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Confusion over MFN status for India

November 02, 2011

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Federal Minister for Information and Broadcasting Dr Firdous Ashiq Awan addresses press briefing in Islamabad on Wednesday. – Photo by PPI

ISLAMABAD: A flurry of contradictory statements by the information minister and the commerce minister in a single day kept the answer to the question unclear: has Islamabad given India the status of the most-favoured nation (MFN) or not?

The issue of granting MFN status has been much-hyped in recent days, especially since the prime ministers of India and Pakistan are expected to meet during the Nov 10-11 Saarc summit in Maldives.

A cabinet meeting on Wednesday was to discuss the normalisation of trade with India.

Information Minister Dr Firdous Ashiq Awan told a crowded press conference that the cabinet meeting presided over by Prime Minister Yousuf Raza Gilani had ‘unanimously’ decided to grant India the MFN status to improve trade relations between the two countries.

Defending the coalition government’s decision, she said the step was taken in view of national and geo-strategic interests. “All stakeholders were taken into confidence, including our military and defence institutions,” she claimed, adding that no compromise would be made on national sovereignty. Furthermore, she said, the move would not affect Pakistan’s stance on the Kashmir issue — a sore point between the two countries that for decades has marred economic and trade relations.

When asked if Kashmiri leaders had been taken into confidence, the minister said the two parts of Kashmir were already trading across the Line of Control (LoC), bus services were operational, and that the Kashmiri leadership had been engaged on the issue.

To further justify her government move, Dr Awan gave the example of China, which has bolstered its trade relations with India despite having territorial disputes. “We cannot live in regional isolation,” she insisted.

However, a press note issued after the briefing by the commerce ministry did not mention that Pakistan had granted MFN status to India. It just said that the ministry apprised the cabinet on the current process of trade normalisation with India.

“The cabinet fully endorsed the efforts of the ministry for complete normalisation of trade relations and directed to implement in letter and spirit the decisions taken in this regard,” the statement read. It further said that the cabinet gave the ministry “the mandate to take the process of normalisation forward, which would culminate in the observance of MFN principle in its true spirit”.

When Dawn contacted Secretary Commerce Zafar Mehmood, who briefed the cabinet on the trade talks held so far with India, he too avoided saying that “MFN status for India had been granted” but admitted that it was a vital part of the trade normalisation process.

He elaborated that a roadmap for trade normalisation would be finalised during his meeting with his Indian counterpart in November. “But the entire trade liberalisation process is linked with the removal of non-tariff barriers (NTBs) by the Indian government,” he insisted.

India granted Pakistan MFN status in 1996, but Islamabad was reluctant to reciprocate arguing that India maintained a long list of NTBs that restrict Pakistan’s exports to India despite having the MFN facility.

Meanwhile, after the issuance of the commerce ministry statement when Dawn approached the information minister, she backtracked from her earlier announcement. Asked whether the cabinet had granted MFN status to India, she replied that the cabinet had granted approval to the secretary commerce to continue the trade normalisation talks with India.

“Commerce secretary cannot talk to India without the cabinet approval.” Ms Awan said the commerce secretary would meet his Indian counterpart in India in mid-November to discuss ways to boost trade. “They will sign documents during the meeting,” she said but did not elaborate on the nature of the documents.

Statistics show that trade between the two countries was $1.4 billion in the year 2009-10. Of these, Indian exports to Pakistan stood at $1.2 billion, while Pakistan exports to India were a mere $268 million — clear proof that India had not opened up its market for Pakistani goods.

This is not surprising as Pakistan trades with India under the positive trade list. While Pakistan has allowed 1,946 items to be imported from India, the latter does not allow trade of 850 items from Pakistan.

Under the trade normalisation process, one issue would be the switching over from positive list to negative list based trade, and if word is to be believed then the ministry of commerce has already worked out a negative list in consultation with all stakeholders. This list is awaiting approval of the cabinet.

Meanwhile, responding to a supplementary question in the Senate, Minister for Commerce Amin Fahim said India had assured that it would support Pakistan in the World Trade Organisation for getting access to the European market. Mr Fahim, who did not inform the house about the cabinet proceedings whether it granted the MFN status to India or not, just referred to the one-time trade facility that the European Union announced last year for Pakistan to help the flood-affected people but that facility was blocked by India in January last.