SAFTA

S.A.F.T.A.
Sitar Solomon
LL.M
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South Asian Free Trade Area(SAFTA)
Agreement
• An Agreement reached on 6th January 2004 at the 12th SAARC Summit
held in Islamabad
• Came into force on January 1, 2006
• Created a Free-Trade Area of 1.6 billion people in Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan, and Sri Lanka
• The agreement succeeded the 1993 SAARC Preferential Trading
Arrangement (SAPTA)
What is SAFTA’s Ultimate Goal?
• It replaced the South Asia Preferential Trade Agreement (SAPTA)

which was limited in its scope
• The ultimate aim of SAFTA is to reduce tariffs for intra-regional trade
among the SAARC countries
What Falls within the Ambit of SAFTA?
• The Agreement incorporates trade in goods.
• Services and investments are not part of the Agreement
SAARC Preferential Trading Arrangement
(SAPTA)
• 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 Least Developing Countries & Developng
Countries
• Despite tariff reductions under SAPTA, intra-regional trade in South
Asia did not register any noticeable growth
Reasons for Failure of SAPTA
• The concessions granted by the countries were not substantial
enough to increase the overall trade of the region
• SAPTA failed to take into account the diverse needs of each member
countries
• 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
• The stringent Rules of Origin prescribed under SAPTA were also party
responsible for its failure
Principles of the SAFTA Agreement [Art. 3(2)]
• SAFTA will be governed by the provisions of the Agreement and also
by the rules, regulations, and protocols to be agreed upon with its
framework by the contracting states.
• The contracting states affirm their existing rights and obligations with
respect to each other.
• SAFTA shall be based and applied on the principles of overall
reciprocity and mutually advantages in such a way as to benefit
equitably all contracting states.
Principles of the SAFTA Agreement
• SAFTA shall involve the free movement of goods between countries
through the elimination of tariffs and non-tariffs restrictions on the
movement of goods and any other equivalent measures.
• SAFTA shall entail the adoption of trade facilitation and other
measures and the progressive harmonization of legislations by the
contracting states in the relevant areas.
• Special and favourable treatment to Least Developed Contacting
States
Objectives of the SAFTA Agreement
• Article 3(1) of the SAFTA Agreement lays out its
objectives.
• To promote and enhance mutual trade and economic cooperation
among contracting states by
• eliminating barriers to trade in, and facilitating the crossborder movement of
goods between the territories of the Contracting States
• promoting conditions of fair competition in the free trade area, and ensuring
equitable benefits to all Contracting States, taking into account their
respective levels and pattern of economic development;
Objectives of SAFTA
• creating effective mechanism for the implementation and application of this
Agreement, for its joint administration and for the resolution of disputes; and
• establishing a framework for further regional cooperation to expand and

enhance the mutual benefits of this Agreement.
Instruments of SAFTA
• The SAFTA Agreement will be implemented through the following
instruments:-
• Trade Liberalisation Programme
• Rules of Origin
• Institutional Arrangements
• Consultations and Dispute Settlement Procedure
• Safeguard Measures
• Any other instrument that may be agreed upon
Trade Liberalisation Programme
• As per TRADE LIBERALISATION PROGRAMME, the contracting states
must
• Follow the prerequisite tariff reduction schedule
• There should be a fall to 20 percent tariff from the existing tariff by
the non-least developed countries and;
• 30 percent reduction from the existing tariff by the least developed
countries
Rules of Origin
• Products with at least 40% domestic value addition will enjoy the
tariff reduction preferences under the SAFTA
• A special and differential treatment is provided for products of the
least developed countries(LDS), meaning only 30% value addition is
required for the LDCs to qualify tariff reductions
Institutional Arrangements
• The SAFTA Ministerial Council (SMC) is established by the Contracting
States
• It is the highest decision making body of SAFTA
• It is responsible for the administration and implementation of the
SAFTA Agreement and all decisions and arrangements made within its
legal framework
• The SMC is supported by a committee of Experts which has the
primary objective of receiving, and facilitating implementation of the
provisions of the Agreement and undertake any task assigned to it by
the SMC
Consultation and Dispute Settlement
Procedure
• Any dispute between or among the contracting states regarding the
application of provisions will be settled through bilateral
consultations
• If they fail to settle such disputes, the Committee of Experts looks into
the matter following its own procedure
Safeguard Measures
• SAFTA Safeguard Measures permit member countries to withdraw the
tariff concession to protect domestic industry from serious injury due
to increase in import from free trade under SAFTA.
• Tariff withdrawal is allowed to prevent or rebuild such economic

damage and the duration of these measures is not more than three
years
Benefits of SAFTA Agreement
• Increased trade between member countries
• Greater specialization in production and trade
• Lower consumer prices
• Greater market access
• Political Stability
Conclusion
• Even though the SAFTA Agreement has helped reduce tariff as well as
other non-tariff barriers for the SAARC members, the SAFTA seems far
from achieving its ultimate objective of closer integration among the
member countries.
• Major hurdles in this way are lack of trust and political tensions
among member countries

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S.A.F.T.A.

• It replaced the South Asia Preferential Trade Agreement (SAPTA)

• establishing a framework for further regional cooperation to expand and

• Tariff withdrawal is allowed to prevent or rebuild such economic

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