South Asian Free Trade Agreement

Posted on April 12th, 2021

Why is intra-regional trade not growing in South Asia, despite more than a decade of SAFTA, several bilateral free trade agreements and a one-way tariff-free customs regime from India to all the least developed countries in the region (Afghanistan, Bangladesh, Nepal, Maldives and Bhutan)? The Latest World Bank report “A Glass Half Full: The Promise of Regional Trade in South Asia” explains itself. And here are the reasons for the inefficiency of SAFTA. First, the SAFTA is undermined by the so-called “sensitive” list – a long list of products excluded from the tariff liberalisation programme. Each country has many products in this sensitive list, which range from 6 to 45 percent of its imports from other South Asian countries. Bangladesh, Sri Lanka and Nepal account for the highest proportion of sensitive imports from South Asia. Similarly, 5 – 48% of exports to South Asia do not benefit from tariff preferences from recipient countries, with the Maldives, India and Pakistan accounting for the highest proportion of exports subject to this treatment. The South Asian Free Trade Area (SAFTA) is the free trade agreement of the South Asian Association for Regional Cooperation (SAARC). The agreement entered into force in 2006 and came into force with the 1993 ASAC preferential trade agreement. SAFTA`s signatory countries are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. 87 At the Hong Kong Ministerial Conference, Pakistan and Sri Lanka appear to oppose the granting of duty-free and quota-free access to Bangladeshi clothing to developed countries in general and the United States in particular. The attitude of these two countries was contrary to the spirit of the Dhaka Declaration, adopted at the 13th ASAC Summit in Dhaka in November 2005. Governments agreed that ASARC member states would “cooperate closely to coordinate their position” in the ongoing trade negotiations and ordered trade ministers to hold WTO ministerial consultations to develop a common ASARC position on issues of common interest. See A.

Rahman, “Hong Kong ministerial” The Independent Bangladesh, online: The Independent Bangladesh . See also the Dhaka declaration of the 13th SAARC Summit (13 November 2005), online: . 71 See “Timeline: The Volcker Controversy?” Times of India (August 3, 2006), online: Times of India . Only recently, Indian Foreign Minister Natwar Singh was forced to resign after being accused of illegally benefiting from the UNITED Nations oil-for-food programme in Iraq. See also “Bangladesh and Denmark in the aid series” BBC News, online: BBC . In addition, in 2002, the Danish government announced that it was withdrawing $45 million in aid from Bangladesh`s maritime sector because it had stated that the Bangladeshi minister at the time, Akbar Hossain, had behaved dishonestly during a tender for the repair of four ferries. The agreement was signed in 2004 and came into force on 1 January 2006, with the wishes of ASAC Member States (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka) to promote and maintain mutual trade and economic cooperation within the ASARC region by exchanging concessions.