February 3, 2003	Monday	Zilhaj 1,1423

Why has India not complained so far to the relevant quarters at the WTO against Pakistan’s continuous refusal to reciprocate New Delhi’s gesture of according this country the status of Most Favoured Nation?

The WTO experts here said that India had a very strong case against Pakistan in this respect and that Pakistan would not be able to obtain a decision in its favour, if India went to the WTO as according to them the world trade body’s rules governing its MFN status clauses were very strict.

On the face of it, therefore, it looks as if India does not want to create problems for Pakistan on this score by going to the WTO with its complaint against Islamabad and forcing it through the World Trade body to establish trade links with it without having to meet Islamabad’s condition of talks on the core Kashmir problem. It appears as if it is content enough with the embarrassment it is causing to Islamabad at the regional and international level by beating it every time it gets a chance with the MFN status. But this is unbelievable. How can a country which is leaving no stone unturned to make Pakistan accept its hegemony and is using coercive diplomacy to its limits to force it to give up its claim on Kashmir be expected to give up on an assured chance to go one up on Pakistan by winning the MFN status from Islamabad, through the WTO route and without first having to start talking on Kashmir? So, there must be some other more pressing reason for India’s reluctance to go to the WTO with its case against Pakistan. And this reason becomes too obvious when a closer study is made of the rules governing India’s foreign trade and the actual trade pattern between India and Pakistan since India gave Pakistan the MFN status. Let us take the second aspect first. In the full financial year of 2000-1 ( after which 9.11 and 13.12 incidents completely disrupted the trade between the two countries), Pakistan’s total export to India was no more than $55.34 million and imports from India were $235.86 million. So despite enjoying the MFN status Pakistan suffered from a trade gap of more than $180 million and India despite being a non-MFN state earned that much more from its exports to Pakistan. Even during the first nine months of the disrupted year, Indian exports to Pakistan went up to $141 million and exports from Pakistan to India were no more than $41 million , showing a big gap of $100 million.

And what does Pakistan, the MFN state, export to India rather more frequently and in reasonable quantities? Green beans,Kishmish, fresh and dry fruit, rock salt, leather products, cotton yarn and mulahti. And what does India, a non-MFN state, export to Pakistan? Black tea,manganese ore and concentrates, iron ore agglomerates, betel leaves, plant for perfume pharma, xylene, terephthalic acid and its salts, tyres and tubes, sugar, cardamom, oil cake and residue of soyabean.

Clearly, despite being a MFN state Pakistan is not exporting to India anything of significance other than dry fruit. On the other hand India despite being a non-MFN country is exporting to Pakistan items which are essential industrial raw material and intermediaries.

What is the reason for this? And the answer to this question could be obtained by studying the rules governing foreign trade in the two countries. In Pakistan import duties have been reduced to a maximum of 25 per cent with little or no non-tariff barriers against any item other than those whose use is banned by religion. On the other hand in India the tariffs are still as high as 45 per cent and there are a plethora of non- tariff barriers which Pakistani products find it almost impossible to surmount.

In fact even the newly acquired strategic partner of India, the USA, found the Indian non-tariff barriers to be very restrictive. The US assistant secretary of commerce who was leading a trade mission to India in last May had warned New Delhi that India may be left in the lurch and not taken seriously in the next round of WTO negotiations unless it allows greater market access and trims its bureaucratic red tapism. He said: “US investment has shrunk here, our trade has decreased. We don’t want India to be left behind in the trade game, but unless India shows it wants to be taken seriously, the possibility that India will be left behind is all too real.”

So, if even after having given us the MFN status, India is only buying dry fruit from us and if Indian trade regime is so restrictive as to make it difficult even for its strategic partner, the US, to cross the hurdle of New Delhi’s high tariff rates and massive non-tariff barriers then it becomes too obvious why India does not want to go to the WTO to force Pakistan to give it the MFN status in return for the MFN status it has granted to Pakistan.

In simple words Indian economy today is not in a position to open up beyond the level it has already done. Not even for Pakistani goods and services. That is why while it seems content with drawing political and diplomatic mileage by beating Pakistan with the MFN stick every time it gets a chance to do so, India does not want the perception that it is Pakistan which does not like to trade with India to disappear which would if Pakistan too were to give the MFN status to India. And once this happens, it will become impossible for India to refuse to give more market access to pakistani goods.

That is why many in Pakistan have now started advising the government to call the Indian bluff by immediately according it the MFN status. They believe that once this happens, the Indian designs of keeping Pakistani goods from entering into India in any substantial manner would get exposed. Pakistan would gain immensely because after having cleared the hurdle of MFN out of the way, it could claim access to the huge Indian market without any reservations and using the advantage of freight could market its goods at least in northern India at highly competitive rates. On the other hand there are a number of the WTO rules which Pakistan can invoke if India tried to monopolize the Pakistani markets. As it is, in India energy for industry is subsidized. This very fact could come handy in keeping out of our borders most of its goods which seem to pose a serious threat to the local industry.

In any case, the clandestine trade between the two countries amounts to as much as $1.5 billion annually and this has not hit the local industry in either of the two countries. Of course, if trade is libralized between the two countries the uneconomic car-making set-ups and pharmaceutical industries in Pakistan would suffer immediately. But then with a little bit of restructuring the two can not only survive but could also do more profitable business if they aim at the vast Indian market.