Neha Sharma
India granted Most Favoured Nation status to Pakistan in 1996. Both India and Pakistan are founding members of General Agreement on Tariffs and Trade (GATT). One of the fundamental Principles of GATT is the MFN, the other being the National Treatment Rule,. The MFN is concerned Under Article I of the GATT 1944. According to MFN Clause, any trade concessions granted to one member of GATT must be extended to all members. As mentioned above, India granted MFN status to Pakistan in 1996 whereas Pakistan has not reciprocated the same to India.
India allows export and import of all goods to Pakistan, except for the items that India has banned from being exported to or imported from all countries. Pakistan, on the other hand, does not restrict any items from being exported to India but as far as the imports are concerned, Pakistan allowed only a limited ‘Positive list’ of 1946 items till November 2011. In November 2011, Pakistan shifted to ‘Negative list’ approach on the pretext of granting MFN to India. Currently there are 1,209 items on the negative list and MFN to India still not granted.
In a study conducted by SAARC (South Asian Association for Regional Cooperation) Chamber of Commerce and Industry in November 2014, it was stated that trade volume between the two countries stood as US $ 2.4 billion which is just a fraction of informal trade between the two countries. The study said that India and Pakistan indulge in informal trade to the tune of US $ 13 billion by way of smuggling and personal baggage. It also includes trade through third parties such as Dubai to the tune of US $ 3-3.5 billion.
The study further says that Pakistan will greatly benefit through increased trade activities between the two countries as its GDP will grow by 2 per cent and it can save Rs. 100 billion in import of goods from India, which are currently sourced from other countries.
It is worth pondering that if Pakistan stands to gain in the wake of trade with India than what is it that caused Pakistan not to grant MFN status to India all the way.
It can be better understood from the analysis on MFN status to India by institute of policy studies, Islamabad. It says that despite the grant of MFN treatment by India to Pakistan, Pakistan has a persistent trade deficit with India. When in November 2011, it was announced that Pakistan will give India a much awaited MFN status in a phased manner and trade with India on MFN basis from 1st January 2013, strong reactions came from all sections of Pakistan.
Pakistan claims that India has granted MFN status to Pakistan but maintains very high Non-Tariff Barriers (NTBs). In exchange of MFN, Pakistan wants India to remove such NTBs. The strong opposition by Pakistan on MFN Status to India is also due to (i) Flooding of Pakistan markets with Indian goods. (ii) Political opposition which is one of the strongest reasons for not giving MFN to India.
It was also stated in the analysis that Pakistan industry as well as economy cannot afford to build any kind of dependence on supply of raw materials and other goods from Indeia, even if the cost of imports from other countries is relatively high. The reasons cited in the analysis are the hostilities, tensions and unresolved nature of many ‘substantial issues’ (Read J and K) between the two countries.
It ways, it is not simply a case of ‘trading for peace’ but essentially demands sustainable ‘Peace for trade’.
Pakistan has always linked normal trade ties with India to the resolution of Kashmir conflict. It has time and again asserted that Kashmir resolution takes a precedence over any kind of ties with India.
If such is the stance taken by a country like Pakistan who stands to gain more from its trade relations with India, a country which prioritises politics over economics than our Prime Minister Narender Modi is very apt and right in reviewing the MFN treatment to Pakistan.
In a statement by Secretary General ASSOCHAM, D.S Rawat, trade between India-Pakistan is significantly law which accounts for meager less than half a percent of India’s global trade involving both exports and imports. India’s total trade with Pakistan stood at US $ 2.67 billion out of India’s total merchandise trade of US $ 641 billion. Rawat said that MFN or no MFN has not made much of a difference on bilateral trade and the symbolic presence of Pakistan’s exhibition at the annual India International trade fair in November is not expected (Pakistan has already cancelled it).
The Indian Tea Association has also shown its readiness tosuspend trade with Pakistan. It also termed it as a fair weather friend who generally buys from Sri Lanka and Kenya. They buy from India when the prices are cheaper here. Out of 230 million kg of Tea exports, Pakistan accounted for only 15 to 18 million kg. It said that suspending of trade with Pakistan will not have much impact on India in terms of exports.
In the aftermath of Burhan Wani killing, the chaos abetted by Pakistan by creating unrest in Kashmir by sending money to separatists and declaring him a martyr, Indian Government is trying to counter Pakistani propaganda through effective statesmanship.
Firstly India started isolating Pakistan diplomatically which is evident from the Prime Minister Modi’s efforts in G20 meet wherein India succeeded in garnering the support of G20 members ( like Japan and Germany) in condemning the role played by Pakistan as a country sponsoring terrorism.
Thereafter India’s support to the people of Baluchistan and raising of Human Rights (HR) violations there at international level has sent jitters to Pakistan Government.
After Uri attack, India has renewed its efforts in cornering Pakistan at international level. Indian Minister of External Affairs Sushma Swaraj’s address to UN General Assembly also highlighted theuncooperative role played by Pakistan during the years over which India has tried to bridge the gaps between the two nations. It was made amply clear that it takes two to tango. Peace and cooperation is a two way process. The decisaion to review Indus-water treaty has created tremors in Pakistan Government and resulted in a situation wherein Pakistan has declared that it will challenge the decision of Indian Government in international Court of Justice. This statement itself shows the sensitivity of Pakistan towards the Indian Government’s decision.
The state of Pakistan stand on these affairs is so sad that they even made fictitious statement that China will eventually support Pakistan openly in case of war with India and also that the China supports the Pakistan stand on Kashmir. Much to its dismay, both the statements were openly refuted by China further isolating Pakistan. The condemnation of Uri attack by close Pakistan allies of Past Saudi Arabia and UAE has left Pakistan more or less alone.
The diplomatic pressure is further accentuated by India’s decision on not participating in SAARC Summit which was to be held in Pakistan in November 2016. Afghanistan, Bangladesh and Bhutan have also supported India’s stand and these countries have decided not to attend the summit as well.
On the similar lines, India is mounting pressure on Pakistan on economic front as well deciding to review is decision of MFN status to Pakistan.
The repealment of MFN status to Pakistan by India might appear to be a vengeful act but in reality it is a well thought out action which could not have been taken at an appropriate time other than now.
India is making a campaign to get Pakistan under various sanctions at international forums. If any such sanctions are imposed on Pakistan it will surely fluster Pakistan and render it helpless on various fronts and eventually force the state to review its policy of supporting terrorism and using it as a tool to achieve its unholy objectives.
After the success of Indian attempts to isolate Pakistan diplomatically and economically, if there is still a requirement of blunting Pak efforts of using terrorism, the Indian Government would be free to use the final and ultimate tool of states craft that is military.
(The author is lecturer in Economics in School Education Department)
