India now closer to Pak MFN tag

Last Updated: Wed, Feb 29, 2012 19:30 hrs

The Leap Day of 2012 turned out to be quite fruitful in the history of bilateral trade between India and Pakistan, with the latter’s transition from a positive list regime to a smaller negative list for trade with India even as the Pakistani cabinet unanimously approved phasing out of this negative list existing between Pakistan and India by December 2012. So far Pakistan had been maintaining a positive list that contained around 1,950 items which were permitted to be imported from India, rest all were under negative list, meaning those items were not allowed to be imported from Pakistan.

But with today’s move by the Pakistan cabinet that met under the chairmanship of Prime Minister Syed Yousuf Raza Gilani, it has phased out the positive list completely and shifted to a negative list containing only 1,200 items which cannot be imported from India, while the remaining items can be traded freely that comes to around 6,800 items. This negative list would also be gradually phased out by December this year, which technically implies towards MFN trading status kicking in.

“This will mark a dramatic shift in the lines that can be traded as now almost 90 per cent items can be traded with Pakistan as opposed to 17 per cent earlier. Flourishing trade is the biggest confidence building measure among any two nations. During my visit to Pakistan, I saw considerable enthusiasm in industry leaders and the trading community of both countries for deepening this engagement. We now need to continue the momentum of regular exchanges which we have started since mid-2011,” said commerce and industry and textiles minister Anand Sharma.

Earlier this month Sharma had visited Pakistan with a high-powered business delegation from the Federation of Indian Chambers of Commerce and Industry (FICCI). This was the first ever visit by an Indian trade minister to Pakistan in last several years. There he met his counterpart Makhdoom Amin Fahim who assured him of moving towards MFN soon.

“This is a significant step towards trade normalization between India and Pakistan. We were hoping to hear this for a long time but better late than never. This would give a major boost to our trade now,” Rajiv Kumar, secretary general, FICCI.

In 2010-11, India-Pakistan trade stood at $2.6 billion. Both sides have set a target of $6 billion worth of bilateral trade by 2014. India had granted MFN trade status to India in 1996. Under the World Trade Organization (WTO) rules, trading partners offer MFN status to each other so as to not discriminate between their trading partners. Granting of MFN status implies lowering of tariffs and customs duties for the products trade between them.

India had been demanding proper implementation and ratification of the provisions under the South Asia Free Trade Agreement (SAFTA) to ensure greater access for Indian products in the Pakistani markets with reduced tariffs. As of now the understanding between both the countries is that when the transition to MFN is effected, all items other than those in the SAFTA (South Asia Free Trade Agreement) sensitive list would get preferential access at peak tariff levels of 5 per cent by the end of 2012.

Surprisingly though, even though India had granted MFN status to Pakistan in 1996, imports from Pakistan has remained significantly low compared to India’s export to Pakistan. According to the data by Ministry of Commerce and Industry, in the last five years imports from Pakistan had remained within the range of $250-$300 million. On the contrary, exports to Pakistan from India have more than doubled.

Import from Pakistan stood at a paltry $332.51 million, $275.94 million and $370.17 million in 2010-2011, 2010-09 and 2008-09 respectively. On the contrary, exports stood at $2.33 billion, $1.57 billion and $1.43 billion in 2010-2011, 2010-09 and 2008-09 respectively. (With inputs from PTI)

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