advantage was not massivly in Pakistans favour even if it means cutting ones nose to spite ones face.

If trade is seen as bad with India ( a view shared by every Pakistani govt ), why sign ? Obviously because third countries ( Like UAE Dubai etc ) are benefitting hugely from importing Indian goods and selling them on to Pakistan, This trade alone is worth $5 billion with Pakistan paying the higher costs of this indirect trade.

Chinas inclusion is only as a "observer" ( as of 3 weeks ago ) in SAARC as is Japan. This "observer" status is not even defined in the SAARC charter. First SAARC has to work out what "observer" status means in SAARC and these countries can be "observers" for a decade or two before they are invited to become members on conditions LAID OUT UNANIMUOSLY by SAARC as per the SAARC charter. No one can become a member of SAARC unless ALL parties agree

Exactly.
Even in Kashmir issue is not resolved, we do not need to add additional burden to our selfs.

The Kashmir issue is not going to be resolved any faster, by holding on to stupid policies.

SAARC is for South Asia, and I don't think China should be included. Although, China would help nuetralize India's influence in SAARC, but SAARC is for South Asia, and I don't think other nations should be included. Other nations should hold 'observer' or 'full dialogue' partner status.

In 2005, war is not fought with guns, and missiles, its fought with economy. The best option for South Asia, and its people is to develop SAARC, form a South Asian Union on the pattern of the E.U. and trade among each other with a billion and a half plus consumers.

Last time I checked Afghanistan was in centeral asia not South asia but it was allowed into SAARC no reason why China cant join.

Afghanistan is not in Central Asia. Its always been a part of South Asia. It was only natural for Afghanistan to join the Union. Everything above Afghanistan is Central Asia. The term Central Asian Republics is used to identify those countries that broke away after the USSR collapsed.

Afghanistan is very closely linked to Pakistan. We have millions of Afghani refugees. The flight from Delhi to Kandahar, is shorter then to sout tip of the country.

I back the Idea that China should be limited to observer status. SARRC is our chance to interact directly with the rest of South Asia. And in Particular try to sort out the problems between our selfs.
It may look attractive to have China on our side, but i fear it may erode the idea to create better understanding between the SAARC countries. It may actually lead to SAARC becoming irrelevant, wich is bad for us.

You might as well add that India Pakistan and China already belong to trade organisations ASEAN, SCO,WTO,ITC etc and banking organisations like the world bank,ADB, etc. The agreements with these organisations also means that Indo-Pakistan trade can no longer be exclusivly controlled either by India or Pakistan.

Pakistan's desire to belong to these organisations means that it cannot isolate itself from trade with India without breaking thier rules and finding itself out in the cold and in breach of thier rules.

Pakistan is doing what it knows it can no longer avoid without serious repurcusions to its trade with the rest of the world and its membership to those other organisations.

SAFTA offers the means to correct that threat

Well I am in full agreement with telstar...trade with India will ultimately turned up in our favours....like we import rough material for steel mill from belgium ....but importing from india would cost almost 60% of the price we are paying for belgiun tin.....a bigger coridor of importing cheaper goods would be available to us.....