Q27
1 markSection D

Which one of the following is NOT a core objective of South Asian Free Trade Agreement (SAFTA) ?

Contemporary South Asia
Objectives of SAFTA

Options

(A)To establish a common currency for SAARC nations.
(B)To promote and enhance mutual trade and economic co-operation.
(C)To reduce custom duties and non-tariff barriers.
(D)To create a free trade area among member states.
Official Answer

The correct answer is (A) To establish a common currency for SAARC nations — this is NOT a core objective of SAFTA.


Why A is correct as the exception: SAFTA (signed 2002) was designed purely as a trade instrument to progressively reduce tariffs and non-tariff barriers and create a free trade area; it never envisaged a common currency, unlike the European Union's Eurozone model.

SAFTA2002free trade areatariff reductioncommon currencynon-tariff barrierstrade cooperation

Marking Scheme

  • 11 mark: correct option (A) selected as the one that is NOT a SAFTA objective.

Hint

SAFTA is about tariffs and trade, not currency — think of what the EU has that SAFTA does not.

Quick Oral Answer

Establishing a common currency is NOT a SAFTA objective — SAFTA only aims at reducing tariffs and creating a free trade area among South Asian states.

Analysis & Explanation

This is a 'NOT-correct' type question, so the correct answer is the option that does NOT describe SAFTA.


Why option A is the correct answer (the exception)

  • SAFTA's entire mandate is centred on trade liberalisation, not monetary integration.
  • No SAARC member state has ever agreed to give up its national currency for a shared regional one; this level of economic integration is far beyond what SAFTA envisaged.

Why the other options are genuine SAFTA objectives (hence incorrect answers to this question)

  • (B) Promoting and enhancing mutual trade and economic cooperation is precisely SAFTA's founding purpose.
  • (C) Reducing customs duties and non-tariff barriers is the practical mechanism through which SAFTA operates.
  • (D) Creating a free trade area among member states was the explicit promise made when SAFTA was signed in 2002.

Exam trap: Students may assume any regional trade agreement automatically implies currency unification (drawing false parallels with the EU); SAFTA is a much shallower form of integration limited to tariff reduction.

Common Mistakes

  1. 1Assuming SAFTA involves currency unification by wrongly comparing it to the European Union's Eurozone.
  2. 2Misreading the 'NOT' in the question and selecting a genuine SAFTA objective instead of the exception.

Interesting Facts

SAFTA was signed in January 2004 at the 12th SAARC Summit in Islamabad and came into force on 1 January 2006, though the passage refers to its 2002 promise.

SAFTA aimed to reduce tariffs to 0-5% for Least Developed Countries within the region over a phased timeline.

Unlike ASEAN or the EU, SAFTA has seen limited success due to continuing political tensions, especially between India and Pakistan.

Spotted a mistake or something unclear?

Tell us — we fix reported answers fast.

Frequently Asked Questions

What is the difference between SAARC and SAFTA?

SAARC (1985) is the overarching regional political and cooperation organisation of South Asian states, while SAFTA (2002/2004) is a specific trade agreement signed under SAARC aimed at creating a free trade area by reducing tariffs and non-tariff barriers.

Why doesn't SAFTA include a common currency like the Euro?

SAFTA was designed only as a trade liberalisation mechanism. Currency union requires a much deeper level of political and economic integration and trust among member states, which SAARC nations have not achieved given persisting political differences.