SAFTA

SAFTA, which stands for the South Asian Free Trade Area, is a free trade
arrangement of the SAARC. It is an agreement among countries in South Asia
to make it easier for them to trade with each other. It was formed in 2004 to
help countries work together and increase trade. Afghanistan, Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka are SAFTA members.
They follow certain rules to treat goods fairly, remove trade barriers, and
cooperate with each other. The main goals of SAFTA are to boost trade, help
SAFTA countries work together, and reduce poverty.

SAFTA covers trade in goods, services, and investment. It has a special

document called SAFTA Certificate that gives benefits to traders. SAPTA is a
predecessor of SAFTA. SAFTA has broader coverage and an elaborate dispute
settlement mechanism.

What is SAFTA?

SAFTA stands for South Asian Free Trade Area. It is an agreement among the
member countries of the SAARC. It promotes and enhances economic
cooperation in the South Asian region. SAFTA aims to create a free trade area
by gradually reducing and eliminating tariffs. It also aims to cut down other
trade barriers among its member countries.

Historical Background of SAFTA

The idea of establishing a free trade area in South Asia was first proposed in the
early 1990s.

o The South Asian Preferential Trade Agreement (SAPTA) was signed in

1993. It aimed to promote trade liberalization among the SAARC
member countries.
o SAPTA did not achieve significant progress in bringing down the trade
barriers. Hence, SAFTA was launched as an enhanced version of SAPTA
in 2004.
o The SAFTA agreement aimed to establish a more effective free trade area
in the region.

Principles of SAFTA

SAFTA is based on the following principles:

 o SAFTA aims to eliminate discriminatory treatment among member
countries. It provides them with equal opportunities in trade.
o SAFTA recognizes the differing levels of development among member
countries.
o It provides special and differential treatment to the less-developed
countries. This facilitates their integration into the regional
economy.
o SAFTA promotes reciprocal trade concessions among member countries
to ensure mutual benefits.
o SAFTA aims to reduce and cut down tariffs on goods traded among
member countries.
o SAFTA encourages transparency in trade policies and practices. It
promotes fair competition among member countries.

Objectives of SAFTA

The main objectives of SAFTA are as follows:

o To promote trade liberalization in the South Asian region.

o To provide a framework for the elimination of tariffs and non-tariff
barriers to trade among member countries.
o To promote economic cooperation and integration among member
countries.
o To create an environment for investment opportunities in the South Asian
region.
o To enhance the competitiveness of industries in the region through
cooperation in the following areas:
o Technology transfer,
o Research and development, and
o Capacity building.

SAFTA Certificate

SAFTA Certificate is a document issued by the designated authorities of

member countries. It certifies that a product qualifies for preferential treatment
under SAFTA. It enables exporters to avail reduced or zero tariffs on eligible
products. This is applicable while importing or exporting within SAFTA
member countries.

The SAFTA Certificate includes the following details:

o Name and address of the exporter and importer,

o Description of the product, and
o Applicable rules of origin.
Member Countries & Observers of SAFTA with their roles

SAFTA consists of the following member countries and observers:

Member Countries of SAFTA

Member Year of Joining Role
Countries SAFTA
Afghanistan 2007 Trade and economic cooperation
Bangladesh 2006 Trade of textiles and garments
Bhutan 2006 Trade of agricultural products and
hydroelectric power
India 2006 Trade of various goods and services,
investment
Maldives 2011 Trade of fish and tourism services
Nepal 2004 Trade of agricultural products and
hydropower
Pakistan 2006 Trade of textiles, pharmaceuticals, and other
goods
Sri Lanka 2006 Trade of tea, textiles, and tourism services
Observer Countries of SAFTA
Observers Role
Myanmar Aspiring to join SAFTA and learn from member countries
Iran Seeking trade and economic cooperation with SAFTA
China Exploring opportunities for increased trade with South Asian
countries
European Union Seeking closer trade ties with South Asian countries

Principal Organs of SAFTA

SAFTA has some important groups that make decisions:

Council of Ministers

o The Council of Ministers is the highest group in SAFTA. The trade

ministers from each country meet and talk about what they should do.
o It provides policy guidance and direction to promote regional economic
integration.

Committee of Experts
 o The Committee of Experts has senior officials from each country who
know a lot about trade.
o They are responsible for overseeing the implementation of SAFTA and
resolving trade-related issues.

Secretariat

o The SAFTA Secretariat is located in Kathmandu, Nepal.

o It provides administrative and technical support to SAFTA. It facilitates
coordination among member countries.

Special Groups

o SAFTA establishes special committees on specific sectors or issues. This

is to enhance cooperation and address challenges in those areas.
o These groups talk about customs, trade facilitation, agriculture, services,
and investments.

Specialized Bodies of SAFTA

SAFTA has established the following specialized bodies to promote cooperation

in specific areas:

Committee on Economic Cooperation

This committee helps countries work together and share ideas for making the
economy stronger. They discuss matters related to promoting investment,
technology transfer, and capacity building.

Committee on Trade in Services

This committee wants to make it easier to trade services like tourism, banking,
and healthcare. They want people from different countries to be able to work in
each other's countries.

Committee on Agriculture

This committee helps countries trade things like food and plants. It focuses on
issues related to agricultural trade, market access, and agricultural development.

Committee on Customs Cooperation

This committee works towards enhancing customs cooperation. It simplifies

customs procedures among member countries to facilitate trade. The committee
makes sure that things can move quickly through borders.
Committee on Trade Facilitation

This committee aims to reduce trade barriers. It improves trade facilitation

measures to increase the efficiency of cross-border trade. It makes sure that
businesses can trade without any problems.

Committee on Rules of Origin

This committee helps decide where products come from and if they can be
traded without too much tax. They want to make sure that products from
member countries get preferential treatment.

SAFTA Vs. SAPTA

The below table gives a comparison of SAFTA and SAPTA on a range of

factors:

Comparison of SAFTA and SAPTA

Factor of SAFTA SAPTA
Comparison
Full Form The full form of SAFTA is South SAPTA stands for South
Asian Free Trade Area Asian Preferential Trade
Arrangement
Year of 2004 1993
Establishment
Coverage Trade in goods, services, investment, Trade in goods.
and so on.
Trade o Aims to simplify customs Less emphasis on trade
Facilitation procedures and regulations. facilitation measures.
o Promotes trade facilitation
measures.

Tariff Progressive reduction of tariffs on a Reduction of tariffs on

Reduction wide range of products. limited products.
Rules of Origin Has detailed rules of origin for Has relatively fewer specific
determining the source of products. rules of origin.
Dispute Has a more elaborate dispute Had a less formal dispute
Settlement settlement mechanism to resolve settlement mechanism.
trade disputes.
Objectives Increase regional trade, Enhance trade among
member countries.
foster economic cooperation,
 reduce poverty and inequality.
Areas of Investment, services trade, Primarily focused on
Cooperation agriculture, infrastructure reducing tariffs on goods.
development, etc.
Membership Afghanistan, Bangladesh, Bhutan, Initially, only seven SAARC
India, Maldives, Nepal, Pakistan, Sri member countries.
Lanka
Trade Efforts to address trade imbalances Less focus on addressing
Imbalances among member countries. trade imbalances.
Click on this link to download the notes on Trade and Urbanization in Early
Medieval India for UPSC!
Areas of Cooperation of SAFTA

SAFTA promotes cooperation among member countries in various areas. Some

of the key areas of cooperation include:

Trade in Goods

o SAFTA aims to promote trade in goods among member countries.

o It encourages the expansion of intra-regional trade in the following
sectors:
o Textiles,
o Agriculture,
o Pharmaceuticals, and
o Automobiles.

Trade in Services

o SAFTA encourages the liberalization of trade in services. This includes

sectors such as tourism, banking, healthcare, and IT.
o Service providers from member countries can operate in each other's
markets. This boosts cross-border service trade.

Investment

o SAFTA encourages people to invest their money in different countries. It

aims to attract foreign direct investment (FDI).
o It also wants to protect investors and make it easier for them to invest.

Customs Cooperation
 o SAFTA wants to make it easy for things to move between countries. It
wants to make sure that things can move quickly and without any
problems.
o Member countries work together to simplify customs procedures. They
work on enhancing border infrastructure to facilitate trade and reduce
delays.

Trade Facilitation

o SAFTA strives to improve trade facilitation measures. The measures

include:
o simplifying trade documentation,
o enhancing transparency, and
o promoting the use of digital platforms for trade-related processes.
o This reduces the time and cost associated with cross-border trade. It
benefits businesses and promotes economic growth.

Agriculture

o SAFTA recognizes the significance of the agriculture sector in the

region.
o Member countries collaborate to promote agricultural trade, share best
practices, and enhance productivity.
o It wants countries to share ideas and work together to make farming
better.

Economic Cooperation

o SAFTA wants countries to work together and share ideas to make the
economy stronger.
o It wants countries to trade more, make things together, and use new
technology. This helps create jobs and make the countries richer.

Benefits & Challenges of SAFTA

Benefits of SAFTA

The following are some of the benefits of SAFTA:

o SAFTA provides member countries with enhanced market access to a

larger regional market. This leads to increased trade opportunities and
economic growth.
o SAFTA promotes trade diversification. It encourages member countries
to explore new markets within the region.
 o This reduces dependence on traditional trading partners and
expands business opportunities.
o SAFTA facilitates the development of regional value chains. This leads to
increased efficiency and competitiveness.
o SAFTA encourages investment flows among member countries.
o It promotes technology transfer, knowledge sharing, and capacity
building. This contributes to the growth of industries and economic
development.
o SAFTA aims to integrate economies within the region. This leads to
increased regional cooperation and improved relations.
o SAFTA reduces trade barriers among member countries. This leads to
increased trade volumes and economic integration in the region.
o SAFTA provides preferences to the less-developed member countries. It
helps them overcome their economic challenges and integrate into the
regional economy.

Challenges of SAFTA

The following are some of the challenges faced by SAFTA:

o Non-tariff barriers continue to pose challenges to trade among member

countries.
o Sometimes, there are too many rules and regulations to trade with
other countries. It can be difficult to understand and follow all the
rules.
o Inadequate infrastructure and connectivity hinder the smooth flow of
goods.
o Some places don't have good roads or ways to transport goods.
This makes it hard to trade with other countries.
o Less-developed countries may face difficulties in adjusting to competitive
pressures. This can make it harder for them to benefit from SAFTA.
o Sometimes, countries have political tensions and don't get along. This can
make it difficult to work together and trade with each other. This creates
obstacles to trade and economic cooperation.
o SAFTA's scope is limited to trade in goods, services, and investments. It
does not cover other important areas, such as intellectual property rights.
o SAFTA focuses on some areas but may not help everyone equally.
o Some countries may need more support to benefit from the
agreement.
Role of SAFTA in the Indian Economy

SAFTA plays an increasingly important role in the Indian economy. Following

are some of its major roles in shaping the Indian economy:

o SAFTA allows Indian businesses to sell their products to member

countries more easily. This means more Indian goods can be exported.
This leads to more sales and business opportunities.
o SAFTA encourages Indian industries to explore new markets within
South Asia. By doing so, they can sell their products to different
countries. This reduces the reliance on only a few markets.
o SAFTA gives special treatment to small and medium-sized businesses.
o Even smaller companies can participate in regional trade and
expand their business.
o SAFTA works to bring countries together and create a bigger market.
These efforts can attract foreign investors. These investors may set up
factories and businesses in India. This can bring in more money and
create more jobs.
o SAFTA promotes the sharing of technology. It also assists in the
improvement of skills among member countries. This helps Indian
industries learn new ways of doing things and become more competitive.

Concluding Remarks

SAFTA is a regional trade agreement. It contributes significantly to the

economic development of South Asian countries. SAFTA aims to create a
favorable environment for trade and investment in the region. This involves
reducing trade barriers, promoting cooperation, and fostering economic ties.
However, challenges such as non-tariff barriers, infrastructure gaps, and
development disparities do exist. They need to be worked on for the full
realization of SAFTA's objectives. SAFTA can play a vital role in shaping the
economic landscape of South Asia. It can foster shared prosperity. This can be
realized with continued efforts and collaboration among member countries.