South Asia Free Trade Agreement Upsc

Regional trade agreements have been and will continue to be an important instrument for trade liberalization. While the theory is skeptical of ATRs, most empirical studies find that commercial creation dominates trade diversion. In practice, several factors increase the benefits of ATRs, including large and varied membership, low external maximum tariffs, comprehensiveness, liberal rules of origin and trade facilitation. For these reasons, SAFTA offers room for improvement. Restrictive rules of origin, large sensitive lists and uncoordinated efforts currently threaten to limit the region`s commercial potential. SAPTA was a clear example of the restrictions on the introduction of restrictive rules of origin and the negative role played by exclusion lists, which in some cases covered most of the existing trade (Baysan and others, 2006). The India-Sri Lanka free trade agreement has been hit by similar restrictions, but it has significantly increased trade between India and Sri Lanka, demonstrating the enormous potential of unexplored trade links. The other drawback of the agreement is that the agreement did not bring much benefit to India in the services sector. Under ASEAN rules, the free trade agreement will not be implemented until all nations have ratified free trade agreements in their parliaments. This has caused a lot of problems for India, because the Philippines has not ratified the free trade agreement in the services sector, because there will be direct competition between India and the Philippines in direct competition with services, which would be a disadvantage for the latter.

The South Asian Free Trade Area (SAFTA) is the free trade agreement of the South Asian Association for Regional Cooperation (SAARC). The agreement entered into force in 2006 and came into force with the 1993 ASAC preferential trade agreement. SAFTA`s signatory countries are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. There are several agreements to facilitate trade in the region. The SAARC Preferential Trading Arrangement (SAPTA) was signed in 1994, followed by the South Asian Free Trade Area (SAFTA) agreement a decade later in 2004 (which came into force in 2006). India`s bilateral trade with Myanmar is governed by the 1994 Indo-Myanmar-border trade agreement and the 2009 ASEAN-India Trade Agreement (AITGA). In addition, India and Sri Lanka signed the Indo-Sri Lanka Free Trade Agreement (ISFTA) in 1998. The agreement came into force in 2000. Over the years, with trade statistics and figures, it is easy to decipher the trade imbalance in favour of ASEAN and India, which has a growing trade deficit with the region, which is severely damaging their current account deficit, which is affecting India overall in terms of fiscal employment.

The aim of SAFTA is to promote and increase common contracts between countries, such as medium- and long-term contracts. State-managed trade contracts, the supply and import insurance of certain products, etc. It is an agreement on tariff concessions, such as national tariff concessions and non-tariff concessions, which make up the bulk of its trade with its neighbours (Figure 1).