Latest Industry News

Safta Agreement Came In To Force On

This paper provides a quantitative assessment of the potential impact of SAFTA and its possible extension to the North American Free Trade Agreement (NAFTA), the European Union (EU) and the Association of Southeast Asian Nations (ASEAN), and plus 3.7 Section II provides an overview of trade integration in South Asia, the institutional aspects of SAFTA and the existing empirical work on SAFTA. Section III describes methodology and empirical results. The document assesses the economic impact of trade agreements (trade flows, trade balance and customs revenues). A key outcome is that South Asia would gain greater economic benefits by extending to other APAs. However, what is considered a block for South Asia cannot apply to all Member States, creating a need for compensation mechanisms. Section IV. SAPTA has encouraged the region`s commitment to further integration with limited success. The implementation of the agreement was marked by sequential rounds of negotiations in which trade preferences were granted on the basis of products. When SAPTA came into force in December 1995, it imposed rules of origin that were too restrictive for most of its members and reduced in 1999, and trade facilitation measures were implemented on a limited basis. Only the least developed countries (LDCs) benefited from substantial trade preferences, while most trade between the largest countries was still subject to significant trade barriers (Baysan and others, 2006). SAARC Secretariat, 2006c). The paper focuses on the impact of SAFTA`s BPL program.

The estimates presented here therefore provide a partial view of the overall impact of SAFTA. However, by focusing on this homogeneous and directly quantifiable component, it is possible to compare this agreement with other hypothetical IFCs and assess the benefits of SAFTA over the alternative of looking outside the region to conclude trade agreements. Although the initial reduction in tariffs by the TLP is small, achieving the medium-term objectives of the agreement would require substantial reductions, particularly from Bhutan and the Maldives. Overall, the initial requirement to have tariffs of less than 30% (LDCs) and 20% for non-LDCs by 2008 would have a minor impact. However, the final target of a tariff level of 5% or less will mean a reduction in the average tariff rate from 2 to 3 percentage points for Sri Lanka and Pakistan to 16-18 for Bhutan and the Maldives.16 Trade agreements with NAFTA, the EU or ASEAN would generate higher trade flows than SAFTA (Chart 3). An extension to ASEAN – seen as the most natural candidate to continue liberalisation efforts in SA (see Baysan and others, 2006) – would likely result in lower trade flows than NAFTA or the EU. Once again, the fact that current trade relations with the European Union and NAFTA are of greater importance than bilateral flows with ASEAN members is an important factor; However, another factor worth considering is the similarity between South Asia`s major exports and imports and ASEAN members, which would replace their supply of goods and services instead of supplementing it.23 Simulations of impact on customs revenue (with their restrictions already mentioned) allow two main conclusions: i) SA -NAFTA would probably result in the least revenue loss. , with the exception of India and Pakistan; and (ii) its effects would be heterogeneous, ranging from 0.01% of GDP for Bhutan to 0.2% for the Maldives. Such an uneven distribution of revenues is far from the existence of an exclusive agreement with NAFTA, since SAFTA`s TLP, as currently designed, produces the most diverse effects.

Back to top