The Hindu Business Line : `For SAFTA to deliver, tariffs should come down within stipulated time'

FOR the intra-regional trade among SAARC countries to grow to $14 billion by 2010, from the present level of $7 billion, the existing tariffs should come down within the stipulated time frame of South Asian Free Trade Agreement (SAFTA), according to the industry chamber FICCI. Also, the Sensitive Lists of all the SAARC countries need to be limited and the trade facilitation infrastructure strengthened, says the chamber.

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

A total of 5,500 tariff lines under SAFTA have been liberalised and are expected to move towards zero tariff for non-least developing countries (non-LDCs) by 2013 and for LDC by 2016. But the chamber says that unless the tariff lines cover items with trade potential and member-countries have small Sensitive Lists, the very purpose and spirit of this agreement would be defeated.

If sectors such as agriculture, textiles, leather, pharmaceuticals, rubber, light machinery and automobile parts are put under the Sensitive Lists then the region will not be able to harness the benefits of SAFTA.

The reduction in tariff rates, as effected by SAFTA, shall multiply trade and commerce only if it is complemented and supported by adequate infrastructure and trade facilitation measures by member-countries.

At a later stage, the chamber suggests that the scope of SAFTA be expanded to cover trade in services and investments. The private sector needs to be given incentives to set up enterprises across South Asia. For this, an encouraging investment climate is essential and concluding a Regional Investment Agreement within SAARC is a must. This alone shall maximise gains from enhanced intra-trade and investment flows, says the chamber.