Indo-Pak trade and the non-tariff barriers

The much-trumpeted Indo-Pak ministerial-level trade talks, having started yesterday in India, hold great promise for the two countries. The five-day long trade moot has assumed greater importance as it is the first such dialogue since the rupture which followed the unfortunate genocide in Mumbai, in 2008. Both the countries seem to have their own recommendations and reservations over mutual trade relations. In that backdrop, finding a common agenda and sticking to it would be no mean achievement. Owing to the convoluted nature of its politics and economics; Pakistan has, thus far, refused to grant India the "most favoured nation" status. India granted MFN status to Pakistan in 1996; however, Pakistani authorities believe India negated the benefits of its MFN status by imposing non-tariff barriers to trade. As per the WTO rules, the objective of MFN principle is to ensure that WTO members do not discriminate against one another, and allow all countries in the organization to benefit equally from the lowest possible tariffs. However, Pakistan has not reciprocated yet, despite its WTO obligations. As for the Indians, they would rather have Pakistan do away with the positive list - a list containing 1,983 items whose import is allowed by Pakistan - and follow the negative list regime like the rest of the WTO members: items not on the negative list can be exported. WTO rules do allow a country to safeguard or protect up to four sectors or industries from open trade until they attain reasonable competitiveness. While it appears that the Indian demand would be accepted soon, as the abolishment of the positive list is more of a procedural matter; there seems to be little or no respite for Pakistan over the issue of non-tariff barriers (NTBs). The Pakistani delegation needs to negotiate harder this time around over this issue. Many in Pakistan believe the country has been denied the opportunity to score big (or score at all) in the huge Indian market owing to NTBs. Resultantly, the trade terms favour India; as bilateral trade figures for FY10 show Pakistans import to export ratio at 5 to 1. While Indian NTBs may not be Pakistan-specific per se, they have worked to the latters disadvantage. Indias trade restrictiveness is also apparent in IMFs Trade Restrictiveness Index, as it is placed 7th (on a scale of 1 to 10), compared to Pakistan at 6. Higher NTBs in India are linked down to the multiplicity of laws and regulations in numerous Indian states; which often run counter to the central governments international agreements. Multiple certifying bodies and enforcement agencies add to the red tape. Since the NTBs are difficult to identify and complex to resolve, there is a need to have direct interaction among the stakeholders; including Pakistani and Indian business partners, and state authorities. There ought to be free movement of chambers of commerce and industrial bodies across the border. Then, the issue of visa restrictions resurfaces, whose resolution is still awaited. Nonetheless, it is heartening to see the bilateral trade talks moving forward, albeit at a slow pace. "Engagement is essential to creating a conducive environment as confidence-building measures will certainly raise the sentiments on the two sides. To open up to each other, economic relationship must be harnessed and kept separated from political affairs", asserts former FPCCI president Zubair Motiwala. News reports suggest that both sides are working towards an end-October deadline to push a number of initiatives; including a new trade check post on the Wahgah border in Punjab and making it easier for Indians and Pakistanis to obtain business visas. It is the issue of NTBs, however, that may linger on!