Pakistan’s last-minute retraction irks India

Business Standard, India

Pakistan’s last-minute retraction irks India

By Nayanima Basu / New Delhi

5 November 2011

India is particularly displeased with Pakistan, after an early end to a party it was enjoying over Islamabad’s proposed grant of a ‘most favoured nation’ (MFN) status in bilateral trade. All eyes are now focused on Pakistan commerce secretary Zafar Mahmood’s upcoming India visit. This is likely to be followed by a sideline meeting between the prime ministers of the neighbouring countries.

As of now, Mahmood is slated to land in the Indian capital on November 13. The visit, though, may be cancelled, given the controversy surrounding the grant of the MFN status, according to government sources.

A top official noted on Friday that the South Asian Free Trade Agreement (SAFTA) made the MFN status virtually India’s fundamental right. “Pakistan is retracting from its position after its Cabinet took the decision and their information minister made the (pertinent) announcement. This is unqualified and unconditional,” he told Business Standard.

Senior officials in the ministry of commerce and industry also said it was “at the last moment” that Pakistan’s Cabinet changed the statement, making it “further difficult to take the process of enhancement of trade”.

However, going by records, MFN status bears no guarantee to enhanced trade ties. For, New Delhi had granted MFN status to Islamabad in 1996, but imports from Pakistan has since remained significantly low compared to India’s export to that country. Data released by the ministry of commerce and industry show imports from Pakistan, in the last five years, had remained within the range of $250-$300 million. On the contrary, exports to Pakistan from India have more than doubled.

As for imports from Pakistan, the figures stood at a paltry $332.51 million, $275.94 million and $370.17 million in 2010-11, 2009-10 and 2008-09 respectively. Contrastingly, exports stood at $2.33 billion, $1.57 billion and $1.43 billion in 2010-11, 2009-10 and 2008-09 respectively.

Even so, Pakistan on Friday said the process of “normalisation” was underway. “The grant of MFN status is part of that normalisation process,” according to that country’s high commissioner to India Shahid Malik. “There is no question of a U-turn about it.”

It was late on Wednesday that Pakistan broke the news when information minister Firdous Ashiq Awan told reporters after a Cabinet meeting that the government had approved giving MFN status to India. Anti-climax followed, as an official statement issued thereafter did not mention ‘MFN’ anywhere.

All it said was that the Pakistan government had approved the decision to “normalise” trade with India. What’s more, Islamabad soon took back an earlier statement (issued by its press information department) that mentioned ‘MFN’.

The India-Pakistan trade in the last financial year stood at $2.6 billion. As for the next three years, both sides have set a target of $6 billion worth of bilateral trade. At present, Pakistan’s “negative” list features more than 12,000 items, while there are 1,948 “positive” items.

Currently, without an MFN status mutually accorded, it’s through Dubai that the two-way trade (worth billions of dollars) takes place — informally. This is one main reason India has been pushing Pakistan to grant it MFN status.

Securing an MFN status would facilitate India to export to Pakistan all those items it ships to the countries under the SAFTA.

They include engineering goods, fruits and vegetables, drugs and pharmaceuticals, textiles, food items, chemicals and machinery.

At present, SAFTA mentions Islamabad having a specific rider that Indian imports into Pakistan would continue to be as per their positive list of importable items from the eastern neighbour. This, currently, comprises 1,938 items.

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