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Pakistan improves offer, but still no MFN status to India

Economic Times, India

Pakistan improves offer, but still no MFN status to India

By Amiti Sen, ET Bureau

5 September 2011

NEW DELHI : Pakistan is ready to double the number of goods it imports from India, but has stopped short of offering full-fledged most-favoured nation, or MFN, status it had promised earlier this year as part of bilateral confidence-building measures.

Nonetheless, the development is being seen an important first step for the Pakistani administration, which may be wary of antagonizing political opponents by granting MFN status to India immediately. India had included Pakistan in the MFN category 16 years ago.

At an official-level meeting in New Delhi last week, Pakistan assured India that by November it would put out a negative list of imports in place of the existing positive list of about 1,930 items. It also said it was working internally to meet its obligations towards India under the South Asia Free Trade Agreement which would go beyond offering MFN status and would involve extension of tariff concessions agreed under the pact.

"Since Pakistan does not ban imports from other countries, stopping even a small number of items from India would amount to discriminatory trade and violation of the MFN principle," a government official told ET. Under the World Trade Organization’s MFN rule, a country has to extend its trading partner similar treatment given to other trading countries.

Trade experts are not disappointed, though. "So far, Pakistan would not allow import of anything beyond the 1,930 items. Now they are willing to allow many more items. I am optimistic," said Nisha Taneja of Icrier and author of several papers on Indo-Pakistan trade relations.

Pakistan hinted that the negative list could be the size of the existing positive list or even shorter, the official said. This would mean that the number of goods allowed to be imported would increase to over 4,000 items. Pakistan has a total of 6,800 tariff lines, or goods that are traded with other countries.

In April, Pakistan’s commerce secretary Zafar Mehmood had promised his Indian counterpart, Rahul Khullar, that his government would work towards extending MFN status to India. Fehmida Mirza, speaker, National Assembly, Pakistan, also confirmed during her talks with her Indian counterpart Meira Kumar in July that Pakistan was ready to give MFN to India.

The two secretaries will meet again in November to review the progress on the decisions taken in the last meeting which included removal of non-tariff barriers by India in the form of high quality standards and allowing investments from Pakistan into the country.

At the recent joint secretaries’ meeting in New Delhi, India asked Pakistan to include it in the MFN category in the true spirit at the earliest as it too could reap benefits of avoiding higher costs of circuitous trade and bring down inventory costs for many Pakistan business enterprises.

According to Indian government’s estimates, bilateral trade could double from $2 billion to $4 billion if MFN is offered as it would save businesses the trouble of shipping through third countries like Dubai. Other issues being discussed by the two countries included permitting trade of petroleum products and electricity.

India stressed that it could start talks on a preferential trading arrangement proposed by Pakistan that would bring down tariff walls further between the two countries only after Pakistan normalises its trade policies with India.