THE cabinet decision of November 2, made public by different actors with varying statements, caused confusion in both India and Pakistan but conveyed at least one clear message: it is too early to grant Most-Favoured Nation status to India.

Four days later, Indian foreign secretary also played down the confusion, saying such a step “could take some time.”

But the whole exercise left an initial impression, particularly among some Indians, of ‘backtracking’ by Pakistan on the MFN decision. The seeds of confusion were sowed by Information Minister Dr Firdaus Ashiq Awan by her announcement that the cabinet had decided to grant India the MFN status to improve trade relations between the two countries.

Hours later, a press note issued by the commerce ministry did not say that Pakistan had granted MFN status to India. It said that the cabinet has given the ministry, “the mandate to take the process of normalisation forward, which would culminate in the observance of MFN principle in its true spirit.” After the commerce ministry statement, Dr Awan backtracked from her earlier announcement. She said, the cabinet had granted approval to the secretary of commerce to continue the trade normalisation talks with India.

Commerce secretary Zafar Mehmood, who briefed the cabinet on the trade talks held so far with India, is of the view that the entire trade liberalisation process is “linked with the removal of non-tariff barriers” by the Indian government. But Indian High Commissioner to Pakistan, Sharat Sabharwal insisted on November 5 in Karachi that India’s non-tariff barriers were uniform for all the countries and not “Pakistan specific.” However, Zafar Mehmood has set up committees to identify trade barriers to exports to India.

Three days later, Prime Minister Gilani also contributed to the confusion, saying the cabinet has not granted India the MFN status. How it could happen, he explained: “We will give it go-ahead if the situation is quite favourable and in the national interest; otherwise, proceedings on it would be withheld.” Gilani’s remarks, the Economic Times of New Delhi commented, came against the “background of a flip-flop” by the Pakistan government on the issue.

Gilani who is fond of asserting that the parliament is supreme in all matters, made a departure on the MFN issue. He said, “we can brief Parliament on the cabinet’s decision of going ahead with MFN, but according to my point of view, it is not necessary. Only cabinet approval is necessary to negotiate with other countries.” Many MNAs interviewed by TV channels on this issue had opposed giving such status to India. Indian daily Hindustan Times, quoted Dr Awan saying that some ministers had voiced concerns over granting MFN status to India in the cabinet meeting but dropped opposition after assurances from the prime minister.

About the rephrased cabinet decision, The Hindu, a leading Indian daily, carried the headline, ‘Pak now dilly-dallying on MFN status to India.’ Similarly, Indian news agency Press Trust of India said: “A day after granting most favoured nation status to India, the Pakistan government appeared to be playing to the gallery by being ambiguous on the issue.

India had granted Pakistan MFN status way back in 1996 but Islamabad had so far held out on reciprocating due to opposition from some trade lobbies and religious and hardline political parties which contended that such a move would harm the country’s stand on the Kashmir issue.” Hours before the news briefing at the Foreign Office, The Hindu said, the commerce ministry’s statement was removed from the Press Information Department’s website.

The fact remains that a sizable section of social and political community is not willing to accept normalisation of trade relations with India unless the Kashmir dispute in particular is resolved according the UN resolutions. They include many from the security personnel and religious elements.

However, opponents in the business community, have different reasons; they seek protection of their businesses which they fear may be swept away with the perceived flood of Indian products in the country. While formal trade between the two countries is a paltry $2.7 billion annually, unregulated trade, much of it routed through third countries, is much larger. One estimate puts formal and informal trade at $10 billion.

But some analysts are of the view that it is not the right time for going ahead with liberalised trade relationship. According to Munir Akram, former ambassador to the UN, “It is no secret that western powers have strongly pressed Pakistan to normalise trade ties with India, arguing that this would help improve political relations — the reverse of Pakistan’s long-standing posture.”

In an article in this newspaper, he says Pakistan is unlikely to gain much from trade liberalisation at this time with India or any developing country because it does not produce much that it can sell abroad. It does not enjoy a price advantage in more than a handful of products.

But the Pakistan Business Council, which represents the 35 largest companies in the country, strongly favours unrestricted trade with India. Its members think that since they have had to compete with the MFN-granted products from all other WTO members, they can compete favourably with Indian products as well. Besides, the increased trade with India, they believe, would improve Pakistan’s GDP growth rate by one to two per cent.

However, it is the flawed policies of the successive governments that have kept sectors such as textiles, pharmaceuticals and automotive industry incompetitive and still in ‘infant industry’ mode. In pharmaceuticals, Pakistan has not encouraged the production of generic drugs under the pressure of multinationals but India is one of the leaders in this sector.

According to Munir Akram, Pakistan must wait for the moment when the parameters of India’s ambitions become more benign towards Pakistan.