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Not softer

Not softer january 1, 2006, ushered in the new South Asian Free Trade Area (safta) pact. This paves the way for free trade of goods among the seven countries of the South Asian Association for Regional Cooperation (saarc). Pakistan and Sri Lanka were yet to complete their ratification. The least developed countries (ldcs) in South Asia were still unsure of what they would gain from the pact except a flood of goods from the regional economic giant, India.

The pact comes at the start of a crucial year. By the end of 2006, India will sign and ratify free trade pacts with the Association of Southeast Asian Nations (asean) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation countries.

According to the safta agreement, India, Pakistan and Sri Lanka will have to bring down their custom duties for imported goods from other saarc countries to 0-5 per cent by 2013. ldc saarc members, Bangladesh, the Maldives, Nepal and Bhutan can do so by 2018, giving them time to build their internal capacities to be able to compete.

New Delhi has a list of 884 items for non- ldcs and 765 for ldcs on which tariff reduction would be carried out. Perhaps, the industry that will suffer the most will be the textile and textile-based finished product business.

safta will compensate ldcs for the revenue lost on custom duties when they lower their tariffs. Rajesh Mehta of Research and Information System for Developing Countries, a Delhi-based think tank, says, "Only a few other regional free trade area pacts have tried out such support systems, with unsatisfactory results for ldcs.'

The agreement has been hanging fire for long, since developing countries like India and Sri Lanka were not keen on an agreement that will give an edge to the ldcs.

This and the other crucial issue of the

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