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Although South Asia was relatively slow to take up the issue
of regional economic cooperation, it was quick to set itself
an ambitious agenda. In 1993, the proposal to set up a South
Asian Preferential Trade Agreement (SAPTA) was accepted
by all seven member states of the South Asia Association
for Regional Cooperation (SAARC) and SAPTA came into formal
operation in December 1995. A year later, SAARC countries
agreed to the formation of a South Asian Free Trade Agreement
(SAFTA) by 2000, but not later than 2005. Subsequently,
the date for establishing SAFTA was brought forward to 2001,
but reflecting concerns of some member states, a more practical
target of 2008 has since been proposed.
So far, three rounds of tariff negotiations under SAPTA
have been completed and concessions of nearly 4700 tariff
lines out of a total of 6000 under the HS code system have
been exchanged. But the impact of SAPTA on generating trade
in the region has been negligible. Intra-regional trade
remains disappointingly low, accounting for about 4 percent
of trade in South Asia. In the case of Sri Lanka, SAPTA
has had no discernible impact on Sri Lanka’s trade
with the rest of South Asia. This has largely been due to
the limited number of concessions, the irrelevance of much
of the concessions that have been offered, limited depth
of tariff cuts, failure to deal with non-tariff issues and
restrictive rules of origin. Political tensions in the region,
particularly between India and Pakistan have only served
to undermine regional economic cooperation.
Given the limited achievements of the SAPTA process, bilateral
trade agreements are now being pursued more vigorously among
the SAARC member countries, offering far more liberal and
substantial concessions than anything under the regional
framework. The Indo-Lanka Free Trade Agreement (ILFTA),
signed in December 1998 came into operation in March 2000.
More such agreements are in the pipeline, posing a threat
to further fragmentation of a common South Asian goal towards
regional integration.
The question then remains whether economic cooperation
within the framework of a regional arrangement in South
Asia has any future. The first step that has to be taken
is to acknowledge the limitations of past performance. Although
the present quite low level of intra-regional trade is only
partly a result of policy, SAARC has to rethink its approach
to the trade negotiating process adopted so far. A realistic
option to hasten liberalization in the transition to a free
trade area appears to be a combination of both a product-by-product
and chapter wise negotiations. It will require a more substantive
commitment than shown in the past to open markets to each
other and a willingness to set aside political differences.
Only by insulating the economic agenda as far as possible
from regional politics will South Asia begin to achieve
any tangible results from closer economic cooperation.
Table of Contents
- Introduction
- Regional Trade Arrangements: Costs and Benefits
- The Experience of Economic Integration in South Asia
- The Relevance of SAPTA in Generating Trade in South
Asia : The Case of Sri Lanka
- The Future Prospects for Economic Cooperation in South
Asia
- Conclusion
- Appendices
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