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f. It also performs different trade related work with the help of other international
institutions such as IMF (International Monetary Fund), World Bank.

Principles of WTO
The general principle of WTO is to have freer and more predictable trade without
discrimination and being more beneficial for less developed countries. The most
important principles built into the foundation of the multilateral trading system are:

• Trade without discrimination
• Most-favored nation (MFN) : Treating other nations equally – a tariff reduction
granted to one country that has to also be extended to all countries in the GATT;
this is a multilateralization of the bilateral liberalization.
• National treatment : Treating foreigners and locals equally – countries should
not discriminate between its own and foreign products once they have crossed
the border and entered the market.
• Freer trade : Gradually through negotiation – the objective is to gradually
reduce trade barriers as one of the most obvious means of encouraging trade.
• Predictability : Binding commitments – provide stability and predictability
which in turn widens business opportunities; a change in binding has high
opportunity costs.
• Promoting fair competition : A system of rules dedicated to open, fair and
undistorted competition.
• Encouraging development and economic reform : Contributes to development,
special assistance and trade concession for developing countries, flexibility in
WTO agreements.

South Asian Free Trade Area (SAFTA)

The South Asian Free Trade Area (SAFTA) is an agreement among Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan, Afghanistan and Sri Lanka signed on 6
January 2004 to eliminate tariffs and trade barriers on products and services.

To alleviate poverty and promote economic prosperity in SAARC member countries
the government of Sri Lanka proposed the necessity to expand inter-regional trade
in this region at SAARC's 6th ministerial conference held in Sri Lanka in 1991. This
proposal was agreed by other member countries and signed in the agreement on
South Asian Preferential Trade Agreement (SAPTA) on 7th SAARC conference in
Dhaka, Bangladesh. SAPTA was approved and implemented in 7th December 1995.
There was a provision for continuous reduction in custom duties to promote regional
trade in SAPTA. Later, with the objectives of promoting mutual co-operations among
the member countries in regional trade and other sector, it was proposed to convert
SAPTA into SAFTA in 10th SAARC summit held in Colombo, Sri Lanka in 1998. In
order to promote trade and development in SAARC, SAFTA was approved on 12th
SAARC summit held in Islamabad, Pakistan on 6th January 2004. The noble objective

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