South Asian Nations Sign Free Trade Pact

In January, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka signed a free trade zone agreement that will start to bring trade barriers between those countries down beginning in 2006.

The agreement calls on the most developed of these countries — Pakistan, India and Sri Lanka — to virtually eliminate tariffs with the other countries by 2013, but gives the other countries until 2016 to lower their tariffs. There is, however, a provision that allows countries to maintain a list of “sensitive” products on which tariffs can be maintained.

Beyond advancing the cause of free trade, the real importance of this pat is the shot in the arm it could give to trade between Pakistan and India. Currently, trade between the two rivals is estimated at about $1.5 billion. That could double under the free trade regimen. And, of course, the more the two countries become economically intertwined, the higher the cost (and hence, the lower the risk) of war between them.

According to the BBC, there are now more than 200 regional free trade agreements.


South Asia ‘agrees to free trade’. The BBC, January 2, 2004.

South Asia signs free trade pact. Reuters, January 6, 2004.

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