Pakistan146;s MFN blindspot

Islamabad is apprehensive that if it grants India MFN status, its own citizens might get the impression that it is cosying up to its bigger and mightier neighbour. Another problem stems from the fact that Pakistan had earlier linked the granting of MFN status to the satisfactory resolution of the Kashmir problem. A movement on MFN might signal a softening of stand on the Kashmir issue, or so Pakistan fears.

The concept of MFN is, however, very simple. The status is said to be given when a country has normal trade with another country and allows the import of all items of course, on payment of import duties except the few mentioned on the negative list. While India has accorded MFN status to Pakistan, Islamabad allows the import of just 773 items out of a total of over 5,000 from India.

Pakistan needs to understand that its refusal to budge on the issue could hamper its larger economic interests. It could substantially dilute the provisions of Safta, which is being seen as South Asia8217;s answer to the numerous regional integrations taking place in the western world and Southeast Asia, accounting for more than 60 per cent of world trade. It should also realise that Safta is perhaps its only chance to be part of a significant regional trading agreement, especially since it is out of Bimstec FTA also to be implemented from July 2006, which includes all Saarc members except Pakistan and Maldives and also has Thailand and Myanmar.

India, too, on its part, needs to be more pro-active and not be overly concerned about its diplomatic relations with Pakistan. Over the last few years when the Safta was being negotiated, it did not press for MFN status believing that once the treaty was implemented, the status would automatically be bestowed. Indian policy makers fooled themselves into believing that if they don8217;t say the MFN word aloud, Pakistan will not have any problems and Safta would ensure that trade moves from the positive list to the negative.

What India, and also possibly Pakistan, overlooked was the fact that even if the governments don8217;t openly talk about the grant of MFN status, the media in both countries would not show as much discretion. Pakistani officials have been continuously badgered by the press, more so in the last few months, on whether Safta would automatically lead to granting of MFN status to India. Although, when cornered in their own country, some senior Pakistani officials have replied in the negative; at international forums most officials, including President Pervez Musharraf, have avoided answering the question directly.

But this charade cannot go on. Pakistan and India cannot both pretend that they are getting their own way while keeping their heads buried in the ground. This week, the Indian government finally decided to wake up and show some concern by stating at the first Safta ministerial meeting in Dhaka that all trade within Safta has to take place on the basis of negative lists.

India, however, failed to drive home the seriousness of the consequences of denying this right to members, by merely stating that in the absence of such a provision, the agreement will not have any operational meaning. It should have, instead, threatened to take Pakistan to the dispute settlement panel.

Pakistan is certainly not going to take such a mild warning seriously. All the more so because India has not taken any action against it even under the World Trade Organisation WTO which also mandates that all members should extend MFN to each other.

If India keeps maintaining this soft stand, Pakistan will never be motivated enough to restore normal trading relations with this country. And this, in turn, does not augur too well for any integration plan for South Asia.

amiti.senexpressindia.com