Decks cleared, Safta rings in

Ushering in a new era in the history of South Asian cooperation, the seven-member Saarc has finalised the South Asia Free Trade Area Safta...

Ushering in a new era in the history of South Asian cooperation, the seven-member Saarc has finalised the South Asia Free Trade Area Safta on Thursday.

According to an official release, commerce minister Kamal Nath, who is in Brussels, indicated this on receiving intimation from Kathmandu where the committee of experts CoE was huddled in a meeting to iron out last-minute glitches.

Safta, a pact between Saarc countries India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, was signed at the 12th Saarc Summit in Islamabad last year. It is scheduled to come into force on January 1, 2006 and will be fully operational by 2016.

The pact holds huge potential for intra-regional trade growth as over 90 per cent of the imports by South Asian countries are being sourced from outside the region and a major part of exports of South Asia are made to countries that are not part of the group.

The total intra-regional trade amongst Saarc countries is less than 7 billion today as against the total volume of the combined international trade of 350 billion in the region.

India, which is the largest of the seven member countries, stands to gain significantly from the pact. The country8217;s total trade with Saarc countries increased over 8 per cent to 5.2 billion in 2004-05. Benefits accruing to India would keep multiplying in the next ten years of the agreement8217;s implementation, trade experts said.

nbsp;	It8217;s sealed

		nbsp;	Expectations 8226; Agreement could lead to more investment 8226; Trade growth to be symmetric 8226; Positive signal to global community on South Asian unity Concerns 8226; Tariff compensation mechanism for LDCs may be a sticking point 8226; Complicated customs rules 8226; High value goods in negative lists may hurt	nbsp;

India8217;s enthusiasm could be gauged by Prime Minister Manmohan Singh8217;s recent statement in which he said the agreement would lead to growth in intra-regional trade from 6 billion to 14 billion within two years of its coming in.

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While it will take some time to resolve complex issues relating to tariff compensation mechanisms, huge negative list of products to be kept outside the agreement and exemptions for a substantial number of products from the strict rules of origin ROO, these cannot undermine the huge opportunity the FTA holds for the region.

As regional trade expert Ram Upendra Das from RIS points out, 8220;If everything goes well, the FTA could also result in enhanced investment flows within the region despite the fact that it is a strictly goods agreement.8221;

With unity leading to strength, Safta could lead to greater recognition of the region in the global arena and lend it a more effective voice on global issues.