SANEI: Completed Studies: Abstract

Charting a Free Trade Area in South Asia: Instrument and Modalities

The study provides an overview of the progress in moving towards a free trade environment within South Asian Association of Regional Co-operation (SAARC). The study describes the extent of liberalisation, provides several measures of the coverage and impact of the measures agreed upon till date and goes on to discuss approaches that may be fruitful when the South Asian Preferential Trade Area (SAPTA) process moves forward again.

The study has highlighted that the steps advanced towards Free Trade area (FTA) have been short, hesitant and in the final analysis, halting. It argues that in view of the current political stalemate that characterises the region, charting to a FTA seems to be removed from reality which means that to set a baseline for moving to a FTA is quite far fetched. A blueprint nevertheless serves the purpose of providing some guidelines that the CS would have on how they could proceed further towards the path of a FTA in the region and compensate for the lost opportunities.

SAPTA provides for four principal modalities for negotiations. These include:
(i) Product-by-product basis
(ii) Across-the-board tariff reductions
(iii) Sectoral basis.
(iv) Direct trade measures.

The study focuses on the first two modalities.

Taking note of the experience of select regional groupings and after examining some blueprints on charting the path to a FTA, the study recommends the following measures that appear to be appropriate in the case of South Asia.

In the first instance, the CS would do well to draw up an inventory of two lists: (i) prohibited, and (ii) restricted. The items included in the prohibited list are those that are prohibited or banned from being imported on grounds of national security, health, or morals. Most CS already have such a list. The items in the restricted list (sometimes referred to as "negative list") contain those items which CS are not yet ready to liberalise to the forces of regional/international competition. As and when these products are able to withstand the forces of competition, they may be phased out of this list to the inclusion list. The process would also involve identifying products with adequate trade potential. Once these lists are in place, the movement to a FTA in the region could be expeditiously set to motion.

The study however advocates the adoption of the across the board approach to negotiations. This is likely to be more effective in moving towards a FTA as entire sectors are liberalised in negotiations.

The study has highlighted how meaningful negotiations could be resumed to accelerate the pace of trade liberalisation within the region. It may be noted that in recent years, there has been a move towards bilateral and sub-regional arrangements with objectives similar to those endeavoured under SAPTA. It is hoped that this study will continue to have relevance as to the method to be applied in the conduct of negotiations even under such arrangements.


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