India complained bitterly to the commerce ministers governing the South Asian Free Trade Agreement (SAFTA) that Islamabad has failed to implement key provisions of the agreement into force and not granting tariff reductions to its exports. Asserting that this is a negation of the contract, Indian officials warned that this attitude of selective implementation will affect the “entire SAARC process in future.” The South Asian Association for Regional Cooperation (SAARC) has had a unenviable history of member states using the forum to blackball another and using it to settle diplomatic scores. It is only recently that the forum has been functional to claim to be effective and its most important achievement has been SAFTA which took 4 years to conclude.
Pakistan claims that it is only trying to limit damage to its businesses caused by a 400% surge in Indian imports because of an Most-Favored Nation “plus” status while its exports to India has not taken off and that it would like to understand why their products have not been successful. New Delhi dismisses this claim saying that “It contradicts the directives of the leaders at the 13th summit and it contradicts the public pronouncements made by Pakistan's own leadership.” After hearing both sides, SAARC members said that this issue will be discussed at a SAFTA Ministerial Council on a date to be proposed by India.
On the positive side, the SAARC nations adopted new “guidelines on observers” and decided to accept the United States, South Korea, and the European Union, China, and Japan as observers. After agreeing with the aims and objectives of the SAARC Charter, they would be able to attend the opening and closing sessions and the meetings of the Council of Ministers of the SSARC summit meeting including the 14th summit in New Delhi on April 3-4 2007. The observers are also allowed to make statements if they circulate the text ahead of time.
