South Asian Free Trade Area

The South Asian Free Trade Area (Hindi: दक्षिण एशियाई अबाध‌ व्यापार क्षेत्र ; SAFTA), established in 2004, aims to boost economic integration among eight nations, Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka, covering a market of 1.6 arab people. A key objective was eliminating customs duties on all traded goods by 2016.

South Asian Free Trade Area दक्षिण एशियाई अबाध व्यापार क्षेत्र
Countries under the South Asian Free Trade Area
Member states	Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka
Establishment	2006
• Location	12th SAARC summit, Islamabad, Pakistan
• Date	6 January 2004
• In force	1 January 2006

Under the agreement, developing countries like India, Pakistan, and Sri Lanka were required to slash duties to 20% in the first phase (2005–2007), followed by incremental reductions to zero by 2012. Least developed nations were granted an extended timeline of three additional years. While India and Pakistan formalised the treaty in 2009, Afghanistan, joining as SAARC’s eighth member, ratified the SAFTA protocol on 4 May 2011.

History

SAPTA

During the December 1993 SAARC summit in Colombo, member countries gave their approval for forming an Inter-Governmental Group (IGG). This body was assigned the responsibility of drafting the South Asian Preferential Trade Arrangement (SAPTA), with the goal of implementing it before 1997.

SAFTA

The SAFTA agreement was finalised on 6th January 2004 during the 12th SAARC summit. Signed by all eight member nations (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka), this trade pact officially became operational from 1st January 2006 after receiving ratification from each participating government. The agreement reflects the collective commitment of SAARC countries to enhance regional economic cooperation through mutually beneficial trade concessions.

The basic principles underlying the SAFTA are as follows:

1. overall reciprocity and mutuality of advantages so as to benefit equitably all Contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems;
2. negotiation of tariff reform step by step, improved and extended in successive stages through periodic reviews;
3. recognition of the special needs of the Least Developed Contracting States and agreement on concrete preferential measures in their favour;
4. inclusion of all products, manufactures and commodities in their raw, semi-processed and processed forms.

Afghanistan became part of SAFTA in 2011. This agreement aims to strengthen trade ties among member countries through medium and long-term contracts, including state-operated trade, supply guarantees, and import agreements for specific goods. It offers tariff concessions like reduced national duties and non-tariff benefits.

SAFTA's core goals are fostering fair competition, ensuring balanced benefits for all nations, and enhancing transparency to benefit citizens. It seeks to boost trade and economic collaboration within SAARC by lowering tariffs and trade barriers, with special provisions for Least Developed Countries (LDCs). Additionally, it lays the groundwork for deeper regional cooperation, alongside SAARC's existing free trade agreements.

Instruments

The following are the instruments involved in the SAFTA:

• Trade liberalisation programme
• Rules of origin
• Institutional arrangements
• Consultation
• Safeguard measures
• Any other instrument that may be agreed upon.

Trade liberalisation programme

Under the trade liberalisation programme, member countries must adhere to a phased tariff reduction schedule. Non-Least Developed Countries (non-LDCs) are required to lower tariffs to 20% of current rates, while Least Developed Countries (LDCs) must reduce theirs by 30%. However, these cuts do not apply to the sensitive list, which is subject to mutual negotiation among member states before trade can occur.

The sensitive list requires consensus, with special consideration for LDCs. The SAFTA Ministerial Council (SMC) reviews this list every four years, aiming to gradually shorten it to promote freer trade.

Sensitive list

Under the SAFTA framework, sensitive lists that exclude certain products from tariff concessions vary among member nations. Bangladesh originally had 1,233 items on its sensitive list for LDCs and 1,241 for non-LDCs, with plans to reduce these by 246 and 248 items respectively. India maintained 25 items for LDCs and 695 for non-LDCs, and former PM Manmohan Singh announced a reduction of 46 items during his visit to Dhaka. Bhutan kept its list at 150 items for both LDCs and non-LDCs, with no immediate plans for revision. Nepal reduced its non-LDC list from 1,295 to 1,036 items, a reduction of 259, while keeping 1,257 items for LDCs. The Maldives applied the same list of 681 items to all seven SAFTA members. Pakistan cut its sensitive list by 20%, reducing it from 1,169 to 936 items. Sri Lanka and Afghanistan retained 1,042 and 1,072 items respectively on their lists. These adjustments reflect ongoing efforts to enhance trade cooperation under SAFTA.