Pak decision on SAFTA will make agreement meaningless: India

Pak decision on SAFTA will make agreement meaningless: India

PTI from Islamabad

7/15/2006

UNHAPPY over Pakistan’s decision to limit trade with it to a few items under the South Asian Free Trade Area (SAFTA), India on Tuesday said such a move would make the agreement meaningless and sought an "urgent" meeting of the SAARC Commerce Ministers to discuss the issue, an Indian newspaper reported.

Addressing the first SAARC Finance Ministers’ meeting at Islamabad, Pakistan, State Minister for Finance of India Pawan Kumar Bansal also highlighted the need for combating terrorism collectively as also curbing cross-border terrorism to promote peace and security in the region.

Pakistan’s move to limit trade to a few items with India under SAFTA contradicted the decision taken at the 13th SAARC summit in Dhaka last year which called for timely implementation of SAFTA, he told the meet inaugurated by Pakistan Prime Minister Shaukat Aziz.

The free trade agreement became operational from July 1.

Bansal said India was "surprised" to see Pakistan’s notification issued on July 1 stating that SAFTA tariff concessions for India would be on 773 items existing in bilateral "positive list."

"We regard this action as going against the very essence of SAFTA as it operated on the basis of agreed sensitive lists. SAFTA has little operational meaning if commitments are not honoured in letter and spirit," he said. He said Pakistan’s decision to introduce conditionalties could undermine the credibility of SAARC members.

Meanwhile, debunking Pakistan’s arguments that normalisation of trade relations with India benefitted only the bigger partner, a study by the country’s State Bank has said the move actually favoured Islamabad. The study by State Bank of Pakistan (SBP) estimated that if Pakistan opened up, bilateral trade volume could cross a whopping USD five billion.

It called for liberalisation of trade with India which it believed would benefit Pakistan more, with imports mopping up net savings ranging from USD 400 to 900 million.

The report titled "Implications of liberalising trade and investment with India", also suggested joint ventures, which the Pakistan government has studiously shunned, to benefit from the Indian experience in different sectors.

The bank said 32 per cent of Pakistan’s export products were currently bought by India from other countries and constituted a third of its total imports. The two countries, bogged down in political disputes, have achieved only two per cent of the total trade potential during the past 25 years, said excerpts of the report published in Dawn newspaper here yesterday.

About 1,181 items worth USD 3.9 billion, covering 45 per cent of the total items exported by Pakistan, were common with India’s imports during 2004, it observed. About 70.3 per cent of the common items exported from Pakistan have unit values less or equal to Indian imports’ unit values.

It said, "there is a large scope for export of these items simply by producing the quality required in India. The potential of trade (exports plus imports) between the two countries estimated by the SBP amounts to $5.2 billion."

Pakistan’s Commerce Ministry has often argued that India has an unfavourably high tariff regime which prevented Pakistani products from benefiting from the Most Favoured Nation (MFN) status accorded to it under the SAARC charter. Pakistan has also declined to fully apply the South.

Asian Free Trade Area (SAFTA) for India, saying it would continue to trade with the positive list of 773 items and provide SAFTA concessions to only those items.

The SBP study identified that India currently earned USD 15 billion of export revenue from 2,646 common items being imported by Pakistan from other countries and analysed that in 2004 the unit value for Pakistan’s imports were more than unit value of Indian exports in 48.7 per cent of these items.

Even after excluding the items currently permissible for imports from India, about 45 per cent of them still remain in the common list which could be imported from India at a lesser cost than from the rest of the world.

"Allowing import of such items from India (i.e. expanding the current list of positive items) will give Pakistan an average saving estimated between 400 million dollars to 900 million dollars" the report said.

It observed that the country had adopted a conscious strategy to gradually open trade with India, which did not impose equivalent formal restrictions on exports to imports.

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