Due to these restrictions, Pakistani goods can hardly enter Indian Punjab or New Delhi what to say of transporting them to markets in southern India. Hopes, however, have risen since the Indian government formed a ministerial task force to address the issue. It is expected that the task force would recommend phased withdrawal of these restrictions.
The Indian commerce secretary indicated at the 13th meeting of the Committee on Economic Cooperation of the South Asian Association for Regional Cooperation (Saarc-CEC) held in Dhaka last week , that Delhi would take necessary steps to mitigate or eliminate the non-tariff and para-tariff trade barriers by the end of this year.
Another major breakthrough is the willingness expressed by India to scale down customs duties below their applied rates for Pakistan and Sri Lank under Safta. The tariff reduction made by India under Safta for Pakistan and Sri Lanka was slightly higher than its applied tariffs. So far imports from Pakistan and Sri Lanka had no comparative advantage for the Indian market over imports from non-south Asian countries.
A lowering of duties by India under Safta would boost imports from the South Asian countries as would the removal or relaxation of the NTBs. Pakistan certainly can hope to increase its exports of marble, minerals and textile products to India in that situation.
It is for the first time that the Indian government has conceded that its trading regime was ridden with rules and restrictions that distorted India’s external trade rather than promoting it. Pakistan’s steadfast position linking the granting of most favoured nation (MFN) status to India with the elimination of NTBs is believed to have influenced the change of heart in India.
Analysts say India has agreed to remove these NTBs to gain MFN status from Pakistan. “I don’t think that there would be any problem in granting MFN status to India,” a Pakistan government official said on condition of anonymity.
Pakistan’s positive list of tradable items has already increased to more than 1,100 items. More than 400 items are in the pipeline to be added to this list. .
This new idea of linking trade liberalisation to removing of NTBs emerged at the Saarc Council of Ministers meeting held in February last in Kathmandu. This was the major shift in Pakistan’s foreign policy that liberalisation of trade relations with India would not be linked to progress on other issues.
Pakistan had handed over a copy of the non-paper on tariff, non-tariff and para-tariff barriers, restricting flow of border trade with neighboring countries, to India at the sideline of the commerce ministers meeting.
The 30-page report titled “an overview of trade policy of India on trade in goods” details tariff, non-tariff and para-tariff barriers, which restricted access to Indian market for Saarc countries, including Pakistan.
As far back as 2004, study groups constituted under the aegis of the newly-established India-Pakistan Chamber of Commerce gave initial recommendations to the India to remove these trade distortions by August 2005.
But as Former chairman of the Federation of Pakistan Chamber of Commerce and Industry, Chaudhry Mohammad Saeed, said the Indian government did not implement the initial proposal on removal of NTBs, so the idea of coming up with a final report was dropped.
According to the report prepared by Pakistan’ s Commerce Ministry Joint Secretary Shahid Bashir, the Indian main non-tariff barriers include — agriculture permits, phyto-sanitary certificates, Indian standard of quality, licensing requirement for import of vehicles, textile specific barriers, health and safety regulations, and tariff quotas etc.
Pakistan is in a position to market its textiles to India but the strict conditions, laid down under the Textile (Consumer Protection) Regulation of 1988, are a major barrier. These include producer identification and production composition, the colour and even the form, size and colour of letters and signs.
The rules and regulations regarding food items are very complicated, which give authority to the customs authorities to detain and even completely stop imports on minor infringements of rules and procedures. Inter-state movement of goods is another major hurdle in trade. Each state has it own set of rules, regulations, and levies and further inspection on border crossing. Disputes could result in more costs in terms of time and money.
Recently, Pakistani cement exporters lost around eight months to comply with the Indian standards before they were allowed to ship their containers despite the fact that cement was in great demand in India.
In some cases, the Indians were reluctant to export raw materials to Pakistan. Indians were not ready to export blue wed — a raw material used in leather goods — to Pakistan. They are interested in exporting only value-added goods.
Interestingly, the sides have also decided to ease visa regimes for the business people and fix up certification of products following the world standard yardsticks.
On bilateral level to work on prompt basis, Pakistan and India have also exchanged a list of 20 products to identify the NTBs. Apparently, this decision is the outcome of the commerce secretary-level talks between the two countries in August last in New Delhi. The bilateral trade between Pakistan and India reached $1.6 billion in 2006-07 from $835 million in 2004-05. . For the first time, imports from India to Pakistan have crossed the figure of $1billion and currently stand at $1.25 billion.
Pakistan’s exports to India, on the other hand, have grown slowly from $280 million in 2004-05 to only $370 million in 2006-07 despite the fact that India has granted MFN status to Pakistan.
The recommendations of the Indian task force on NTBs raises hope . But is will require approval of Lok Sabha—Lower House of India -- for implementation. It means that Indian politicians will also play a positive role in scrutiny and approval of the report.
Until these NTBs and para-tariffs are removed, it is unlikely that the reduction in customs duties will help increase the bilateral trade between Pakistan and India and other South Asian countries.