South Asian Free Trade Agreement

The objective of SAFTA is to promote and improve common treaties between countries, such as medium- and long-term contracts. Trade contracts with States, security of supply and import for certain products, etc. This is an agreement on tariff concessions such as domestic tariff concessions and non-tariff concessions 26 Rule 4 of Annex II to the SAARC Preferential Agreement (SAPTA), online: . In total, about 36% of trade in South Asia is outside the preferential regime. In contrast, ASEAN countries have no import duties on 96% of products on average, which stimulates intra-regional trade. Second, the region has been very adept at creating a proliferation of “para-customs”, which are tariffs that are only aimed at imports and not domestic production: in fact, tariffs with a different name. In South Asia, these para-duties have become ubiquitous in Bangladesh (additional duty, regulatory customs duty), Sri Lanka (port and airport development tax, Cess) and Pakistan (regulatory duty, additional duty). These para-tariffs reinforce the general protection, lack of transparency and dispersion of customs duties, as well as the general anti-export bias of the trade regimes where they prevail. This para-customs phenomenon is not observed in most countries of the world, including ASEAN countries. Due to their lack of transparency, large countries have so far generally been able to keep para-tariffs outside the framework of free trade negotiations.

In South Asia, SAFTA is, for several countries, the main free trade agreement in which they participate. Since para-tariff reductions are not part of the SAFTA negotiations, this undermines the free trade agreement. If SAFTA is to be more effective, the two problems mentioned above must be addressed. The reduced lists of sensitive countries will have to be reduced in due course. This can be carefully calibrated, taking into account the impact on revenues and jobs in the short term, and exceptional interest can be deterred from liberalizing tariffs (subject to a cap, say 5% of tariff lines). However, for the process to be credible, the timetable for tariff liberalization by each country must be clearly expressed and respected, unlike the current SAFTA process. Secondly, the issue of para-tariffs must be addressed directly. One of the starting points could be to reduce and accelerate the elimination of para-tariffs on items that are not on sensitive lists and to include para-tariffs in the SAFTA negotiations. Our report shows that intra-regional merchandise trade in South Asia can triple from the current $23 billion to $67 billion.

Given the deep links between trade and investment, a more effective free trade system can also have knock-on effects when it comes to attracting foreign direct investment, both within and outside the region. By not using this trade and investment potential – which undermines human well-being by reducing prices and increasing the diversity of goods, improving the quality of inputs for producers and exporters, expanding markets and creating jobs – South Asian countries are missing opportunities on their doorstep. The main objective of the agreement is to promote competition in this area and to offer fair advantages to the countries concerned. It aims to serve the peoples of countries by bringing transparency and integrity among nations. SAFTA was also established to increase the level of trade and economic cooperation among SAARC countries by reducing tariffs and barriers, as well as to give special preference to least developed countries (LDCs) among SAARCs to create a framework for further regional cooperation. . . .

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