MFN Status For India: Its Pros And Cons

Pakistan and India are neighbours, as well as two important members of the South Asian Association for Regional Cooperation (SAARC). There are immense potentials of cooperation in the sectors of trade, industry, research, technical cooperation, education and healthcare, but, unfortunately, have been neither availed nor explored. Instead of benefiting from geographical proximity, time was wasted on efforts for airing the differences. It did not help in co-sharing prosperity; rather precious resources were wasted on wars. Pakistan was disintegrated into two parts in 1971. The SAARC Chamber of Commerce and Industry from its inception had realised that the differences created on political basis were damaging the potentials of regional cooperation. Therefore, it accepted the challenge and after making efforts of bridging the differences of the private sector on both sides succeeded in persuading the Indian and Pakistani governments to sit on the table and discuss how economic cooperation can be given a practical shape pending the political issues. Subsequently, meetings among the Commerce Sectaries of both countries were held where a framework was agreed upon to normalise trade relations and sort out procedural bottlenecks. A brief of the framework finalised at the 5th round of the India-Pakistan talks on commercial and economic cooperation held on April 27-28, 2011, in Islamabad is given below for information: Both sides agreed that increase in trade and economic engagement would help not only in the mutual quest for national development, but also contribute to building trust between the two countries. To build confidence, dispel misunderstandings and allay any misapprehensions, it is essential that governments in both countries support the business communities in the promotion of bilateral trade. To promote trade, both tariff and non-tariff barriers (NTBs) need to be reduced or removed. Both sides agreed to expand trade through the Wagah-Attari border by: (a) increasing trading hours taking advantage of the new infrastructure; (b) expeditious clearance of cargo; and (c) facilitating movement of large vehicles and containerised traffic. It was noted that an informal and effective customs liaison arrangement is already operating at the Wagah-Attari border. It was decided to undertake a new initiative to enable trade of electricity between both countries. Both sides also agreed to work out how to initiate and substantially expand trade in all types of petroleum products. A new initiative to promote bilateral trade in BT Cotton Seeds was identified.

Cooperation in the Information Technology (IT) sector would be encouraged through the private sector route. Pakistan recognised that grant of the Most Favoured Nation (MFN) status to India would help in expanding the bilateral trade relations. Both sides agreed to remove the NTBs and all other restrictive practices that hampered bilateral trade. Both sides agreed that facilitating grant of business visas was essential to expansion of trade. While appreciating the need for business-to-business contact, both sides desired to create an enabling environment and encourage the Chambers of Commerce and Industry on both sides to form officially recognised Joint Chambers at the apex and regional levels. On opening of bank branches in each others countries, both sides agreed that banking channels are important and the process needs to be fast tracked. Similarly, a number of conferences were held in various SAARC member countries to come out with the viewpoint of stakeholders. After 15 years, the ice melted and Pakistan agreed to grant the MFN status to India. It may be noted that while signing the SAFTA agreement on June 6, 2004, Pakistan agreed granting MFN status to liberalise trade, being a requirement of the World Trade Organisation (WTO) framework of softening trade policies. Anyway, the fears being raised in the country on granting MFN status to India is not based on facts. Prior to granting this status, the Government of Pakistan invited suggestions from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), regional chambers and other trade bodies acknowledging trade and industry as the major stakeholders. Later on, various trade sectors, like textile and automobile industry, leather manufacturers, garments manufacturers, pharmaceutical manufacturers, etc, will be involved while selecting items for concessionary tariff and negative list to save the domestic industry from any damage. It may be noted that the Pakistani Secretary Commerce has categorically assured, in a press statement, that the process of compiling a new list will be completed with the consensus of all sectors. For the time being, the government has decided to continue trading on the basis of the existing positive list. He was of the view that granting MFN status to the neighbouring country will not harm domestic industries or sectors, since there will be room to protect it through imposing high tariff and other duties as are permissible under WTOs legal framework. He further said that, as the Ministry is in direct contact with various chambers and trade bodies, every step would be taken in the best interest of the country and its industry. The Ministry will definitely protect the countrys own industry. Another benefit will be that New Delhi will not oppose the European Union unilateral trade concession package to Pakistan in the forthcoming meeting of the WTO. Regionalisation of economic interests has become necessary in the present turmoil to protect domestic industries. The financial crunch in advanced countries and their debts have weakened their economic growth, which has become a headache for the whole world.

Regional cooperation among the SAARC countries is a most welcome step. Indeed, it has a number of advantages. Short distances ensure savings on transportation and shipping cost, besides reducing the time period. Other advantage being that the importers could visit any country in the region at short notice for pre-shipment inspection to ensure the quality of goods being imported. At the end of the year, these benefits help in saving millions of dollars, besides reducing the cost of production. In industry, India has succeeded in acquiring franchise from a number of world renowned industries. Thus, machinery, semi-finished goods and raw materials could be imported from it at the most competitive prices, resulting in savings on account of cost and low inventory level to be maintained by the industry. Pakistan could reciprocate if our youth accentuate export-oriented efforts, instead of confining themselves within the country. India has worked hard in the agricultural sector. Its advancements are in development of hybrid seeds, improvement in yield per hectare, control of diseases, water management, etc. Pakistan could benefit from these achievements. Moreover, in case of shortage of any agriculture products, India could help through immediate exports; examples of tomato, onion and ginger can be quoted. Because of these imports, prices of vegetables in Pakistan remain low and within the reach of common man. Pakistan has a strong network of 50 chambers and 128 associations with FPCCI, which is their apex body. During the discussions at the meetings of these trade bodies various aspects of cooperation with India have been looked into. Their pros and cons have been examined and analysed. Thus, fears being expressed by various quarters are not much related with trade and industry, but otherwise private sector is the major stakeholder and it knows how to protect its interests. Moreover, the SAARC Chamber of Commerce so pleads the case that every member country is in a win-win position. This policy nurtures the cooperation without any complaint on the other side. Efforts are also being made to sort out the non-tariff barriers. It is hoped that when trade starts, the NTB will be identified and removed. The parliamentarians and political leaders are requested to work to improve infrastructure, so that economic cooperation could produce results through improving production and employment. If the shortage of gas, electricity and water persists no investor will come to Pakistan. Our friends are ready to help us provided there are transparent policies. If Pakistan wants to become a respectable member of the international community, then we will have to march forward with hope and confidence.