The Basic Principles of South Asian Free Trade Area Agreement



South Asian Association for Regional Cooperation (SAARC) consists of seven countries all of these countries are South Asian namely Bangladesh, Bhutan, India, Maldives, Pakistan and Sri Lanka which formed in 1985 having its 1st summit in Dhaka Bangladesh. It was created for the purpose of having local consultation periodically for the matters of common interest & to inspect whether there is a possibility of cooperation in future for these concerns among the countries. It was done to enumerate the same relations that resulted in the regional group in which Corporation was created to enhance a comparative position and international representation.


SAPTA  or South Asian preferential trade agreement came into being on 11/ 04/ 1993 at Dhaka, Bangladesh on this day all the countries except India and Sri Lanka signed the agreement and on 28 December 1998, India and Sri Lanka also were signatories of this accord. The aim of this agreement was to promote and sustain mutual trade and grow the economic cooperation to exchange of concession with the region. SAPTA was the initial step towards South Asian Free Trade Area which was target to be established by 2005.

The purpose of this agreement aims at encouraging and increasing common contracts among the countries, be it medium or long term. It involves the contract that are operated by respective nations, supply, and input insurance in respect of their specific products.

South Asian free trade India agreement was reached on January 6th 2004, SAARC summit in Islamabad Pakistan targeted an area for 1,600,000,000 people in countries like Afghanistan, Bangladesh Bhutan, India, Maldives Nepal, Pakistan and Sri Lanka to trade freely,  as of now by population of all the countries is 1,800,000,000 people. Foreign ministers of the areas and formation of the areas agreed to be the signatories of a Framework agreement to reduce all the custom duties of the goods traded down to 0% by the year 2016.

According to the agreement the emergent nations in Southern Asia like India, Pakistan, Sri Lanka were required to cut down custom taxes or duties down to twenty percent in the IST phase and in the next five years i.e. IInd phase to 0% which was ending in 2012. The remaining lesser developed countries were given 3 more years to bring the tariffs down to 0%.

As per the agreement there are 2 types of members one is “Lower Developed Countries(LDC)” and other is “Non-Lower Developed Country(Non-LDC)” least developed countries include Bhutan, Bangladesh, Maldives and Nepal has not least developed countries include countries like India, Pakistan, Sri Lanka.


  • FTA or common markets are correct footsteps taken towards a greater overall economic interaction among the group of countries that are situated at the same location on the sphere that is our earth.
  • Then we see is that, all Unions of different members of the custom where area where the trade is being done should have the same agreement if any external members come to trade with the signatories of the agreement.
  • The highest level of incorporation happens when all the trading policies of the region comes together as whole.


1. SAFTA will be governed by the provisions of this Agreement and also by the rules, regulations, decisions, understandings and protocols to be agreed upon within its framework by the Contracting States:

According to this principle all the countries who are signatories of this agreement have to follow rules and regulations when they have to make decisions as written down in the agreement.

2. SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit equitably all Contracting States, taking into account their respective levels of economic and industrial development, the pattern of their external trade and tariff policies and systems:

The main aim of this agreement is to develop each and every nation who is a signatory state by increasing their exports and imports and also by taking their respective level of economic and the industrial development into account. A way by which this could be done was by reducing the custom duties when goods are being transported via International borders among these countries it could be either sea or land.

3.SAFTA shall entail adoption of trade facilitation and other measures, and the progressive harmonization of legislations by the Contracting States in the relevant areas:

According to this principle all the signatories have to reduce their custom tariff down 0%. According to this agreement the developing countries like India, Pakistan and Sri Lanka have to reduce their tariffs down to 20% within 2 years ending 2007 in the first phase, and from 20 % to 0% in the next phase ending 2012 and the least developed states like Nepal, Bhutan, Bangladesh and Maldives, were given additional three years to bring their talents down to zero.

4.Inclusion of all products, manufacturers and commodities in their raw, semi-processed and process forms.

All of the goods that are to be imported or exported among the countries should include all the products that are manufactured or commodities in any form or state, the restrictions if to be imposed should be mutually beneficial to both the states.

5. SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures;

One of the basic objective of the SAFTA because of which SAFTA came into being that all the goods should be freely transported between the signatories of this agreement.

6.The special needs of the Least Developed Contracting States shall be clearly recognized by adopting concrete preferential measures in their favour on a non-reciprocal basis.

According to accord, while the least emergent nations had to cut down their tariffs to 20% gradually within 2 years at same time the least emergent nations like India, Pakistan and Sri Lanka what to bring down their custom tariffs 30% in the same time frame. By doing this the definition of the least developed countries work being done so that they aren’t been taken advantage of.


  1. Establish a liberal trading area in Southern part Asia where the tariffs are absent.
  2. To make sure that the countries really want to export a product should not be forced to do so, by other countries.
  3. Members of the agreement to limit the goods that they want to import, in lieu of the national interest.
  4. To make a compensation scheme for least developed members in the agreement because of the loss of revenue caused due to the free traded area.
  5. To assist the least developed countries in exports by giving them technical support, and promoting healthy competition


It is in force since 2006 with common aim to abolish trade and direct restrictions and create a common market to promote mutual trade by exchange of their concession. So, this after can be said to be the initial step in the direction of combining and having a greater overall interaction of the economies in the middle of the SAARC countries.


Author: Kashish Goel,
Delhi Metropolitan Education, GGSIPU 4th Year

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