South Asian free Trade Agreement (SAFTA) and Implications for Pakistan (W - 138)

South Asian free Trade Agreement (SAFTA) and Implications for Pakistan (W - 138)

Publication details

  • Thursday | 26 Dec, 2013
  • Shakeel Ahmed Ramay, Muhammad Hamza Abbas
  • Working Papers
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Shakeel Ahmad Ramay, Muhammad Hamza Abbas

INTRODUCTION

Trade linkages within the geographical expense of South Asia are not a new phenomenon for the region. These linkages have their own history which dates back to our recorded history. In Pakistan’s context the famous silk route to China inform us of traders’ activity for long time.After 1947 and emergence of new states, the region have observed significant changes in the trade relations of the countries. South Asia, once being a collection of highly protected economies till early 90s, showed keen interest in embracing globalization and lowering the trade barriers during the last one decade, partly because of structural adjustment agendas. The trading relations have gained importance for the region in 1980s and thus South Asian Association for Regional Cooperation (SAARC) was established. Under the umbrella of SAARC, the ideas of SAARC preferential trading agreement (SAPTA) and SAFTA were developed and now SAFTA is in the process of implementation. The process of implementation of SAFTA is, unfortunately, not as smooth as envisaged earlier, and Pakistan-India political relations does stall the process of implementation.

South Asian region constitutes around 22 percent of world’s population, potential market for the world due to its huge population and it has its own importance due to its geo-strategic location and due to abundance of natural resources that it has.

During 1990s, South Asian countries embarked upon trade liberalization as part of structural adjustment initiatives and also as response to changing international scenario. According to some analysts, some countries had become confident that their economies can quickly adjust with the forces of globalization and pursue sustainable growth with increased integration into the world markets. Foundation of SAARC in 1985 was an important step in intra-South Asia Cooperation. Mainly all the parties have envisaged the need for economic corporation among the member states.

Prior to 1990s not much intention was given towards the economic integration; the idea was to pursue technical cooperation for economic development. Efforts to organize regional economic integration started in early 1990s. The 6th summit of SAARC, which was held in Sri Lanka, in 1991, passed the establishment of Inter-governmental group (IGG) to lie down and pave the way to formulate the basis of an agreement for the establishment of SAARC Preferential Trade Agreement by 1997.IGG held many meetings and worked intensively to prepare the acceptable agreement for all the regional countries, thus it gave way to an agreement on SAPTA in 1993. The member states of the region desired to promote regional trade and attain sustainable growth of economies through the exchange of concession among each other.

 

SAARC’s Islamabad declaration in 2004, promised SAFTA which was enacted on 1st July, 2006. SAFTA was designed initially to be fully implemented by 2015. SAFTA improvised the work for reduced tariffs, safeguards, rule of origin, different institutional structures and dispute resolution through the help of different committees such as the committee of experts. This agreement calls for elimination of all kinds of quantitative restrictions and allows merely sensitive list of products. These lists are to be reviewed after every four years with an aim to reduce the list and expansion of free trade coverage of the agreement and its implementation in letter and spirit.