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Pak cabinet puts India MFN in deep freeze

The decision means Pak will continue with the existing regime of restricting imports from India.

Written by P Vaidyanathan Iyer | Karachi |
February 15, 2012 3:57:17 am

Pakistan’s cabinet today put in deep freeze a proposal by its commerce minister,Makhdoom Amin Fahim,that would have operationalised the Most Favoured Nation (MFN) status to India announced last November.

The cabinet,which met today,directed the commerce ministry “to consult all stakeholders before the preparation and finalisation of negative and positive lists for trade with India”,said a press statement issued by the information department.

The decision means Pakistan will continue with the existing regime of restricting imports from India to just 1,963 items.

“This is not the best of times to push ambitious decisions,” said a Pakistani government official on condition of anonymity,referring to the ongoing political turmoil in the country.

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The Pakistani supreme court on Monday indicted Prime Minister Yousuf Raza Gilani for not writing to the Swiss authorities to reopen graft cases against President Asif Ali Zardari. This led opposition leaders like Nawaz Sharif and Imran Khan to demand that Gilani must resign. The PPP’s coalition partners,however,reposed full faith in the prime minister’s leadership at today’s cabinet meeting.

The militant Defa-e-Pakistan Council,led by Lashkar-e-Toiba founder Hafiz Saeed and comprising hardline anti-India groups,have opposed MFN status for India. At a massive rally in Karachi on Sunday,Saeed declared,“India will not be a favoured nation. We will not let Pakistan become a market for India.”

Pakistan’s commerce ministry had proposed a small negative list of only 636 tariff lines,which too,it had said,must be phased out over the next three quarters ending December 31,2012. The ministry had decided on the list after a six- to eight-month-long discussion with Pakistan’s domestic industry.

Moving from a positive list to a negative list would have led to a sharp increase in bilateral trade,which was a minuscule $ 2.7 billion in 2010-11. This trade was overwhelmingly in India’s favour,which exported $ 2.33 billion worth merchandise to Pakistan that year. Shifting to a negative list — the first step towards giving India MFN status — would have opened Pakistan’s doors to larger exports from its neighbour.

India granted MFN status to Pakistan in 1996. But Pakistan’s export base has remained small,said government officials in New Delhi. The Indian government and India Inc have long expected reciprocity from Pakistan,which they believe would trigger Indian investment in Pakistan in the medium term.

“It’s sad,” FICCI president R V Kanoria said of the decision by the Pakistani cabinet. “I don’t think the sentiments of the business community are being correctly understood by politicians. We will convey this to the leadership of Pakistan,” he said.

B Muthuraman,CII president and Tata Steel vice-chairman,said,“It is disappointing. While businesses on both sides are keen to forge better ties,there is still mistrust on the political front.”

The two countries will sign three pacts on Wednesday — an agreement on cooperation and mutual assistance in customs matters,a bilateral cooperation agreement on mutual recognition between Pakistan Standard and Quality Control Authority (PSQCA) and Bureau of Indian Standards (BIS),and an agreement on redressal of trade grievances. The three agreements will address complaints by Pakistani business that India’s non-tariff barriers have disincentivised exports from Pakistan.

Pakistani business has been complaining that India does not implement the MFN status in spirit. “The resolution of NTBs is important. Trade itself is so small (exports from Pakistan),everything looks like an NTB,” Kanoria said.

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