"Safta commencing from July next does not contain any article to grant MFN status to India, hence its ratification would not have any change in its present status," the sources quoted attorney general as saying at a meeting on January 4.
The Committee of Experts (CoE) comprising technical level officials of Saarc countries which negotiated the agreement, was mandated by the summit to finalise the annexes to the agreement namely sensitive list, rules of origin, technical assistance to least developed countries (LDCs), mechanism for compensation of revenue loss for LDCs.
Article 22 of the agreement stipulates that the agreement shall enter into force on 1st January upon completion of formalities including ratification by all contracting states and issuance of notification thereof, by the Saarc Secretariat.
The CoE, in its meeting at Kathmandu which was held from 29th November to 1st December 2005 has finalised all the four annexes to the agreement. It was also decided by consensus that the ratification instruments shall be deposited with the Saarc Secretariat by the end of December 2005.
The first tariff reduction under the agreement, however, would be made on 1st July 2006 by all Saarc countries except Nepal which would notify the tariff concessions on 1st August 2006.
The commerce ministry is of the view that since no tariff reduction was notified by any Saarc country on 1st January 2006 the annexes relating to Sensitive List and Rules of Origin would become operational in July or August 2006 as the case may be.
The annex relating to revenue compensation mechanism for LDCs would be operative after July 2007, when the first claim of compensation will be made by the LDCs in the Saarc region. Practically, therefore, only the annex pertaining to technical assistance to LDCs shall be operational on 1st January 2006.
The sources said, the meeting decided by consensus that the sensitive lists, (on which no tariff reduction would be undertaken), can be reviewed on unilateral/bilateral basis with a view to reducing the items therein.
According to sources commerce ministry is of the opinion that Safta despite being a regional free trade agreement also has direct linkages for the bilateral trade and economic relations of individual countries of Saarc since it envisages improvement in liberalisation of the regional trade arrangement in South Asia and accordingly this would have implicit and explicit implications on our bilateral trade regime with India.
They said, these implications would be due to the positive enabling environment, which is envisaged in the agreement such as elimination of all tariff and non-tariff barriers, free flow of exchange of goods, Gatt plus type of commitments pertaining to trade and tariffs, non-maintenance of any type of negative lists of tradable goods and ultimately movement towards a single and unified regional trade zone. Hence Safta may have a direct bearing on Pakistan-India trade regime.
The sources further said, the commerce ministry before proposing the cabinet to ratify the agreement held an in-house meeting with the secretary law and the attorney general to address the issues which creates confusion in translating the agreement on Pak-India trade.
The attorney general and the secretary law were of the opinion that as the Safta agreement does not contain any article to grant MFN status to India, so its ratification would not automatically confer MFN status on India.
However, on the domestic front the local legislation will prevail over any treaty obligations unless the latter is incorporated into municipal legislation. On the international plan, however, Pakistan may incur obligations, which may be enforceable at the instance of India.
Saarc Secretariat has informed that the Kingdoms of Bhutan and Nepal have already ratified the agreement and have deposited the instruments of ratification. The Secretariat has also informed that India has ratified the agreement on 29th December 2005 but has not deposited the instrument of ratification.
The ministry however has assured the cabinet that the sensitive list may undergo certain changes and would be resubmitted to the cabinet, if revised.