SAFTA: the long and arduous journey goes on
Shamsul Huq Zahid
Born two decades back, the South Asian Association for Regional Cooperation (SAARC) is yet to become anything different from a talking shop.
Experts on different committees, officials, ministers -- past and present -- of seven member nations have had plenty of talks. But what the peoples of these countries have witnessed are the pomp and ceremony and the beefed up security around the summits of kings, presidents and prime ministers.
The South Asian forum is still far away from achieving the objectives incorporated in its charter and the declaration adopted at the first summit meeting held in Dhaka in 1985. There is no denying that mistrust that clouded the political relations between countries has had a dampening effect on the outcome of the SAARC.
Of all the cherished goals, economic cooperation, particularly in the area of trade, for obvious reason, is viewed as the most important one. And the founders had in their mind the need to focus more on trade cooperation among the SARRC countries. But how far have the SAARC nations progressed in building a mutually beneficial trade cooperation?
The SAARC member countries after prolonged negotiations agreed to put into effect the South Asia Free Trade Area (SAFTA) from January 01, 2006. But the prospect of SAFTA becoming a reality on that day remains clouded. The member nations are yet to iron out their differences on some issues, including the sensitive lists, the mechanism to compensate the poorer members for possible revenue loss due to reduction in tariff and the rules of origin (ROO).
Bangladesh Foreign Minister M. Morshed Khan has, however, expressed his about the SAFTA becoming effective as scheduled.
The 13th SAARC summit scheduled for November 12-13 in Dhaka is unlikely to discuss the SAFTA issue since a meeting of the Committee of Experts (CoE) on SAFTA scheduled to be held in Pakistan last month was cancelled following the devastating earthquake in some parts of that country.
The Committee now will be meeting in Katmandu from November 29 to December 05 next with a view to resolving the outstanding issues. However, at the ministerial and official level talks, the issue is likely to be discussed and a decision may be taken to put into effect the SAFTA, pending resolution of the disputes on certain issues.
Putting the SAFTA into operation from January 01 next would not be a problem since the treaty relating to SAFTA provides for review and downsizing of the sensitive list every five years.
Despite the fact that the acceleration of economic growth through regional cooperation was incorporated as one of the goals of the SAARC charter adopted in the first summit meeting held in Dhaka, it was not until 1987 that an explicit commitment to economic cooperation was adopted. The South Asian leaders in the seventh SAARC summit held in Dhaka in 1993 signed the South Asian Preferential Trading Arrangements (SAPTA). The agreement provided a framework and institutional base for trade liberalization and economic cooperation between the SAARC member countries.
However, the SAPTA could produce minimal impact on inter-regional trade in earlier years. This had been mainly due to the extreme reluctance to make any tangible concessions to each other in the matters of trade emanating out of protectionist attitude and political problems and hostilities between two major member countries--- India and Pakistan.
However, negotiations on SAPTA progressed amidst intermittent hiccups and the SAARC Council of Ministers at its first meeting in 1995 decided to form SAFTA by the year 2001, but not later than year 2005.
But the factors that had hindered the progress in the negotiations under the SAPTA continued to create problems for the SAFTA. However, in a major breakthrough the seven member countries signed a free trade agreement at the Twelfth SAARC summit held in Islamabad on January 06, 2004 and decided to put the SAFTA into effect from January 01, 2006.
The SARRC members, according to the provisions of the SAFTA, agreed to gradually harmonize and eventually bring down their import tariffs on trade with SAFTA to 0-05 range.
In the first phase, the LDC members (Bangladesh, Bhutan, Nepal and the Maldives) will be required to reduce their maximum tariff rates to 30 per cent within two years. The non-LDC members are to reduce their maximum tariff rates to 20 per cent with in the same time period.
In the second phase that comes into effect on January 01, 2008, the non-LDC members will have to reduce their import tariffs to the 0-05 range in 5 years while the LDC members will do the same in 8 years.
However, the tariff reduction may not apply on items on the 'sensitive lists' that are to be negotiated among the signatories to the agreement.
It appears from the progress in SAFTA negotiations that the issues relating to sensitive lists, compensations demanded by the LDC members for revenue loss and ROO would take some more time to resolve. But the recent thaw in relations between two major member countries has raised hopes for a major turnaround in economic relations in South Asia. What is, however, expected from the major economies in the region is that they should be generous in taking into cognizance the problems of the LDC members and granting them concessions in accordance with the WTO (World Trade Organisation) Rules.