|Thursday, 13 February 2003|
Update on SAFTA negotiations
An update on the latest position in regard negotiations on the South Asia Free Trade Area (SAFTA) formed the basis of a talk by D. G. A. P. Dharmapriya, Deputy Director of Commerce at the monthly meeting of the Sri Lanka Nepal Business Council recently at the Nepal Embassy.
According to Dharmapriya the subject of Preferential trading was incorporated into the broader agenda of SAARC on a proposal made by Sri Lanka. Sri Lanka submitted the draft framework treaty on SAPTA which came into operation in December 1995 with the ratification of the concessions exchanged under the first round of tariff negotiations.
At the conclusion of the second round of negotiations a noteworthy feature was that the agreement (was accepted in principle) by SAARC and that an action plan should be prepared with timeframes for each individual step for moving from SAPTA to SAFTA preferably by 2000 but not later than 2005. Whilst the third round of negotiations was concluded in 1998 a downward revision of SAPTA rules of origin (ROO) was implemented in March 1999. The fourth round of negotiations was concluded in December 2002 subject to ratification.
Thus, according to Dharmapriya concessions on around 10% of total tariff lines of about 42,000 have so far being exchanged between the member states of SAPTA. This forms the backdrop to SAFTA.
The initial step in the change over from SAPTA to SAFTA led to the formation of a committee of experts comprising government officials from member countries in 1999. The committee was entrusted with the task of drafting a comprehensive Treaty Regime for a South Asian Free Trade Area.
The committee of experts derived its mandate from a declaration made at the tenth SAARC summit held in Colombo, which stated that "such a Treaty must incorporate among other things binding time frames for freeing trade, facilitate trade and provisions to ensure an equitable distribution of benefits of trade to all states especially smaller and least developed countries including mechanisms for compensation of revenue loss."
A salient feature of the negotiations related to the classification of SAARC into two categories-developing country member states and least developing country member states.
Under SAFTA, a proposal by Sri Lanka that a third category called 'smaller country' be introduced, was accepted by the group.
The rationale for the third category concept advanced by Sri Lanka was based on the inability of smaller countries within the SAARC to undertake the same level of obligations that the larger countries could afford. Sri Lanka had "explained that economic assymetries such as the GDP, the size of the economy, degree of industrialisation, export production base, state of technology, skilled manpower resources were factors to be reckoned with in this regard.
According to Dharmapriya the proposed liberalisation program included a two phased tariff reduction proposal
Developing country member states: reduction of tariffs from existing rates to 20% within two years. It actual tariff rates are below 20% there will be an annual reduction by 10% on actual tariff rates for each of the two years.
For LDCs: reduction of tariff from existing rates to 30% within two years. If actual tariffs rates are below 30% there will be an annual reduction by 10% on actual tariff rates for each of the two years.
For developing country member states: reduction from 20% or below to 0-5% within a second time frame of two years.
For LDCs: reduction from 30% or below to 0-5% within the second time frame of 3 years for primary products and five years for other products.
Dharmapriya said that Bangladesh had submitted, alternative proposals. However, Sri Lanka as a smaller country was pursuing a middle path in respect of phasing out of tariffs. A similar approach was being made by the Maldives.
Among other important aspects of the proposals were the setting up of funds to compensate for revenue losses and the formulation of the Rules of Origin. In this regard the Institute of Policy Studies in Colombo had been commissioned to carry out an indepth study of implications to member states of the transition from SAPTA in SAFTA and its report was expected to be placed by the end of March at the next meeting of the group in Katmandu.
The group of eminent persons had recommended a gradual phasing out of tariff considering its implecations on the least developing countries. It had also suggested that SAFTA be fully operational by 2000 for non-LDC members and by 2001 for LDC members. "However as will be observed the expected dates for the launching of SAFTA had already lapsed," Dharmapriya said.
In proposing the vote of thanks the President of the Sri Lanka Nepal Business Council Jagath Savanadasa said that regional treaties took long periods to complete. He said the example of the European Union which of course covered far wider areas of cooperation and also the North American Free Trade Area (NAFTA). He said that there were possibilities of a clash of interests between bilateral trade treaties and those covering regions specifically.
Savanadasa said that experts of the calibre of Dharmapriya played a vital role in protecting the interests of a country in regional trading whilst ensuring its development for the common good of the region.
Produced by Lake House