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Trade in services in SAARC to be discussed in Oct

Daily Times, Pakistan

Trade in services in SAARC to be discussed in Oct

Staff Report

4 May 2006

ISLAMABAD: The Committee of Experts (COE) of the South Asia Free Trade Area (SAFTA) will examine the proposal to include trade in services under the SAFTA agreement in October this year.

At present, the SAFTA agreement only covers the promotion of trade in goods among its seven contracting states, Pakistan, India, Sri Lanka, Bangladesh, Nepal, Bhutan and the Maldives. The SAFTA Ministerial Council formally handed over the task to prepare a study for inclusion of trade in services in the SFATA agreement to the Research Institute of India at its meeting held at Dhaka during April 18-19. The Indian Institute will submit its study report on possible inclusion of trade in services between its seven member states under the SAFTA agreement before the next meeting of SAFTA Committee of Experts scheduled in October.

The COE has been mandated not only to examine the inclusion of trade in services in the SAFTA agreement, but to suggest measures for the removal of non-tariff barriers and para-tariff barriers for facilitation of trade among the contracting states. Pakistan and India would be most benefiting countries of SAARC if trade in services is included in the SAFTA agreement, services such as IT and telecommunication, banking and financial services and engineering services.

The share of services sector in Pakistan’s GDP was 51.2 percent in the fiscal 1999-2000, it rose to 51.8 percent in the fiscal 2000-2001, it further rose to 52.7 percent in the fiscal 2001-02, it went up to 52.9 percent in the fiscal 2002-03, it declined to 52.6 percent in the fiscal 2003-04 and it further declined to 52.4 percent in the fiscal 2004-05.

The COE of SAFTA will also act as a Dispute Settlement Body under the SAFTA agreement for settlement of trade disputes among the contracting states. The COE will receive the complaints and will investigate the matter, and then it will submit its recommendations for resolution of trade disputes. The SAFTA Ministerial Council will be the final authority to announce and implement decision.

All the members of the South Asian Organization for Regional Cooperation (SAARC) Pakistan, India and Sri Lanka being developed countries of the Association and four least developed countries, Bangladesh, Nepal, Bhutan and the Maldives, are aiming to enforce the SAFTA agreement from July 1 this year.

The SAARC Agreement has four annexes, ie, the list of sensitive items; Rules of Origin; Technical Assistance to least developed countries of SAARC and Revenue Compensation Mechanism for these countries. It was decided with consensus that all member countries would undertake the first tariff reduction of around 5% on July 1, 2006, Nepal however will do so in August 2006. Besides, the Revenue Compensation Mechanism would be available to the LDCs of SAARC not before July 1, 2007. Accordingly, before July 2006 only the annexure relating to Technical Assistance to the LDCs will become operational.

Pakistan and India have reduced their negative lists further for enhancement of trade in real terms recently. Pakistan has reduced its negative list from 1,310 to 1,185 and in response to Pakistan’s measure, India has also slashed its negative list from 927 to 834. The SAFTA agreement shall come into force on July 1. The member states shall reduce their tariffs through Trade Liberalization Programme that would be implemented in two phases. In the first phase, Pakistan and India would reduce tariffs to 0 to 5 percent within seven years, ie, by 2013, Sri Lanka within eight years, ie, by 2016 and the four Least Developed Countries of SAARC by 2016. Pakistan, India and Sri Lanka, however, would complete their Trade Liberalization Programme for the four LDCs within three years, ie, by 2009.