The South Asian Free Trade Area (SAFTA) agreement aims to eliminate barriers to trade and facilitate cross-border movement of goods between South Asian countries. It was established in 2004 and began implementation in 2006, with the goal of reducing customs duties between member countries to zero by 2016. However, the earlier South Asian Preferential Trading Agreement (SAPTA) failed to significantly increase intra-regional trade due to issues like non-deep tariff cuts and stringent rules of origin. SAFTA aims to address these issues through gradual tariff reductions and provisions that give preferential treatment to least developed countries.

1. INTRODUCTION
• The South Asian Free Trade Area or SAFTA is an
agreement reached on 6 January 2004 at the 12th
SAARC summit in Islamabad, Pakistan
• It created a free trade area between all the then member
countries
• The SAFTA agreement came into force on 1 January
2006
• The purpose of SAFTA is to encourage and elevate
common contract among the countries such as medium
and long term contracts.
• It involves agreement on tariff concession like national
duties concession and non-tariff concession.

2. COUNTRIES IN SAFTA

3. The SAPTA experience…
• Signed in Dec 1993, came into force in 1995
• Objective was to create and sustain mutual trade &
economic cooperation through exchange of concession
• Distinction between LDC & developing countries
• 3 rounds of PTA
• In the first round 226 tariff lines included & No discussion
on NTB
• Despite tariff reductions under Sapta, intra-regional trade in
South Asia did not register any noticeable growth in
percentage terms

4. Reasons for failure of SAPTA
• Tariff cuts by the Saarc countries were not deep
• Majority of the items offered concessions were not relevant to
the trade interest of other member countries
• Sapta was negotiated on product-by-product basis
• Tariff concessions alone could not generate any significant
gains in the intra-Saarc trade.
• The stringent rules of origin prescribed under Sapta were also
partly responsible for its failure

5. • The seven foreign ministers of the region signed a
framework agreement on SAFTA to reduce customs duties
of all traded goods to zero by the year 2016
• SAFTA required the developing countries in South Asia
(India, Pakistan and Sri Lanka) to bring their duties down to
20 percent in the first phase of the two-year period ending
in 2007.
• It was decided that in the final five-year phase ending 2012,
the 20 percent duty will be reduced to zero in a series of
annual cuts.
• The least developed nations in South Asia (Nepal, Bhutan,
Bangladesh, Afghanistan and Maldives) have an additional
three years to reduce tariffs to zero.

6. Some Statistics at a glance…
• The SAARC countries house 23.4% of world population in
just 2.96% land area.
• The total GDP (PPP) is only 6.66% of the world GDP. .
• Total GDP-US$ 4,382,700 million
• Per capita - US$ 2,779
• Total Area - 5,130,746 km2
• Population (2009 estimate) 1,600,000,000
• Density - 304.9/km2

7. Objectives
• To eliminate barriers to trade in, and to facilitate the
cross- border movement of goods between the
territories of the Contracting States
• To promote conditions of fair competition in the free
trade area, and to ensure equitable benefits to all
Contracting States, taking into account their respective
levels and pattern of economic development
• To increase the level of trade and economic
cooperation among the SAARC nations

8. • To create effective mechanism for the implementation
and application of this Agreement
• To establish a framework for further regional
cooperation to expand and enhance the mutual
benefits of this Agreement

9. Principles
• SAFTA will be governed by the provisions of this Agreement
and also by the rules, regulations, decisions, understandings
agreed by the Contracting States
• Overall reciprocity and mutuality of advantages so as to benefit
equitably all Contracting States, taking into account their
respective level of economic and industrial development, the
pattern of their external trade, and trade and tariff policies and
systems

10. • Negotiation of tariff reform step by step
• Inclusion of all products, manufactures and commodities in
their raw, semi-processed and processed forms
• SAFTA shall involve the free movement of goods, between
contracting states
• Recognition of the special needs of the Least Developed
Contracting States and agreement on concrete preferential
measures in their favour

13. SAFTA-INSTRUMENTS
• Trade Liberalization Programme
• Non Tariff Barriers
• Sensitive List
• Rules of Origin
• Special and Differential treatment Provision for LDC

14. Trade Liberalization Programme
• Phase 1- 2006-2008
a) LDC’s
b) NLDC’s
• Phase 2-
a) NLDC’s 2008-2013
b) LDC’s 2008-2016

16. Non Tariff Barriers (NTB’s)
• Further divided into two:
1) Technical NTB’s
2) Non Technical NTB’s
• SAFTA has divided into
a) Infrastructure
b) Procedural
c) Standardization
d) Para tariff barriers

17. Sensitive List
• Sensitive list is a list with every country which does not include
tariff concession.
• Bangladesh has 1,233 products on the sensitive list for the
Least Developing countries and 1,241 for the non-Least
developing countries under the SAFTA.
• India has 480 items on the sensitive list for the LDCs and 868
for the non-LDCs.
• Bhutan has 150 items for both the LDCs and non-LDCs and has
no plan of shortening its list.

18. • Nepal has 1,257 for the LDCs and 1,295 for the non-LDCs.
• The Maldives has 681 for all seven SAFTA nations.
• Pakistan had 1,169 in its sensitive list but has cut its sensitive
list by 20%.
• Sri Lanka has 1,042 and Afghanistan has 1,072 items on the
negative list

19. Issues
• Lack of commitment by Government
• Self centeredness of the countries in the bloc
• Political issues between member nations
1) India – Pakistan
2) China-India-Bhutan
3) India-Nepal
• Dual Framework with more importance to bilateral agreements.
• Lack of proper framework.
• India –ASEAN and Pakistan-Middle east