Last week, Pakistan notified 302 more items which can be imported from India, raising the total number of such items to 1075 and increasing the hopes of larger trade between the two countries.
Now India’s new foreign minister Pranab Mukherjee says that if Pakistan does not give the tariff concessions agreed under the Safta, the agreement can collapse.
He says: “I am not interested in the number of items. I am interested in seeing the obstructions which are there, removed and there should be free flow of trade.”
Safta, which became really operational from July 1 after it was agreed on January 1, 2004, could turn out to be one of the biggest free trade area comprising 1.4 billion people, but it suffers from a precarious existence.
Pakistan prefers trade with India on the basis of a Positive List of items including a Sensitive list of items on which tariff cut will not be allowed. But India wants no such reservations.
Pakistan says India should be satisfied that 90 per cent of the items importable from India are subject to tariff cut. But India says, it is not impressed by the numbers and seeks abolition of tariff barriers, now specified by Safta.
India used to earlier ask for the ‘most favoured nation’ (MFN) treatment in trade between the two countries after it had given the same status to Pakistan, but Pakistan argued while India had announced the MFN treatment to Pakistan, its tariff barriers were too high and too many.
Pakistan also argued the MFN status could not be given to India until Kashmir was on way to a settlement. But after Safta became operational from July 1 this year, India hoped to get the same kind of tariff concessions through that. But it finds Pakistan not agreeable to it.
The new items permitted from India are no longer goods like vegetables, fruits and meat, but more weighty items. Out of the 302 items, 111 are raw materials and 173 industrial machinery and parts and 17 are other kinds of items and they follow the demands of Pakistani industrialists for such items from India as they are cheaper than they can obtain from elsewhere.
They also include such items as surgical goods, homeopathic drugs and diesel locomotives. Of them, only 20 are in the ‘Sensitive List’. The other 282 items are illegible for tariff cuts.
Soon, Pakistan can also be importing parts from India as the Indian Prime Minister, Dr Manmohan Singh says, India will soon become the workshop of the world. The leading automobile makers in the world have their outlets in India including BMW and Daimler Chrysler and a great many automobile parts are exported to the rest of the world through outsourcing. Indian automobile sales last year was $34 billion and the forecast for 2016 is $145 billion.
Pakistan says if India is not satisfied by the arrangement proposed by it, which does not violate the Safta agreement, it can take up the issue with the Safta dispute settlement mechanism. India is not satisfied with that approach and hopes to persuade Pakistan to fall in line, says the Indian foreign minister.
The issue will now come before the fourth coming meeting of the foreign secretaries of India and Pakistan following the resumption of the composite dialogue where both may only re-state their positions.
The Indian approach is that if Pakistan does not agree to follow the Safta framework in respect of tariff cuts, further such concessions to be given by India to Safta member will not be given by India. But that may not be agreeable to the other five Saarc member states who want to make a success of Safta and they may try to persuade Pakistan to fall in line.
Some find Pakistan’s stand in this regard untenable. How can Pakistan, they ask, be in the lead for the formation of an Islamic Free Trade Area of 57 states which will be the most widespread FTA in the world and simultaneously more helpful to Safta which encompasses nearly 500 million Muslims from among the Saarc population of 1.4 billion people. How could there be a vacuum in respect of mutual trade in a area which has the largest number of the poor people in the world.
Secondly, Pakistan will be importing only those items which are in short supply here and are priced too high by the price manipulators and hoarders.
The poor will benefit from such items as vegetables, beef and buffalo meat coming from India rather than the rich in a period of soaring prices.
It has also been argued that if Pakistan’s approach of “Kashmir first, and everything else next” did not pay for the last 60 years, it may not get quicker dividends now.
Pakistan should hence import from India what is cheaply available there and at low transportation costs and make bilateral trade to persuade India to come to the negotiating table earnestly. And that will be a major part of the confidence-building measures (CBM) between the two countries and pave the way for larger cooperation between them.
And now following the agreement to resume the shipping service between Karachi and Mumbai a protocol is to be signed in New Delhi later this month. Pakistan’s minister for ports and shipping Baber Khan Ghouri is to visit Delhi for that purpose. He says soon after the signing of the protocol a ferry service will be introduced between the two cities as has been done between Karachi and Dubai.
And following the negotiations for the peace pipeline supplying Iranian gas to India via Pakistan, Iran has offered to supply electricity to Pakistan and India if they wanted it. Of course, the price and other issues will matter and it is not known whether Pakistan will opt for it. Pakistan has a long standing offer for 1000 MW of electricity from Tajikistan as well. But the fighting in Afghanistan stands in the way.
Having agreed to permit the import of 1075 items from India and finding what has been imported useful, Pakistan cannot pull out of the arrangement as long as it is on a course of friendship and cooperation with India. But India too should be sensitive to the genuine fears of Pakistan.
Anyway, Pakistani industrialists want machinery and its parts, raw materials and chemicals from India instead of importing that same at higher prices from other countries or through other countries like Dubai and Singapore.
They want to reduce the cost of production so that they can compete better with other countries abroad, particularly in textiles. The Pakistan industry which faces an export crisis should be helped in every way possible instead of letting political considerations stand in the way.