Granting the most favoured nation (MFN) status to India does not mean market access: it is just fulfilment of WTO obligations. Important sectors of economy, like exporters and local manufacturers, feel very strongly that though Pakistan enjoys MFN status but does not have market access in India.
"Pakistan's policy makers have again proved the fact that the golden rule of 'think before you act' is a proverb 'of the past', and now they act first and think, and plan, later." This is how they look at the issue, and this is exactly what has happened while granting MFN status to India, considering trade as a binding force between the two nations.
Among the economic experts, opinion is divided. A significant number is really not happy over the haste shown by the federal government in this regard, while two important bureaucrats are on record of denying the same, throughout.
Granting MFN status to India means allowing trade with India in similar pattern and tariff rates as allowed to other nations of the world by Pakistan. Since the 1965 war, Pakistan had restricted trade with India through limiting 'Positive lists' in Trade Policy Order. Currently 1,946 items, as defined in Appendix G of Trade Policy Order of 2009, are allowed as importable from India, whereas there is no restriction on Pakistan for exporting to India. However, the trade balance shows that Pakistan's exports to India during 2008-09 & 2009-10 stood at $370 million and $276 million respectively, whereas Indian exports to Pakistan amounted to $1,439 million and $1,573 million respectively during the same period, according to Indian Ministry of Commerce figures available here. It is further an eye opener that Pakistan's share of exports to India is showing a downward trend since the grant of MFN by India.
Pakistan and India are signatories to the 1948 General Agreement r Tariffs & Trade (GATT), which gradually progressed to become World Trade Organisation (WTO) in April 1994 during the Marrakesh Round. The object of the entire exercise is to ensure a relatively liberalised movement of goods across the globe with a transparent, non-discriminatory and comparatively tension- and dispute-free trading. It is obligatory on the signatory countries (to date 153 nations) to allow MFN status to each other. India, therefore, granted MFN status to Pakistan in 1996 whereas Pakistan, also being the signatory of WTO, had not allowed the same status to India.
India has restricted products, including Pakistan's, through non tariff & para tariff barriers. Recently, a delegation, led by Commerce Minister, visited India and met with various Indian officials to seek ways to open trade with India. According to a member of the delegation, who represented one of the leading Japanese car manufacturers and leading tractor manufacturers, said that India has not imposed any Pakistan specific non-trade barriers. Yet Pakistan is unable to sell the world's finest quality cement, textiles and agricultural products to India.
There are specific instances of India restricting trade mentioned in the annual report of United States Trade Representative (USTR) on significant foreign trade barriers for year 2006 and similar trade barriers are also notified in the working paper No 200 of Indian Council for Research on International Economic Relations. It is worth noting that even the United States of America, today's superpower, also felt the heat of the quantitative Indian restrictions. Some of the examples of Indian NTBs are as follows:
---- Textiles products require pre-shipment certificate from a textile testing laboratory accredited to the national agency in the country of origin, certifying about the non-use of hazardous dyes. There are instances wherein EU-accredited labs were rejected by Indian customs.
---- Leather and Melamine products require that the samples of export consignments are sent to testing laboratories which are located far away from the port of entry in India, which is not only time-consuming but also acts as a deterrent for exporters of the world;
---- Pharmaceutical products require registration of the drugs with the Central Organisation in India;
---- Processed foods, under the Prevention of Food Adulteration Act, 1954 (of India), require that the product has to have a shelf life of at least 60 percent of the original shelf life at the time of entering India;
---- Pre-packaged products are required to name the importer with his address and also to specify the maximum sale price at which the product will be sold to the end-consumers, which has to include all the taxes (local and otherwise), the freight and transport charges, commission to be paid to the dealers and all other charges towards advertising, delivery, packaging, forwarding and the like which at times become impossible for international exporters to provide; and
---- Agricultural products are required to get a phytosanitary certificate, and the consignment has to go through various other testing requirements. Plant quarantine facilities are available at Amritsar airport only and not at Amritsar rail cargo station or at Wahga border. There is always a possibility that the cargo is held up and delayed during weekends and other holidays, thus exposed to other hazards.
Granting MFN status to Pakistan by India, wrapped with non-tariff barriers (NTBs) and para-tariff barriers (PTBs) means a beautiful trap for Pakistan wherein there is no commitment of market access to India. Therefore, the claim availability of huge Indian market of 1,800 million people for Pakistan's exporters is not justified. Nepal is one of the neighbouring states of India, wherein almost 80 percent of trade, 45 percent of total investments, majority banking industry and manufacturing concerns are dominated by Indians ie Nepal's economy is a hostage to India, according to a Study by Professor Executive Director, Centre for Economic and Technical Studies in Nepal.
The government of Pakistan has always treated automobile as the mother of all industries, considering the fact that the industry contributes 5 percent of total FBR collection; 1.4 million Pakistanis are earning their livelihood through the industry.
Automobile industry constitutes 15 percent of large-scale industry and has second largest investment, after energy sector, in Pakistan as mentioned in Economic Survey of Pakistan 2010-11. Therefore, the Government of Pakistan always restricted automobile imports in all their international agreements and commitments eg it is included in negative list of Afghan Transit Trade Agreement of 1965; included in Appendix G for restricting trade of such items from India; and it was also considered while preparing 'Sensitive List' for South Asian Free Trade Area [SAFTA]. Sensitive list under Safta means allowable imports with 'NO TARIFF CONSESSION'.
During 2010-11, India manufactured 2.50 million cars, 12.671 million motorcycles, 0.548 million tractors, 0.799 million rickshaws, 0.548 million tractors, 0.408 million light commercial vehicles, 0.318 million multi utility vehicles [ambulances, television communication vans etc], 0.344 million buses & trucks, whereas Pakistan is producing 0.119 million cars, 0.034 million LCVs, 0.003 million buses & trucks, 0.070 million tractors, 0.8 million motorcycles and just 0.015 million rickshaws.
Pakistan is producing just 20 percent of current automobile in India. Furthermore, India is sourced with all world renowned automotive players as compared to just four car manufacturers in Pakistan. Major automotive raw materials of the industry, like steel, copper, technical assistance agreements backed with trained human resource, are already available in India. Pakistan's automotive players having strong base in India like Maruti and Hyundai are in favour of allowing imports from India whereas others fear that the bigger market will wipe off small industrial base of Pakistan.
Nabeel Hashmi, Chairman of Pakistan Association of Auto Parts and Accessories Manufactures (PAPAAM), in a communication sent to Ministry of Commerce and Trade Development Authority of Pakistan (TDAP) has suggested that, in the first phase, trade with India be initiated with the import of raw materials, machinery and equipments, moulds and dies, etc. Further, allow transfer of technology through joint venture and technical assistance agreements and thus make our industry competitive.
He also suggested imposing 'Pakistan's Automotive Non Tariff Barriers' like Pakistan's Vehicle Safety Standards, Pakistan's Vehicle Quality Standards and Pakistan's Vehicle Logistics & Trade Standards etc. However, this could only be possible through capacity building (including human resource development & availability of vehicle testing equipments) of government agencies like Ministry of Science & Technology, Engineering Development Board and Ministry of Industries & Production. To date, not only automotive assemblers and parts manufacturers have not taken initiative for preparing and legalising NTB for automotive industry, the Government of Pakistan as well is not playing its roles in NTB Legal Frame Work.
"In the absence of non-tariff barriers, are we allowing Indian traders full market access to Pakistan?" he asked, adding that "our traders are still unable to get market access of India, although having MFN status".