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Global Trade

April 2012 - Posts

  • The EFTA-SACU Agreement – Connecting Countries Through Trade

    Free trade agreements are typically established between countries that share various demographics in common - most notably proximity. Countries that enter into treaties with neighboring countries demonstrate their willingness to remove tariffs on goods that cross borders, and in turn the respective governments attempt to reconcile political and other differences through cooperative trade. When countries firmly established in one FTA work toward expanding the agreement to include other nations, the opportunity for improvement in economy increases.


    The European Free Trade Association (EFTA), founded in 1960, consists of four small countries that nonetheless have proven important in various trade sectors, in particular banking and finance.  Their association with the Southern African Customs Union (SACU) in a treaty finalized in 2008 signifies an agreement designed to benefit both regions as customs are eliminated on imports to Europe and Africa. SACU countries receive ample supplies of medicine and machinery to aid improvement in their industrial sectors, while the EFTA nations may import needed precious metals and natural resources more commonly found in Africa.

    The EFTA is comprised of:

    • Iceland - Iceland's small economy does exceed that of some SACU nations. Their somewhat isolated location in Northern Europe makes trade practically a necessity, and for their part Iceland exports fish and byproducts and select minerals.
    • Liechtenstein - Liechtenstein's prosperous economy may stem from low taxes and ease of incorporation. The nation's primary exports include machinery, audio and video components, and electronics.
    • Norway - Foreigners may associate Norway mainly with the fishing industry. While fish is a prime export, the country also trades out petroleum and machinery.
    • Switzerland - The world is familiar with Swiss chocolate and precision Swiss watches and clocks, but this only scratches the surface of their main exports, which also include pharmaceuticals and electronics.

    SACU is comprised of:

    • Botswana - Botswana has enjoyed progressive economic growth in the last three decades, well before the EFTA-SACU agreement. Precious gems and metals - diamonds, coppers, and nickel - represent the bulk of the country's exports.
    • Lesotho - Since finalization of the joint agreement, about one fifth of all the country's exports - textiles and diamonds - are sent to EFTA nations while the rest are exported to SACU partners and the United States.
    • Namibia - Namibia is a nation rich in precious gems and metals, including diamonds, copper, gold and zinc. Despite these major exports, mining represents a very small fraction of overall employment.
    • South Africa - Perhaps the largest economy among SACU nations, South Africa is the world's largest producer of platinum and gold.
    • Swaziland - Mining plays an important role in this nation's economy, though resources have depleted over time. Swaziland relies mainly on wood and sugar to export.

    Since coming to an agreement in 2008, the nations of EFTA and SACU have noted an increase in value of their respective trade merchandise. In 2010, nearly $3 billion worth of goods traded between member nations, and future endeavors hope for steady growth.  Recent meetings between EFTA and outside nations, including India and Indonesia, may also bode well for SACU nations if there is an opportunity to expand on trade through their association with Europe.

  • The South Asian Free Trade Area and Development of Trade in the Third World

    The purpose of the South Asian Free Trade Area (SAFTA) agreement is not only to encourage economic development of many poor countries in this region, but to help eliminate tariffs among member nations and create a free-trade bloc. With the signing of SAFTA in 2004 and a gradual formation of the current membership over the next eight years, the goal for reduced customs all around is set for 2016.


    Member nations of SAFTA include:

    • Afghanistan - Afghanistan is the most recent member nation in this trade agreement, having officially entered SAFTA in 2011 following approval a few years prior. Among SAFTA nations, Pakistan and India rank among their most common trade partners, with natural gas and dried fruit serving as their primary exports.
    • Bangladesh - Seeing the need to unite lesser South Asian economies for mutual benefit, Bangladesh spearheaded the establishment of the South Asian Association for Regional Cooperation (SAARC) in 1985. From this organization came the roots of SAFTA, which allows Bangladesh to export apparel and jute fibers to partner nations at low tariff costs.
    • Bhutan - Bhutan has enjoyed a long history of trade with India, and since its inclusion in SAFTA the country has seen imports and exports elsewhere steadily increase. Bhutan primarily exports hydroelectricity, timber, and coal.
    • India -Prior to inclusion in SAFTA with Pakistan, India has engaged in several wars and conflicts with the largely Islamic nation. Presently, India continues to experience roadblocks with Pakistan, only on an economic level, as the latter nation allegedly has stifled trade. Nonetheless, India remains arguably one of the greater economies in SAFTA and is ranked among top nations overall.
    • Maldives - Primary exports from the Maldives include food and livestock, various machinery, and crude materials. Association with SAFTA hopes to improve exports to member nations and build Maldivian economy.
    • Nepal - As one of the poorer global economies, Nepal may stand to benefit from a free trade agreement. However, Nepalese businessmen have opined that the country may benefit more from focused trade with India rather than other member nations. Presently, the country imports more goods from India than anywhere else, but exports mainly to non-SAFTA countries.
    • Pakistan - As recently as 2011, Pakistan has made an effort to reduce the number of sensitive goods for which there remain tariffs. Pakistan's main exports include textiles, carpets, and rice.
    • Sri Lanka - Sri Lankan business experts have also had doubts about SAFTA, citing concerns about businesses moving to other countries due to various issues with inflation and proper business development. Nonetheless, the country continues to grow economically and is a prime exports in South Asia of textiles, tea, and spices.

    A significant reduction in tariffs with treaty partners typically seeks to benefit all nations involved in an FTA, though internal conflicts and concerns have left business experts in certain countries somewhat skeptical of SAFTA. Time will tell if a full reduction in customs duties can stimulate growth for this region of South Asia, and if other countries take notice.