South Asian leaders sign free trade agreement

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Last updated at: (Beijing Time) Wednesday, January 07, 2004

South Asian leaders sign free trade agreement

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Leaders of the seven South Asian countries Tuesday inked the Framework Agreement of the South Asia Free Trade Area (SAFTA), at the conclusion of the 12th Summit of the South Asian Association for Regional Co-operation (SAARC).

The SAFTA accord, which topped the agenda of the summit, will come into effect by January 1, 2006, after the completion of a number of required formalities, including ratification by all the member states.

Under the treaty, the non-least developed countries (NLDC) in the region will reduce their tariffs from an average 30 per cent in a period of seven years, from the date of coming into force of the agreement.

The least developed countries (LDC), however, will lower their tariffs to between zero and 5 per cent in a period of 10 years.

Each SAARC member state will be allowed to maintain "a sensitive list"of products on which tariffs will not be reduced. The list will be finalized prior the coming date of the treaty.

At the 1998's SAARC Summit in Colombo, capital of Sri Lanka, all member states agreed to work out a treaty to deepen tariff concessions, in a bid to gear up the steps towards the establishment of the South Asian Free Trade Area.

The combined external trade of the seven South Asian countries stands at more than US$66 billion. The size of such trade within the region, however, is 4 per cent, considered meagre when compared with roughly 61 per cent such as what is in place within the European Union forum.

High tariffs were the main block in the way to bringing the seven countries of the region together in partnership. Some less developed nations have long been worrying about the hazards that products from comparatively developed nations might flood into their markets.

On the sidelines of this summit, India and Pakistan agreed to start a broad dialogue next month and expressed confidence yesterday that the talks would eventually settle their decades-old dispute over Kashmir.

The deal followed a ground-breaking meeting on Monday between Indian Prime Minister Atal Behari Vajpayee and Pakistani President Pervez Musharraf for the first time in over two years.

Source: China Daily

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