It146;s trade, stupid

Pakistan8217;s willingness to finally catch up with the rest of South Asia on the trade front and take steps to resume 8220;normal trade relations8221; NTR with India should be welcomed for more reasons than that it now opens the way for India8217;s participation in the summit meeting of the South Asian Association for Regional Cooperation SAARC at Lahore in January. India did well to make a point of it. After all, what use is all the talk about regional cooperation if the countries of the region will not even pursue normal trade ties.

Pakistani officials have made much of the phrase 8220;most friendly nation8221; MFN, terminology that implies member countries of the WTO treating each other on equal terms. By extending this obligation to India, in response to India8217;s unilateral extension of MFN in 1995, Pakistan will not be doing this country a favour, it will merely be adhering to its WTO commitments. Apologists for Pakistan8217;s recalcitrant stand have said its governments have found it hard to justify calling India a 8220;most favoured nation8221;. If it is a matter of semantics, then the terminology can be changed. When the US decided to have WTO-compatible trade relations with China it used the phrase 8220;permanent normal trade relations8221; PNTR to dub its trade ties with a former foe. Instead of quibbling on MFN, India and Pakistan should agree to PNTR between them. This is an absolute minimum for any progress within SAARC.

While Pakistan must do its bit to catch up with the region. India must also play its part. Presently India enjoys a trade surplus with some of its smaller neighbours. This is a matter of some heartburn, especially in Bangladesh. A recent anti-dumping action against Bangladesh involving battery cells and cement has upset that country. Sri Lanka has also had its share of complaints despite the success of the bilateral free trade agreement. Perhaps the Union commerce ministry must eschew using the anti-dumping provisions against our smaller neighbours and the government should pursue an active policy of allowing them to enjoy a trade surplus vis-8230;-vis India. While India has every right to defend its trade surplus with developed economies like the US, it must concede the logic of its less developed and smaller neighbours seeking a more favourable trade balance.