The establishment of an Intergovernmental Group (IIG) to develop an agreement for the establishment of a SAPTA by 1997 was approved at the sixth SAARC Summit held in Colombo in December 1991. Distributors use SAFTA to divert palm oil through Bangladesh, Nepal to India. The Solvent Extractors` Association of India (SEA), a leading vegetable oil trade organization, has called on the government to look for ways to stop the indirect purchase of palm oil and soybean oil from Nepal and Bangladesh under the South Asia Free Trade Agreement (SAFTA). The agreement was signed in 2004 and entered into force on 1 January 2006 with the wish of saarc member states (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka) to promote and maintain mutual trade and economic cooperation within saarc by exchanging concessions. SEA has called on the government to fill a gap in the South Asian regional free trade pact, which has been used to circumvent tariffs through imports of palm oil and soybeans diverted by Nepal and Bangladesh. Why is intra-regional trade in South Asia not growing, despite more than a decade of SAFTA, several bilateral free trade agreements and a unilateral duty-free customs regime between India and all the least developed countries in the region (Afghanistan, Bangladesh, Nepal, Maldives and Bhutan)? The World Bank`s latest report “A Glass Half Full: The Promise of Regional Trade in South Asia” gets to the bottom of it. And here are the reasons for SAFTA`s ineffectiveness. First, SAFTA is undermined by the so-called “sensitive list” – a long list of products excluded from the tariff liberalisation programme. Each country has many products in this sensitive list, which range from 6 to 45 percent of its imports from other South Asian countries. Bangladesh, Sri Lanka and Nepal account for the highest proportion of sensitive imports from South Asia.
Similarly, 5 to 48 per cent of exports to South Asia do not benefit from tariff preferences from beneficiary countries, with Maldives, India and Pakistan having the highest proportion of exports subject to such treatment. The objective of SAFTA is to promote and improve common treaties between countries, such as medium- and long-term contracts. Trade contracts with States, security of supply and import for certain products, etc. It is an agreement on tariff concessions such as domestic tariff concessions and non-tariff concessions The main objective of the agreement is to promote competition in this region and to offer fair advantages to the countries concerned. It aims to serve the peoples of countries by bringing transparency and integrity among nations. SAFTA was also established to increase the level of trade and economic cooperation among SAAC countries by reducing tariffs and barriers, as well as to give special preference to least developed countries (LDCs) among SAACs nations.to to create a framework for further regional cooperation. In accordance with the trade liberalization programme, the Contracting Parties must adhere to the following tariff reduction schedule. Non-developing countries should be reduced to 20 per cent of tariffs, which reduced no developing countries the least amount of existing customs and by 30 per cent by least developed countries. However, there is no trade liberalization system for the sensitive list, as this list must be negotiated between the contracting countries and then traded. The sensitive list will include a common agreement between the developing countries, which will favour the least developed countries of the Treaty. .