The South Asia Free Trade Agreement (SAFTA) was signed on January 6, 2004 at the 12th #SAARC Summit in Pakistan (Islamabad). The treaty came into force on January 1, 2006, and will be fully implemented by December 31, 2015. Through various trade liberalisation instruments, #SAFTA aims to strengthen intra-SAARC economic cooperation and maximize the region's economic and social potential. Each contracting state is obligated to reduce tariffs by 0-5% by December 31, 2015. In recent years, South Asian countries have been moving toward a SAFTA. SAFTA is regarded as the key to the success of trade liberalization, #economic growth, and welfare gains for the seven South Asian countries.
The core objectives of the SAFTA-
The primary goals of SAFTA are to promote regional competition while providing benefits to the countries involved. The agreement will benefit the people of South Asia by increasing transparency and integrity among nations and lowering tariffs and trade barriers. Finally, it creates a framework for regional cooperation. The following devices will assist in meeting SAFTA's objectives:
• Eliminating barriers to trading and facilitating the cross-border movement of products between the territories of the Contracting States;
• Promoting conditions of genuine competition in the free trade area & ensuring equitable advantages to all Contracting States, taking into account their respective pattern and levels of economic development;
• Creating an effective mechanism for the application and implementation of this agreement, for its joint administration and disputes resolution; and
• Establishing a framework for regional cooperation to enhance & expand the mutual advantages of this agreement.
SAFTA will be governed under the following principles:
1. SAFTA will be controlled through the provisions of this agreement and also by the rules, regulations, understandings, decisions, and protocols to be agreed upon within its framework by the Contracting States;
2. SAFTA shall be applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit all Contracting States equitably, taking into account their respective levels of economic & industrial development, the pattern of their external trade and tariff policies and systems;
3. The Contracting States affirm their existing rights & obligations concerning all others under Marrakesh Agreement Establishing the World Trade Organization and other Treaties or Agreements to which the such Contracting States are signatories;
4. SAFTA shall involve the free movement of products between countries through the elimination of tariffs, para tariffs, among other things, and non-tariff restrictions on the direction of products and any other equivalent measures;
5. The special requirements of the Least Developed Contracting States will be recognised through adopting concrete preferential measures in their favour on a non-reciprocal basis; and
6. SAFTA will entail the adoption of trade facilitation and other measures and the progressive harmonisation of legislations through the Contracting States in the relevant areas.
Benefits and concerns regarding SAFTA
The South Asian Free Trade Agreement may encourage foreign investment in SAARC nations as long as such investments do not harm member countries' domestic industries. According to World Bank reports, nations that have participated in Free Trade Agreements have experienced higher rates of economic growth than countries that have not.
The European Union trade bloc, for example, resulted in the formation of the single European market and significant pan-European industrial restructuring. The #EU also allowed member countries to take advantage of economies of scale, scope, and specialization
The underlying concern is that certain items could be rerouted through SAFTA countries. One example is the palm oil trade, in which India has imposed import restrictions from Malaysia.
The primary goals of SAFTA are to benefit the small economies of Bhutan, the Maldives, and Bangladesh. It is still unclear whether SAFTA will meet its objectives. SAFTA has potential benefits, but successful implementation and significant welfare gains are unlikely to be realized under this agreement. SAFTA's implementation and enforcement face numerous challenges. Political squabbles and low-income groups are likely to stymie much of the agreement's progress.
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