Pak firm on MFN; shift to ‘short negative list’ awaits Cabinet nod

The MFN status dominated the trade talks during the talks with Anand Sharma

Written by P Vaidyanathan Iyer | Islamabad | Published:February 16, 2012 12:39 am

Pakistan today committed itself to operationalising the Most Favoured Nation status to India by opening up trade completely,barring a short negative list — items that India will not be allowed to export — within the next two weeks. The proposal to shift to the negative list from a positive list — one that restricts exports to only 1,963 items from India — will be placed by its commerce ministry in the Federal Cabinet meeting during the last week of February.

The overwhelming sentiment of business on the two sides in furthering trade ties seem to have egged the two governments in clinching a last-minute deal. “The negative list is to be phased out; the timing for this will be announced in February 2012 at the time the list is to be notified. It is expected that the phasing out will be completed before the end of 2012,” the joint statement issued by the commerce ministers of the two countries said at the end of three-day bilateral talks. 

The MFN status dominated the trade talks during the talks with Commerce,Industry and Textiles Minister Anand Sharma exhorting Pakistan and its business community to open up,citing its own beneficial experience following the path of economic liberalisation initiated in 1991. The two countries also initialed three agreements — customs cooperation,mutual recognition and redressal of trade grievances — that would address Pakistan’s concerns on issues related to non-tariff barriers affecting its exports to India. Addressing a press conference,Pakistan’s senior Federal Minister of Commerce Makhdoom Amin Fahim said,“I don’t think there will be any further problem.” Indian Commerce,Industry and Textiles Minister Anand Sharma said,“This will deepen and diversify trade. It will generate not only more resources,but also increase productivity. Trade will move beyond our geographical boundaries to Central Asia.”

While direct bilateral trade between the two countries stood at $2.7 billion in 2010-11,doing away with barriers could potentially increase trade three-fold,said an Indian commerce ministry official. Anand Sharma said,informal trade was as high as $10 billion. With no incentive to route exports through other countries,Pakistan business would automatically shift to direct imports.

In a quid pro quo,India on its part,said a discussion on further liberalisation of the South Asian Free Trade Agreement would commence once Pakistan notifies the negative list. It will not only consider pruning the sensitive list under Safta,but also cut the peak tariff levels under this list to 5 per cent from 8 per cent by the end of 2012. “Tariff liberalisation for up to 30 per cent of the sensitive list shall be considered by India within four months of the notification of the small negative list by Pakistan. After the negative list is dismantled and trade transitions fully to MFN/ Safta basis,the sensitive lists shall undergo further liberalisation,” the joint statement said.

When asked why Pakistan continued to figure on India’s negative list as far as investments are concerned,Sharma said the question of investment becomes relevant as economic engagement between the two countries deepen.

“The concerns expressed on investment have been seriously taken on board. We will take an appropriate and correct view,” he said. The two countries also agreed to explore opening up of the Munabao–Khokharapar route for trade in consultation with stakeholders. An expert group on electricity will be held in Lahore next month to finalise the modalities of electricity trade. Similarly,the expert group on trade in petroleum products will meet in Delhi in March first week. Officials from the State Bank of Pakistan would meet the RBI officials again in March to consider the proposal to let banks open branches in each other’s country.

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