Business Opportunities in - Trade Development Authority Of Pakistan

Export News 23 & 24-2006
BRIEFING ON
AGREEMENT ON SOUTH ASIAN FREE TRADE AREA
The Free Trade Agreement consists of the following components:
� The Agreement, and
� Annexes I, II, III, IV (Annex IV contain Anx-A & B with two appendixes
1&2)
The Agreement
The South Asian Association for Regional Cooperation (SAARC) was established on
December 8, 1985.The SAARC Charter was adopted by Governments of Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan and Sri Lanka with a aim to accelerate the process of
economic and social development in Member States. The Agreement on South Asian Free
Trade Area (SAFTA) was signed at Islamabad during the Twelfth SAARC Summit on 6 January
2004. The ratification of SAFTA by all the member countries is major achievement of SAARC
mandate. SAARC Secretariat on 22 March 2006 has issued a Notification formally announcing
the entry into force of SAFTA Agreement with effect from 1 st January 2006.
The entry into force of the Agreement thus launches the South Asian Free Trade Area
which would be completed by 1 st January 2016. The first round of customs duty reduction
would take place, as agreed by the Member States, in July/August 2006.
Under Article 7 of the Agreement tariff reduction Modality is defined as Trade
Liberalization Programme (TLP) – in the first phase, India, Pakistan and Sri Lanka will bring
down their customs tariff to 20% by 1st January 2008. As far as the LDC Member States i.e.
Bangladesh, Bhutan, Maldives and Nepal are concerned, they would reduce their customs
tariff to 30%. First tariff reduction would be effected on 1st July 2006 by all Member States
with the exception of Nepal which would do so on 1st August 2006.
Article-7 of the Agreement contains modalities of tariff reduction under TLP, which are as
follows:-
� No tariff reduction on items in the Sensitive List.
� Non-LDCs (Pakistan, India, Sri Lanka) shall reduce tariff to 0-5% for LDCs
(Bangladesh, Bhutan, Nepal, Maldives) within three years (2009)
� Tariff Reduction by Non-LDCs for Non-LDCs
Reduction in two phases:
Phase-I (2006-2008)
Existing tariff rates above 20% to be reduced to 20% within two years. Tariff below
20% to be reduced on margin of preference basis of 10% per year.
Phase-II (2008-2013)
Tariff to be reduced to 0-5% within 5 years.
� Tariff Reduction by LDCs for all SAARC Members
Reduction in two phases:
Phase-I (2006-2008)
Existing tariff rates above 30% to be reduced to 30% within two years. Tariff below
30% to be reduced on margin of preference basis of 5% per year.
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