Trade normalisation process with India: 'Foreign ministry wants progress on political issues'

MUSHTAQ GHUMMAN

ISLAMABAD: The trade normalisation process between Pakistan and India is likely to be delayed as the Ministry of Foreign Affairs wants parallel progress on political issues under a composite dialogue, sources told Business Recorder on Thursday.

The Ministry of Commerce, sources said, had sent a summary to the Prime Minister in April through the Ministry of Foreign Affairs, seeking permission to invite the Indian Commerce Secretary to seek guarantees on removal of non-tariff barriers before phasing out a negative list of 1,209 items from June 30.

The Commerce Ministry was expected to host the second round of Commerce Secretary level talks in Pakistan on May 3-4, but they did not receive clearance from the Prime Minister due to ‘unsupportive’ attitude of Ministry of Foreign Affairs.

“What I know is that Ministry of Foreign Affairs did not support the Commerce Ministry’s summary and that is why Prime Ministry has not yet cleared it despite the passage of almost a month,” commented an official of Commerce Ministry on condition of anonymity.

The body language of Commerce Secretary, Zafar Mahmood, who fully supports normalization of trade relations with India was ‘calm and collected’ on Thursday during the meeting of National Assembly’s Standing Committee on Commerce, saying that the federal cabinet had approved the negative list of 1209 items in principle.

 “We will again go to the cabinet which is the competent forum, seeking guidance for phasing out of 1209 items negative list in three instalments by December 31, 2012, after formal talks with the Indian Commerce Secretary,” he added.

Meanwhile, the committee, presided over by Khurram Dastgir, raised a number of questions regarding the impact of removal of the negative list on local industry and the struggling agriculture sector.

Replying to various questions, the Secretary Commerce said that Pakistan was normalising trade relations with India and not giving any preferential treatment to it. He assured the committee that if an industry felt threatened from the influx of Indian goods, the government would use trade defence laws, which were being enforced by many countries, including countries friendly to Pakistan such as Turkey with respect to our textile products.

The annual trade between India and Pakistan stood at $2.3 billion, of which the Indian share was $2 billion whereas Pakistani exports constituted $300 million, implying that Pakistani exports were just one-sixth of the total trade volume between the two countries. 

“We will use trade defence laws to protect our industry in case there is a threat,” he maintained.   

Acknowledging that Indian import regime was more stringent than Pakistan’s, he said that this issue had been taken up at various forums in India. “We have also discussed the role of Indian security agencies in disrupting Pakistani exports and hopefully these will be resolved. At the same time, Pakistani exporters have to comply with the requirements of different Indian departments,” Mehmood clarified.

In reply to a question, the Secretary Commerce replied that a meeting was scheduled between the Secretary Interior and the Indian Home Secretary during which issues such as multiple visas for businessmen for more than 4-5 cities and exemption from police reporting would be settled.

“You will be hearing good news in a week regarding the resolution of issue of visa for businessmen,” he added.

The Secretary Commerce dispelled the impression that Pakistani industry had been destroyed as a result of a Free Trade Agreement (FTA) with China.

“No doubt, the trade balance is in favour of China but Pakistani exports have increased much faster as compared to China.  Pakistan exports are 1/ 3rd of China’s export. FTA is beneficial for Pakistan,” he continued.

Referring to the possibility of launching Pakistani private television channels in India and the use of roaming facility for cell phones, he said that these issues would be resolved once the confidence level between the two countries was restored.

Commenting on the possibility of opening of bank branches, the Secretary Commerce said that the State Bank of Pakistan and the Reserve Bank of India (RBI) were consulting on this issue, adding that at present, trade between the two countries was being done via a third country.

According to Commerce Secretary, the RBI had indicated that it would allow subsidiaries of Pakistani banks under its purview and not full bank braches under the SBP, adding that the proposal had been rejected by Pakistan. Last month, he said, both countries had agreed that banks that want to open branches would submit their applications to the respective countries. 

When the chairman of the committee asked why a third country was being used to trade with India, the Secretary Commerce clarified that when restrictions were in force on official trade, trade was likely to be conducted via third countries and “businessmen know this mechanism well”.

Khwaja Sohail Mansoor of MQM urged the Commerce Ministry to play its role in opening of the Mona Bao route so that Sindh could benefit from bilateral trade.

The Secretary Commerce appreciated the role of political leadership for supporting trade normalisation process, especially the Chief Minister Punjab, with the wish that trade within the region would be on the lines of the European Union.

The Committee was apprised that the Ministry of Finance had agreed to an increase of 4.5 percent on the previous budget. A break-up of budget estimates was also described. The committee directed that projects being shifted to the Ministry of Food Security should not be reflected in the Commerce Ministry’s budget.