MFN status for India not on agenda: Commerce Secretary-level talks on November 14-18

Pakistan and India may hold sixth round of Commerce Secretaries' level trade talks from on November 14-18 in New Delhi, during which both countries will finalise negative lists. Sources in Commerce Ministry told Business Recorder that the much-talked-about 'Most Favoured Nation' (MFN) status for India and transit route to Afghanistan are not on the agenda.
Sources claimed that Pakistan has already granted MFN status to India, unofficially, as Indian goods are being imported by Pakistan without any hurdle or tariff barriers, whereas Pakistan's exports are not being given the same treatment, on different counts. The Pakistani team will be led by Secretary Commerce, Zafar Mahmood while Indian will be represented by Dr Rahul Khullar.
Commerce Ministry is switching over its trade with India from positive to negative list, for which consultations with the stakeholders are underway. The General Agreements on Tariff and Trade (GATT) 1947 says that measures adopted by India and Pakistan to carry out definitive trade arrangements between them, once they have been agreed upon, might depart from particular provisions of this agreement, but these measures would in general be consistent with the objectives of the agreement.
The Commerce Ministry top brass believes that switching from positive to negative list with India is in accordance with the GATT, whereas trade analysts are of the view that any such arrangement will be complete violation of international trade pact.
"GATT clearly says that trade measures between Pakistan and India would in general be consistent with the objectives of the agreement which implies there is no room to switch from positive to negative list," said an analyst. Sources said India has granted MFN status to Pakistan in 1996, whereas Pakistan has not yet reciprocated. However, despite grant of MFN status to Pakistan, the trade balance, as indicated in the figures mentioned above, is in favour of India. The grant of MFN status by India is therefore negated by the existence of very high tariffs on agriculture commodities and maintenance of composite duties on textile manufactures.
Ministry of Commerce is of the view that grant of MFN status to India hinges on a successful resolution of the Bilateral Economic and Commercial Co-operation issues, which are being addressed under the Composite Dialogue and creation of a level playing field by India, the sources continued. The Indian side has been agitating on bilateral as well as multilateral forums that Pakistan's policy of restricting imports from India though the Positive List regime vitiates spirit of the South Asia Free Trade Agreement (Safta).
Pakistan has liberalised its imports from India by adding 83 products in the importable list in 2004. Moreover, in 2006, 302 tariff lines were added to the list. In the Trade Policy 2008-09, another 136 tariff lines were included in the Appendix "G" of IPO 2009-2010.
The Commerce Ministry vide SRO No 242 Dated March 14, 2011 included 7 more items in the Appendix "G" thus increasing the total number of items importable from India to 1946 tariff lines. 1946 tariff lines listed in Appendix 'G' constitute about 31percent of Pakistan's total HS Tariff lines. The importable list now comprises raw materials, minerals, organic and inorganic chemicals, plastics, iron and steel, vegetables and fruits, machinery and parts, agricultural tools, textile machinery, foundry machinery and pharmaceuticals etc.
Sources said that India still practices import licensing, import quotas (infrequently), government or government mandated import monopolies, and a variety of other non-tariff barriers. The major non-tariff barriers are as under: (i) visa and travel restrictions, (ii) inter-provincial movement of goods, (iii) limited number of ports and inland custom posts for imports, (iv) customs clearance and customs valuation, (v) State Trading Enterprises (STE5), (vi) excessive use of trade defence measures, (vii) Tariff Rate Quotas (TRQs), and (viii) technical standards and regulations.
"Para-tariff/non-tariff barriers in Indian regime and elaborate red-tape mechanism for their application in a trade restrictive manner deny market access in India to a considerable extent. India maintains very high tariffs on agriculture commodities (Average tariff 90 percent) and at the same time composite duties (Ad Valorem + Specific duty) on textile manufactures which in some cases exceed 100 percent", sources added. The informal trade between India and Pakistan is estimated in the range of $500 million to $10 billion according to a study conducted by the World Bank.