ISLAMABAD: Pakistan has assured the International Monetary Fund (IMF) to grant ‘most favoured nation’ (MFN) status to India and move towards eliminating the negative list on trade with the neighbour as part of its overall trade policy.

“We are moving forward with eliminating the negative list on trade with India and extending India most favoured nation status, and shifting to ‘sensitive list’ under SAFTA (South Asia Free Trade Arrangement) regime to facilitate increased regional trade,” Finance Minister Ishaq Dar assured the IMF in writing during negotiations for recently approved $6.64 billion economic bailout package.

The PPP government had decided in March last year to switch over from positive list of about 1,900 tradable items to a negative list of about 1,206 items, thereby allowing about 5,000 items to be traded between the two countries.

The PPP government announced that it would grant MFN status to India on Dec 31 last year by doing away with the negative list, but the commitment remained unmet because India did not move to remove non-tariff barriers on Pakistani products and some industrialists opposed the move. A large number of automobile, textile and pharmaceutical products form major part of the negative list of 1,206 items.

Interestingly, Finance Minister Dar said in a television talk show on Aug 12 that the MFN status for India was not under consideration. “There is no immediate consideration to grant MFN status to India. There is need to normalise relations on a number of issues,” he said during tensions over incidents on the Line of Control.

The Memorandum of Economic and Financial Policies (MEFP), the finance minister submitted to the IMF on Aug 19, has spelt out the major contours of the trade policy with major focus on normalisation of trade relations.

Besides intentions to improve trade relations with neighbours, the minister said the government’s strategy would also be to take full advantage of trade preferences available from the European Union where Pakistan had autonomous trade preferences in 75 items. “In addition, the EU is currently considering our request for receiving GSP plus benefits (zero per cent duty) from January 2, 2014 on exports,” he said.

The minister said that trade policy reforms would ensure consumer welfare and stimulate growth via increased competition. “Simplifying tariff rates, eliminating the statutory regulatory orders (SROs) that establish special rates and non-trade barriers in some 4,000 product areas, and normalising trade relations should deliver the much needed competitive environment.”

The finance minister committed to working on simplifying the tariff structure to return to the 2004 framework, with 4 slabs and 0 to 25 per cent rates.

“Design of the new system would be completed by end-December 2013, with application of the revised tariff rates and begin the phase-out of trade SROs by June 2014. Implementation of the new trade framework would be completed by end-June 2016,” he said.

The minister said that for widening the tax base the government would prepare a comprehensive plan to separate existing SROs either by eliminating those granting exemptions or concessions by the end of December this year and introduce more taxation measures in the finance bill of fiscal year 2014-15.