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WTO and SAFTA

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WTO and SAFTA

World Trade Organization (WTO): 

World Trade Organization (WTO) is an international organization which deals with global rules of trade between nations. Its main objective is to achieve economic prosperity through fair and free trade. It was established in January 1995. The main root of WTO is GATT (General Agreement on Trade and Tariff) which was established in 1947 with a View to liberalize and expand the world trade.

The headquarters of WTO is located at Geneva, Switzerland. At present, there are more than 164 member countries of WTO. Nepal is a 147th member and got WTO membership on April 23, 2004. Nepal's membership of WTO is very important for its economic development and integration into the multilateral trading system. It will help Nepal for country-wise and commodity-wise trade diversification.

Objectives of WTO:

1. Raising the living standard of the people:

Raising the standard of living and income, promoting full employment, expanding production and trade, and optimum utilization of the world's resources

2. Sustainable development:


Sustainable development is a concept which envisages that development and environment can go together.

3. A better share of growth in trade:


Taking positive steps to ensure that developing countries, especially the least developed countries (LDCs), secure a better share of growth in trade

Principles of WTO

1. International trade without discrimination:

The member countries of WTO can have total freedom to carry out international trade among them as the most favored nations. There will be no discrimination among them for the exchange of goods and services.

2. Free trade:

The member countries adopt free trade policy by reducing customs duties, import taxes, the quota system, red tape, exchange control, etc. in their business transactions.

3. Security guarantee:

WTO provides a security guarantee to its member countries regarding capital investment and the establishment of multinational companies.

4. Development of free trade competition:

Emphasis should be given for open, fair, healthy, and liberal competition among the member countries. It does not allow the principle of protection

5. Support for developing nations:


It also gives equal emphasis to build up the competitive capacity of the developing nations.


South Asian Free Trade Area (SAFTA):


The South Asian Free Trade Area (SAFTA) is an agreement among the SAARC member countries for the development of regional trade and cooperation in South Asia. This agreement was signed on January 6, 2004, during the 12th SAARC summit held in Islamabad, Pakistan and came into force on January 1, 2006. The main objective of SAFTA is to promote and enhance mutual trade and economic cooperation by eliminating trade barriers and facilitating cross border movement of goods.

The South Asian Association for Regional Cooperation (SAARC) is the organization of South Asian Countries founded in 1985. Its seven founding members are Nepal, Bhutan, Bangladesh, India, Maldives, Pakistan, and Sri Lanka. Afghanistan joined the organization in 2007. Thus, at present, there are eight member countries of SAARC.

Objectives of SAFTA:

1. Eliminating trade barriers:

Eliminating barriers to trade in and facilitating the cross-border movement of goods and services between the territories of the member countries

2. Promoting fair competition:

Promoting conditions of fair competition in the free trade area and ensuring equitable benefits to all the member countries, taking into account their respective levels and pattern of economic development

3. Creating an effective mechanism:


Creating an effective mechanism for the implementation and application of this Agreement for its joint administration and for the resolution of disputes and

4. Enhancing mutual benefits:

Establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this agreement

Principles of SAFTA:

1. Rule-based:

SAFTA will be governed by the provisions of the Agreement and also by the rules, regulations, understandings, and protocols to be agreed upon within its framework by The Contracting States.

2. Compatibility with WTO and other agreements:

The contracting states affirm their existing rights and obligations with respect to each other under the Marrakesh Agreement establishing the World Trade Organization and other Treaties / Agreement to which the Contracting States are signatories.

3. Reciprocity and mutuality of advantage:

SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit equitably all Contracting States, taking into account their respective levels of economic and industrial development, the problem of their external trade and tariff policies and systems.

4. Free movement of goods between countries:

SAFTA shall involve the free movement of goods between countries through; inter alia, the elimination of tariffs, para-tariffs, and non-tariff restrictions on the movement of goods and other equivalent measures.

5. Trade facilitation:


SAFTA shall entail the adoption of trade facilitation and other measures and the progressive harmonization of legislation by the contracting States in the relevant areas.

6. Special preference for the least developed countries:

The special needs of the Least Developed Contracting States shall be clearly recognized by adopting concrete preferential measures in their favor on a non-reciprocal basis.

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