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India’s MFN move: all options under study, says Dawood

Updated February 16, 2019

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Pakistan may revoke concessions under the South Asia preferential trade agreement says PM aide Abdul Razzak Dawood. — Photo courtesy: PID Twitter
Pakistan may revoke concessions under the South Asia preferential trade agreement says PM aide Abdul Razzak Dawood. — Photo courtesy: PID Twitter

ISLAMABAD: Pakistan will consider all available options to retaliate for the Indian government’s decision to withdraw Most Favo­ured Nation status, Razak Dawood, the prime minister’s adviser on commerce, told the media on Friday.

The response came from the adviser while giving briefing to media at the office of board of investment on the two-day visit of Saudi Crown Prince and high level business delegations.

Mr Dawood went on to say that Pakistan might take unilateral measures against India or revoke concessions under the South Asia preferential trade agreement (Sapta) and might take up the issue in the Geneva-based World Trade Organisation.

New Delhi withdrew the MFN status to Islamabad, which it granted in 1995, on Thursday after the attack on Indian forces in Pulwama.

The grant of this status means that a country will treat all WTO member states equally in matters of tariffs on imports.

Pakistan may revoke concessions under the South Asia preferential trade agreement

New Delhi had made a similar attempt in 2016 following an attack on its forces at Uri, in India-held Kashmir.

Instead of withdrawing the MFN status, Indian government imposed ban on Pakistani actors working in Bollywood.

An official of the commerce ministry told Dawn that Pakistan might include more items in the negative list, a list of items not importable from India.

In March 2012, Islamabad placed 1,209 items on the negative list and opened up rest of the products for trade with India. Before that decision, Pakistan used to trade with India only in 1963 items. “We may increase the number of items in the negative list to restrict trade with India,” the official said.

On a bilateral basis, the official said, additional tariffs might be imposed on Indian-origin products or trade might be restricted at the Wagah border.

The official said Pakistan might also consider withdrawing all concessions offered to India under the Safta arrangement. At the multilateral level, Pakistan might take up the issue at the WTO, the official said, adding that nothing had been finalised so far.

Pakistan’s exports to India stood at $288.134 million in 2004-05 and reached $350m in 2016-17 in the wake of liberalisation of the trade regime with India. Indian exports to Pakistan were $547.458m in 2004-05 and shot up to $2 billion in 2016-17.

The unilateral trade liberalisation in goods and services, after resumption of the composite dialogue in 2004, benefited India whereas Pakistan’s exports stagnated.

The tripling of exports to Pakistan is despite the fact that Islamabad has placed 1,209 products on the negative list.

But the official said the Indian government’s decision to withdraw MFN status would have negligible impact on Pakistan as the current regime suited India more.

Although there exists no negative list for Pakistani products in India, non-tariff barriers (NTBs) are used to limit access of Pakistani products to the Indian market. It was because of these lop-sides benefits which compelled the Indian government to reconsider withdrawal of MFN status to Pakistan in 2016.

In 2011, Pakistan reiterated its intention to transition from the positive list import regime — only 1963 items were importable from India — to a negative list regime and subsequently move toward full normalisation of trade relations by complete elimination of the negative list.

The PPP and PML-N governments took several steps to liberalise the trade regime with India on a unilateral basis. The PML-N had even offered several proposals to take trade relations to the “next higher” level to exploit its full potential.

The World Bank, in a recent report, said trade between Pakistan and India was valued at a little over $2 billion, but it could go as high as $37bn.

The current trade between the two countries is much below its full potential.

The potential could be harnessed only if both countries agreed to tear down artificial barriers.

India’s major exports to this country include skimmed milk, vegetables, chemicals and tyres. Pakistan’s major exports to India include dry dates, gypsum, cement, chemicals, petroleum and oils obtained from bituminous minerals.

Pakistan and India currently use three stations for trade — trade across LoC, the Wagah border and Port Qasim, Karachi.

Published in Dawn, February 16th, 2019