Sunday, February 19, 2012

MFN status for India

 Indian Commerce Minister Mr. Anand Sharma, accompanied by a high powered business delegation as well as relevant government officials dealing with trade related issues  seems disappointed  at the first-ever such visit by an Indian Commerce Minister to Pakistan ,the reason being the decision of the Pakistan government to phase out in three steps a negative list of 636 items , a process envisaged to be completed by December ,2011.

This effectively implies that the extension of the Most Favoured Nation (MFN) status to India has been delayed.

In itself this is disturbing as credible reports supported by documents, indicate that the Pakistan government had agreed to extend MFN status to India as a critical condition for India's withdrawal of objections to the European Union humanitarian package for Pakistan's 2010 flood victims that would allow about 75 products of our major exports items duty-free entry into the EU countries for a period of two years.

The reason for the delay, it has been revealed, was the failure of the government to take everyone on board, including but not limited to establishment, with respect to the pace of normalisation in trade relations and the grant of the MFN  to India.

In short, while there is general agreement that trade needs to be strengthened, a win-win situation for the two nuclear rivals, yet there is no agreement on the time frame to achieve this objective.

There is no doubt that the government's failure to convince all the stakeholders in advance of Sharma's visit embarrassed the Indian Commerce Minister that also reflects poorly on our government's ability to deliver on its promise to the Indians.

However be that as it may, there is a continuing paranoia within some parts of our government and people that trade with India may compromise our security.

The PM Gillani during a recent interaction with senior members of the media correctly pointed out that China and India have considerably enhanced their trade relations in spite of the fact that the two countries have border disputes.

Or, in other words, security concerns aside, the economic benefits of trade must be explored to the extent possible that would benefit the peoples of the two countries.

However, to convince different organs of the government is the responsibility of the country's Chief Executive and one would hope that he would take appropriate measures to deal with all lingering concerns from all quarters.

At the same time there are some Pakistani businessmen who have also expressed concern over the grant of MFN status to India, by stating that it would hurt domestic industry of Pakistan.

Additionally, some businessmen lamented India's non-tariff barriers (NTBs) as impediments to fair trade, which are a source of concern to India's other trading partners as well.

The World Trade Organisation (WTO) allows countries to take protectionist measures if the domestic industry is hurting due to the opening of trade and therefore the concern by the industries can be easily dealt with.

However, with respect to the NTBs, the govt can and must negotiate to ensure that they are not an impediment to Pakistani exports to India.

The joint communique does note that the two countries would systematically address issues related to Non tariff  barriers.
To conclude, enhancing trade relations is the way forward to not only deal effectively with our own domestic economic issues, but also gain leverage and bring India on the negotiating table with respect to other issues, including Kashmir, security and water issues as well as border disputes.

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