Clouds over free trade deal as South Asian foreign ministers meet

DHAKA, Aug 1, 2006 (AFP) - South Asian foreign ministers started a two-day meeting in the Bangladesh capital Tuesday amid gathering clouds over the future of a regional free trade deal. The foreign ministers of the seven South Asian Association for Regional Cooperation (SAARC) nations would try to thrash out a dispute over tariff concessions, Indian foreign secretary (top official) Shyam Saran said.

India has accused Pakistan of jeopardising the South Asian Free Trade Agreement (SAFTA) by failing to implement key tariff reductions for New Delhi.

The agreement which went into operation from July 1 was set to create the world's biggest free trade deal covering 1.4 billion people.

But Pakistan issued a notification early last month limiting the SAFTA tariff concessions to items on an existing bilateral list, said Saran.

"It's a negation of SAFTA and jeopardised the implementation of the agreement.

It affects all contracting parties and questions the future of the agreement," he told reporters.

Under the deal Pakistan was also to confer on India Most Favoured Nation status but the latest action contradicted the public pronouncements made by its leadership, he added.