South Asia Free Trade Area (SAFTA) operational from January 1st - Pakistan fails to ratify SAFTA by deadline

By Vijay Kumar

As the world welcomed the year 2006, the South Asia Free Trade Area (SAFTA) was born with the objective of completely integrating the economies of the seven SAARC nations into a regional trading bloc in the next ten years with the phase-out of tariff barriers beginning straightaway. SAFTA has come into effect from yesterday without Pakistan. “It is just that it was not completed today (the deadline). We hope to do it very soon," Pakistan Foreign Office spokesperson Tasneem Aslam said yesterday. She, however, declined to give a definite timeframe for the ratification.

The economic integration between India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan and Maldives has started with the implementation of SAFTA with the further promise of ushering in the much-needed political stability in the region which has two of its members as 'nuclear powers'.

SAFTA holds a potential of becoming one of the most important economic blocs in the world, if the tariff barriers are removed as per the roadmap. As Commerce and Industry Minister Kamal Nath has summed it up.'' Every fifth person on the planet would live under the SAFTA trading bloc.''

Member countries - barring the Least Developed Countries (LDCs) will bring down their import duty by 20 per cent by the end of first year. With gradual progressions, customs tariffs would be brought down to five per cent after seven years. This would effectively mean a duty reduction of 15 per cent every year. However, the LDCs like Bangladesh would get the phase-out period of 10 years to bring down their tariffs to five per cent.

Since the applied rate as on January one, 2000, is being taken as the base for tariff phase-out, no major duty cuts would be necessary for India since India has already cut its tariff substantially since the base date. The SAFTA would result in a major gain for India which will get an automatic MFN (Most Favoured Nation) status in Pakistan.

No two countries that both had a McDonalds' had fought a war against each other, since each got its McDonalds'

New York Times Foreign Affairs Columnist Thomas L Friedman