South Asian Free Trade Area (SAFTA)

The South Asian Free Trade Area (SAFTA) is the free trade arrangement of the South Asian Association for Regional Cooperation (SAARC). The agreement came into force in 2006, succeeding the 1993 SAARC Preferential Trading Arrangement. SAFTA signatory countries are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. In the first phase, India, Pakistan and Sri Lanka will bring down their customs tariff to 20% by 1st January 2008. As far as the LDC Member States i.e. Bangladesh, Bhutan, Maldives and Nepal are concerned, they would reduce their customs tariff to 30%. First tariff reduction would be effected on 1st July 2006 by all Member States with the exception of Nepal which will do so on 1st August 2006. SAFTA recognizes the need for special and differential treatment for LDCs in its preamble. This has been translated in the following measures.
• LDCs were allowed smaller initial tariff reduction and longer implementation periods under. trade liberalization programs;
• LDCs can have a longer list of sensitive products exempted from liberalization commitments than non-LDC signatories;
• LDCs were granted greater flexibility in the continuation of quantitative or other restrictions;
• There is a commitment of contracting states to give, until the trade liberalization program been completed by all Contracting States, special regard to the situation of LDCs when considering the application of anti-dumping and/or countervailing measures, providing an opportunity for consultations and favorably considering accepting price undertakings offered by exporters from LDCs;
• The agreement contains a rule whereby safeguard measures are not to be applied against products originating in LDC contracting states, “as long as its share of imports of the product concerned in the importing Contracting State does not exceed 5 per cent, provided Least Developed Contracting States with less than 5 per cent import share collectively account for not more than 15 per cent of total imports of the product concerned”;
• There is also a commitment to consider taking direct trade measures with a view to enhancing sustainable exports from LDC contracting states, such as long and medium-term contracts containing import and supply commitments in respect of specific products, buy-back arrangements, state trading operations, and government and public procurement;
• LDCs were to be given special consideration in requests for technical assistance and cooperation arrangements designed to assist them in expanding their trade with other Contracting States and in taking advantage of the potential benefits of SAFTA;
• A mechanism to compensate LDCs for their loss of tariff revenue upon liberalization is contained in Article 11 of the Agreement but was not implemented.
Note: SAFTA contains a special provision for Maldives (Article 12), which graduated from the LDC list in 2011. The Maldives was thus accorded LDC treatment in the Agreement and in any subsequent contractual undertakings.