South Asian Association for Regional Cooperation

INTRODUCTION OF SAARC

In recent years, the analysis of economic liberalization has occupied the main focus of debate in development economics. Till the late 1980s while a select group of countries moved ahead on the road of the Regional Trade agreements (RTAs), most of the developing countries continued with their objectives of economic liberalization through the rule based multilateral trading system. However, subsequent to the Uruguay Round, the world trading system experienced a surge in RTAs, which fundamentally altered the world trade landscape. The developed as well as developing countries are actively participating in the RTAs. At present, the number of agreements notified to the WTO is more than 200 1 , a rise of six folds in just two decades. Given the rush to conclude RTAs, it is expected that the number would touch 300 in a couple of years. Today, with the exception of Mongolia, all the WTO Members are participating in one or more RTA negotiations. Since the 1990s, the South Asian countries also made efforts to enhance the trade and investment flows with their neighbors’, with the larger objectives of achieving a reduction in poverty and enhancing development in the region.

South Asian Association for Regional Cooperation (SAARC) was established in 1985 as a grouping of seven countries, namely, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. South Asia has great economic strength in terms of its market potential (one third of humanity resides in this area) and in terms of the rich natural resources and capable human resources. Recognizing the potential of the role of trade and investment flows in the process of regional economic integration, a trade block among SAARC members was formed with the signing of SAARC Preferential Trading Arrangement (SAPTA) in April, 1993. Four rounds of negotiations were held and tariff concessions were exchanged by member countries on a number of products, however, the intraregional trade remained modest.

The decision to convert SAARC into a Free Trade Area (FTA) was taken in the 9 th SAARC Summit in May 1997 in Male. Subsequently, at the 11 th SAARC Summit held in Nepal in January 2002, the Heads of State or Government directed the Council of Ministers to finalize the text of the Draft Treaty Framework by the end of 2002. They also directed that