The Hindu Business Line : SAFTA committee of experts meet begins in Kathmandu today — Agenda includes finalisation of sensitive list, revenue loss compensation issues

Industry & Economy - Foreign Trade

SAFTA committee of experts meet begins in Kathmandu today — Agenda includes finalisation of sensitive list, revenue loss compensation issues

G. Srinivasan

New Delhi , Nov. 28

WITH the deadline for the launch of the South Asian Free Trade Area (SAFTA) drawing nearer, a crucial meeting of the Committee of Experts (CoE) on SAFTA begins its deliberations in Kathmandu, Nepal on Tuesday to thrash out the pending important issues.

Sources in the Government told Business Line here that at its 26th session held in Dhaka on November 9-10, the Council of Ministers directed the CoE on SAFTA to complete all negotiations at its 12th meeting from November 20 to December 1, 2005 so that the SAFTA Agreement comes into force on January 1, 2006 as mandated by SAARC leaders.

Sources said consideration and finalisation of the Nepal meeting agenda includes draft SAFTA Rules of Origin, finalisation of sensitive lists where tariff preferences would not be given and mechanism for compensation of revenue loss for the least developed contracting States such as Nepal, Bhutan, Bangladesh and Maldives.

Sources said that the least developed countries (LDCs) within SAARC might encounter loss of Customs revenue due to the implementation of trade liberalisation programme under this agreement. As such they are in favour of an amendment in the SAFTA Agreement for special and differential treatment for them.

They said that until alternative domestic arrangements are formulated to address this situation, the Contracting States should agree to establish an appropriate mechanism to compensate the LDCs for their loss of Customs revenue.

This mechanism and its rules and regulations should be established within six months of entry into force of the SAFTA Agreement.

Sources said that on the mechanism for compensation, there were divergences on capping, duration and extent of compensation. In the absence of `alternative domestic arrangement' for eligibility for compensation, the non-LDCs proposed capping of compensation to be provided based on the average of expected annual revenue loss.

On the duration of compensation, the non-LDCs have proposed three to five years from entry into force of the agreement, the LDCs have proposed five to seven years from entry into force of the Agreement with a rider for review at the end of the duration.

On the extent of compensation, the sources said, while LDCs would like to factor in the element of trade diversion into the formula for compensation, non-LDCs would like to restrict it to simple loss of Customs revenue for imports of non-sensitive products.

Sources said that at the last CoE meet in the first week of this month in Dhaka, three important agreements were approved and signed by the foreign ministers of the SAARC countries. These include agreement for the establishment of SAARC Arbitration Council, SAARC Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administration Assistance in tax matters and SAARC Agreement on Mutual Administrative Assistance in Customs matters.

Trade policy analysts said the SAFTA Agreement provides for free trade in goods among SAARC member countries and lays down a roadmap for trade liberalisation programme and once SAFTA comes into force from January 1, it would supersede the SAARC Preferential Trading Arrangement.

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