Pakistan's 'pro-Safta' move will establish goodwill with other member states of the South Asian Association for Regional Cooperation (Saarc), particularly Bangladesh, Sri Lanka, Maldives and Nepal.—File Photo

ISLAMABAD: In what appears to be a major policy change, the ministry of commerce has in principle sought permission from the federal cabinet to cut the sensitive list for the South Asia Free Trade Agreement (Safta) to liberalise trade with neighbouring countries, according to sources.

A sensitive list having a large number of items only served to limit the scope of the regional trade regime, an official of the ministry said on Sunday.

Pakistan recently removed 20 per cent of the items (233) from the list. The total number of items on the list now stands at 936.

“The list may be cut further after due consultation with all the stakeholders,” the official said.

The federal cabinet in its last meeting granted a formal approval in this regard and empowered the ministry of commerce to take decisions accordingly.

The 233 items that were removed from the list included about 90 agriculture and food products, 38 industrial raw materials, 23 articles of iron and steel sector, 35 machinery and 48 textile products.

India has 865 items on the sensitive list of Safta, Bangladesh has 1,254, Sri Lanka 1,065, Nepal 1,313, Maldives 671 and Bhutan 157.

Pakistan’s ‘pro-Safta’ move will establish goodwill with other member states of the South Asian Association for Regional Cooperation (Saarc), particularly Bangladesh, Sri Lanka, Maldives and Nepal.

On the economic front, the official said the withdrawal of items from the list would enhance trade with the Saarc member states at much lower cost because of the proximity and reduced cost of transportation. He said the liberalisation of trade regime would help Saarc to achieve its much sought out objective of regional integration and development.

The total value of exports by the member states under Safta was around $1.2 billion since launching of the treaty in 2006, which was only four per cent as compared to the regional trade of the European Union at 67 per cent, the North American Free Trade Agreement (Nafta) at 62 per cent and the Association of Southeast Asian Nations (Asean) at 26 per cent.

The official said that Maldives and Bangladesh had recently offered to cut their sensitive lists by 40 per cent. However, there was no commitment from India and Sri Lanka for any reduction in their lists.

Pakistan will host the sixth meeting of the Safta ministerial council and seventh meeting of the Safta committee of experts in the third week of February 2012 to discuss issues related to promotion of regional trade.

At the time of signing the treaty in 2006, Pakistan’s total exports to Saarc countries stood at $0.055 million, which rose to $56.119 million in 2010. So, some progress has been witnessed but much still needs to be done.

In 2007 the Indian exports were $3.783 million, which edged up to $276.933 million in 2010 making it the member getting the maximum benefit from the treaty. Bangladesh was the second best beneficiary, as it increased its exports under Safta to $236.711 in 2010 from $15.273 million in 2007.

As per trade liberalisation programme under Safta, non-LDCs (Sri Lanka, India and Pakistan) would reduce their tariff to 0-5 per cent by 2013 and LDCs would reduce tariff to 0-5 per cent by 2016.