chapter4

CHAPTER-IV

Trade and Economic Cooperation

SAARC has taken important steps to expand cooperation among member countries in the core economic areas. The completion of the Regional Study on Trade, Manufactures and Services (TMS) in 1991, was the first significant step which paved the way for SAARC to move forward in strengthening cooperation in this important field. The Study outlined a number of recommendations for promoting regional cooperation in the core economic areas.

A high-level Committee on Economic Cooperation (CEC) comprising the Commerce Secretaries of Member States, was established in July 1991 to act as the forum to address economic and trade issues. The Committee is charged with the responsibility of, inter-alia, monitoring the progress in the implementation of decisions relating to expansion of trade and economic cooperation under the framework of SAARC. It considers the reports of Inter-Governmental Group (IGG) on trade liberalisation, Inter- Governmental Expert Group (IGEG) on transition to South Asian Free Trade Area (SAFTA), and Committee of Participants (COP), and other expert groups on customs, investments, and standardisation. It also reviews progress in the implementation of decisions of meetings of SAARC Commerce Ministers.

At the Colombo Summit in December 1991, the Heads of State or Government approved the establishment of (IGG) to seek agreement on an institutional framework under which specific measures for trade liberalisation among SAARC member states could be furthered. The IGG evolved a draft Agreement on SAARC Preferential Trading Arrangement (SAPTA), which was subsequently signed by the Council of Ministers in Dhaka on 11 April 1993 during the Seventh SAARC Summit, upon the recommendation of CEC.

After completion of procedural formalities by all SAARC member countries and subsequent to a notification issued by the Secretariat to this effect, as per Article 22 of the Agreement, the SAPTA Agreement entered into force on 7th December 1995 - two years ahead of the time schedule envisaged initially. SAPTA contains provisions giving special and favourable treatment to the LDCs in the SAARC region. Additional measures in favour of LDCs including provisions for safe-guard action and balance of payment measures are also incorporated in SAPTA to protect the interests of member states during critical economic circumstances.

With the operationalisation of SAPTA in December 1995, the IGG on Trade Liberalisation, embarked on its Second Round of Trade Negotiations, which was successfully concluded after four meetings of the Group in Colombo, Islamabad, New Delhi and at the SAARC Secretariat, Kathmandu in March, September, October and November 1996 respectively. The number of products enjoying preferential treatment at the conclusion of the Second Round is more than 2000. The non-tariff barriers in the way of expansion of intra-SAARC trade are also being identified and removed. The Third Round of Trade Negotiations under SAPTA is presently underway and is expected to be completed shortly.

Following the ratification of SAPTA by all Member States, the Sixteenth Session of the Council of Ministers (New Delhi, December 1995) agreed that Member States should strive for the realisation of a South Asian Free Trade Area (SAFTA). An Inter-Governmental Expert Group (IGEG) on transition to SAFTA comprising experts from the Member Countries was set up as an ad-hoc body by the CEC to identify the necessary steps towards moving into a free trade area. The IGEG has met twice and held in-depth discussions and agreed on the draft terms of reference for the Group and has also drawn up a broad framework of Action Plan for achieving SAFTA. In order to give impetus to intra-SAARC trade under the SAPTA Agreement and to promote economic cooperation in the region, the Commerce Ministers of SAARC countries met in New Delhi in January 1996. It has since been decided that the Commerce Ministers shall meet annually and the second meeting has been held in Islamabad in April 1998.

The first SAARC Trade Fair was held in New Delhi in January 1996 with the theme "Cooperation for Growth". The Fair, organised as a part of the commemoration of the first decade of SAARC, was jointly inaugurated by the Commerce Ministers and leaders of delegations of Member States. The Fair provided a befitting venue for the representatives of the business and industry of SAARC Member Countries to discuss various issues connected with promotion and expansion of intra-SAARC trade. The second SAARC Trade Fair was held in Colombo (1998) and the next SAARC Trade Fair is slated to be held in Islamabad in 1999.

The Heads of State or Government at the Ninth SAARC Summit recognised the importance of achieving a free trade area by the year 2001 A.D., and reiterated that steps towards trade liberalisation must take into account the special needs of the smaller and the Least Developed Countries and that benefits must accrue equitably.

The Tenth SAARC Summit decided to constitute a Committee of Experts with specific terms of reference to work on drafting a comprehensive treaty regime for creating a free trade area and emphasised the importance of finalising the text of regulatory framework by the year 2001 A.D.