The Solvent Extractors’ Association of India has urged the government to regulate the increasing imports of refined soybean and palm oil from Nepal under SAFTA, citing violations of the ‘Rule of Origin’ norms. This highlights the challenges within South Asia’s trade agreements and the need for stricter enforcement mechanisms.
What is SAFTA?
The South Asian Free Trade Area (SAFTA) is a regional trade agreement under the South Asian Association for Regional Cooperation (SAARC). It was established to promote economic cooperation and reduce trade barriers among South Asian nations.
Key Facts about SAFTA:
Established: SAFTA replaced the SAARC Preferential Trading Arrangement (SAPTA) of 1993 and came into effect in 2006.
Member Countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
Special Treatment to LDCs: The agreement provides special and differential treatment to Least Developed Countries (LDCs) like Afghanistan, Bangladesh, Bhutan, Maldives, and Nepal to promote their economic growth.
Challenges in SAFTA’s Implementation
Despite SAFTA’s objectives of enhancing regional trade, intra-regional trade in South Asia remains low, at around 5%. Some major hurdles include:
Poor Transport Infrastructure: Limited connectivity and high logistics costs hinder smooth trade.
Political Disputes: India-Pakistan tensions and other bilateral conflicts restrict full implementation.
Non-Tariff Barriers (NTBs): Even though tariffs are reduced, stringent regulatory and bureaucratic hurdles impact trade.
Rule of Origin Concerns: Goods that do not originate within SAFTA nations are sometimes re-routed through member countries to avail tariff benefits, as seen in India’s concerns over Nepal’s refined oil exports.
Conclusion
While SAFTA was designed to boost regional trade and economic integration, its potential remains underutilized due to political tensions, weak infrastructure, and trade distortions. Addressing these challenges through improved connectivity, streamlined regulations, and mutual trust-building could significantly enhance economic cooperation within South Asia.
Relevance for UPSC CSE
SAFTA is crucial for UPSC Prelims and Mains (GS-2 & GS-3) under:
International Trade & Economic Integration – Understanding the impact of regional trade agreements.
India’s Foreign Policy & Economic Relations – Role of bilateral and multilateral trade negotiations.
Geopolitical & Security Concerns – The effect of political conflicts on trade agreements.
UPSC Practice Question
With reference to SAFTA, consider the following statements:
SAFTA replaced the SAARC Preferential Trading Arrangement in 2006.
All SAARC member countries are part of SAFTA.
SAFTA provides special trade concessions to Least Developed Countries (LDCs) in the region.
Intra-regional trade under SAFTA constitutes over 25% of South Asia’s total trade.
Which of the statements given above is/are correct?
(a) 1, 2, and 3 only
(b) 1 and 3 only
(c) 2 and 4 only
(d) 1, 3, and 4 only
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