Business
Plan to ensure gains from SAFTA
By Business Report
Wed, 25 Jan 2006, 10:34:00

Despite confusi ons on some of the technical issues of the South Asia Free Trade Agreement the SAFTA became theoretically operative on January 1, 2006 as per declaration of the last SAARC summit. The SAARC countries tend to accelerate their economic integration by exploiting opportunities and exploring potentialities therein.

Although some of the members have not yet endorsed, the government is planning to fetch possible benefits from the agreement, credible sources said.

They said, Bangladesh would be sincere enough to implemen the agreement by abruptly and drastically reducing the import tariffs and waiving restrictions on imports. It, however, prefers to proceed cautiously observing the reciprocal responses.

The non-tariff barriers (NTBs) and quantitative restrictions (QRs) have been imposed on Bangladesh products such as ba tteries, garments, tableware, etc.

The issue of compensation is yet to be resolved. A slow move is necessary to ensure flow of reasonable benefits from the agreement.

Sources said, the intra-regional trade has been rallying 3.5 percent to 4 per cent of the total regional trade.

The forging of SAFTA came partly from the fact that South Asia had been largely by-passed by the recent rapid growth of world trade including in neighbouring ASEAN countries. The issues of trade creation and diversion should be counted mainly by the economies.

Trade creation negatively affects local production and employment as demand is shifted from higher-cost local production to lower-cost Preferential Trade Agreement (PTA) or Free Trade Agreement (FTA) member countries.

The net benefit of the trading arrangement would depend on th e trade-off between the trade creation and trade diversion effects.

Sources said, the growth process of other regional trading blocs that intensification of regional integration is often accompanied by growing intra-regional trade.

Such kind of trade was only 7 percent in the ASEAN region before grouping, but it shot up to 43 per cent in 1995 and to 49 per cent in 2003. In NAFTA it was only 12 percent before grouping, but was 44 percent in 2003, and in EU, it was 23 percent in the early eighties and 67 per cent in 2003. Lack of confidence and conflicts amongst the SAARC member countries should be resolved to gear up meaningful economic cooperation.

Unless countries of a region enjoy considerable political harmony, they cannot possibly agree to surrender sovereignty over their import policy, especially in South Asia where the giant Indian economy will tend to dominate outcomes, they added.



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