MarginUp Web Services

          The platform that enables you to take advantage of global supply chain

This Blog


Global Trade

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.


No Comments