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In: Economics

What economic, political, and social objectives drive integration for SAFTA?

What economic, political, and social objectives drive integration for SAFTA?

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Expert Solution

The SAARC nations established the intraregional trade through signing of the South Asian Preferential Trading Agreement (SAPTA). Which later on was replaced by South Asian Free Trade Area (SAFTA) in 2006. The SAFTA was formed to proactively facilitate the intraregional trade among all the SAARC nations.

The aim of SAFTA is to provide equitable benefits and promote the healthy competition to all the countries which are involved in it. The objective is to bring transparency and cohesion between the countries. He tariffs and other trade barriers were reduced in order to increase the trade activities. This agreement is very beneficial for the least developed countries as it gives the special economical preference to them.

Despite being a good model for the development of the SAARC nations, there are many factors which have led to the very steady growth in the integration of South Asian countries. These factors includes the limitation on the impact on the civil society, like the democratic process in the countries like India and Pakistan, security concerns among the countries, and the wide difference in the demographic size of the countries (e.g., India versus Bhutan). Also, the countries sometimes fails to understand the economic benefits by integration from the trade because of political and security issues.

The SAARC nations should focus to cut down the sensitive list but also should focus on reducing the tariffs. SAARC do provide the opportunity to the policy makers of the countries to do the discussion on both formal and informal issues which helps in integrating the economics of the countries. These discussion includes topics like social development in the countries, transportation in order to promote the trade among the countries etc.

In Spite of different tariff reforms and liberalization policies of all the economics of SAARC nations, the nontariff barriers do restrict the intraregional trade. These nontariff barriers includes licensing, quantity restriction on the products, price controls and very strict visa policies by the governments. These factors to hamper the trade policies which need to be monitored.


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