Saarc signs up for free trade

Unshackling the trade in south Asia, India and six other Saarc countries signed the historic treaty that would lead to free trade and movement of goods in the region, paving the way for a future South Asian Economic Union along the lines of the European Union.

The South Asian Free Trade Area (Safta) framework treaty, signed by the foreign ministers of India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives, seeks removal of trade barriers, phased elimination of tariffs, establishment of a ministerial level mechanism for administering the treaty and dispute settlement among members.

The treaty will be operational by January 1, 2006, with tariffs being brought down to 20 per cent in the non-least developed (LDC) Saarc countries and 30 per cent in the least developed countries. The tariffs will be brought further down to between 0 per cent-5 per cent in the non-LDC and the LDC countries in five years and eight years, respectively.

As per the agreement, the seven Saarc countries will have to accord preferential treatment to each other's products as well as undertake additional measures, including harmonisation of standards, reciprocal recognition of tests, accreditation of testing laboratories and certification of products.

Apart from simplifying business visa procedures, the agreement provides for making exceptions to foreign exchange restrictions, if any, relating to payment of products under the Safta scheme, simplification of banking procedures for import financing, removal of intra-Saarc investment barriers, simplification and harmonisation of import licensing and registration procedures.

The treaty also paves the way for the creation of a Santa ministerial council (SMC) and a committee of experts (COE), besides having special and differential treatment for LDCs and safeguard measures.

While the SMC, comprising commerce and trade ministers, will be the highest decision-making body responsible for administration, the COE will act as the dispute settlement body.

However, concessions granted under the Saarc Preferential Trading Arrangement (Sapta) shall continue to be available to member countries till the completion of the trade liberalisation programme.

Looking ahead

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• India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives party to the deal

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• Saarc countries to accord preferential treatment to each other's products from January 1, 2006

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• Safta deal to simplify business visa procedures and provide for making exceptions to foreign exchange restrictions