The Hindu Business Line : SAFTA takes effect from today

The South Asian Free Trade Agreement (SAFTA) takes effect from Saturday with the seven-member governments of the South Asian Association for Regional Cooperation (SAARC) announcing the first tariff reduction under the tariff liberalisation programme (TLP) that comes into effect from July 1.

Sources in the Government told Business Line here that while drawing up the list of items for tariff concessions with the SAARC countries, India has kept as many as 884 items in the sensitive list for non-least developed countries such as Pakistan and Sri Lanka and 763 items for least developed members such as Bhutan, Bangladesh, Nepal and Maldives. On these items, trade liberalisation would not be applicable.

Moreover, the sources said, India's sensitive lists include mainly goods/products from agricultural sector, textile sector, chemicals, leather and sectors reserved for small-scale industries (SSI). Under the TLP, in two years from tomorrow, non-least developed countries such as India, Pakistan and Sri Lanka would bring down tariffs to 20 per cent, while least developed countries (LDCs) would bring them down to 30 per cent. Non-LDCs will then bring down tariffs from 20 per cent to 0-5 per cent in five years (Sri Lanka six years), while LDCs would do so in eight years.

Positive incentive

The Director-General, Research and Information System for developing countries, Dr Nagesh Kumar, told Business Line here that India has autonomously moved to less than 20 per cent tariff level for most of the industrial goods. However, he said, the launch of SAFTA from tomorrow is a positive incentive and a strong stimulus to intra-SAARC trade. He said studies made by the RIS estimates that as the trade liberalisation programme takes effect within five-year timeframe, the intra-SAARC trade would treble from $6 billion to $18 billion.

Besides the general provision in the SAFTA rules of origin, which prescribes two criteria of change of tariff heading at four digit harmonised coding system a value content of 40 per cent (30 per cent for LDCs), product special rules for 191 tariff lines have been prescribed under SAFTA ROO for least developed countries given their limited base for natural resources and undiversified industrial structure.