Safta members propose to reduce sensitive list.

New Delhi: In a move that could boost trade within South Asia, India, Bhutan, Pakistan and Maldives have proposed to drastically reduce the sensitive list, that defines products which will not be eligible for lower import tariffs, in the South Asian Free Trade Area (Safta) to 100 items by 2020 from around 900 now.

An Indian commerce ministry official said the proposal will be discussed among member countries at a meeting scheduled to be held in Kathmandu on 31 July. “If an agreement is reached, then it could be taken up at the upcoming seventh Safta ministerial to be held on 23 August at Colombo,” the official added.

Preferred trade under Safta, which came into effect in 2006, is based on a so-called sensitive list of commodities. The other members of the eight-member trade grouping include Nepal, Afghanisthan, Bangladesh and Sri Lanka. Except for India, Pakistan and Sri Lanka, the others in the grouping are least developed countries (LDCs). India has already reduced tariffs to zero for most of the tradable commodities with such countries.

The official said while Sri Lanka is yet to respond to the proposal, Bangladesh has said that the timeline may be a little ambitious for the LDCs. “We have told them they can suggest any new timeline if they wish. We want the sensitive list to be reduced at one go, instead of a phased approach,” the official added.

Even if a consensus is not reached among all the countries in the region, India should go ahead and unilaterally reduce the sensitive list to 100, said Nisha Taneja, professor at the Indian Council for Research on International Economic Relations.
In September 2012, India and Pakistan announced the reduction of the sensitive list of items to 100 by 2017 as a part of a long-term plan to boost economic ties.

While India was scheduled to prune its sensitive list under the Safta pact for Pakistan to 100 by April 2013, its neighbour had agreed to do the same by 2017.

“Thus, before the end of 2017, both India and Pakistan would have no more than 100 tariff lines in their respective Safta sensitive lists. Before the end of year 2020, except for this small number of tariff lines under respective Safta sensitive lists, the peak tariff rate for all other tariff lines would not be more than 5%,” the joint statement said.
However, India’s proposal was based on the condition that Pakistan would grant the non-discriminatory most favoured nation (MFN) status to India by December 2012. Since Pakistan failed to grant the MFN status, India hasn’t reduced its sensitive list for Pakistan as proposed.

Since then, there has been a change in government in Pakistan, following the election victory of Nawaz Sharif. Pakistan high commissioner to India Salman Bashir said on Tuesday that normalization of trade relations with India was a priority and said “sky is the limit” for deeper economic cooperation between the two countries.

“The present government is settling in. India track is the most important track when it comes to foreign trade policy of Pakistan,” he added.

According to the Safta website, exports have been rising. As of 13 September 2012, this has crossed $2 billion, since the launch of Safta trade liberalisation in July 2006.

Source : livemint.com