ISLAMABAD, Dec 3: Saarc member countries have agreed that the first downward revision in tariffs under the South Asian Free Trade Area (Safta) will come into force from July 1, 2006.

Officials told Dawn on Saturday that the technical committee of experts of Saarc had recently signed the minutes in Kathmandu, allowing the enforcement of Safta from January 1, 2006.

The officials said that during the six months period before the actual reduction in tariffs started under the agreement, the member countries would have the time to ratify the agreement from their cabinets or parliaments.

Bangladesh and India, which were earlier opposing the stance of other Saarc states, particularly on the issue of sensitive list and compensation, had shown flexibility in their stand, which resulted in timely enforcement of the agreement.

The member countries have shown agreement on four areas — finalization of sensitive list, which would be 20 per cent of their total tariff lines, compensation for the least developed countries (LDCs), rules of origin and technical assistance.

According to the Safta agreement signed on January 6, 2004 in Islamabad, the non-LDCs — Pakistan, India and Sri Lank -– would reduce their tariffs from the existing levels to 20 per cent within a period of two years commencing from July 1, 2006. This means that by June 30, 2008, they would reduce their tariffs to the level of 20 per cent.

The accord also stipulates that if actual tariff rates, once the agreement takes effect, are below 20 per cent, there will be an annual reduction on a margin of preference basis of 10 per cent on actual tariff for each of the two years.

The LDCs — Bangladesh, Nepal, the Maldives and Bhutan — will reduce their existing tariff rates to 30 per cent by June 30, 2008. If actual tariff rates on the date the agreement takes effect are below 30 per cent, there will be an annual reduction on a margin of preference basis of five per cent on actual tariff rates for each of the two years.

The subsequent tariff reduction by the non-LDCs from 20 per cent or below 0-five per cent will be done within a second timeframe of five years beginning from the third year from the date the agreement takes effect. However, the period of subsequent tariff reduction by Sri Lanka will be six years.

Moreover, the subsequent tariff reduction by the LDCs from 30 per cent or below 0-five per cent will be done within a second timeframe of eight years from the date of coming into force of the agreement.