MFN status to India: Pakistan to hold special Cabinet meet on Friday

Trade of all goods via Attari-Wagah border also likely to be approved

Pakistan is going to hold a special Cabinet meeting on Friday to discuss trade normalisation with India. On the agenda are two broad issues — removal of the negative list of items for trade, which technically means giving India the most-favoured nation (MFN) status for trade, and allowing all goods to be traded through the Attari-Wagah border.

The meeting has been proposed by that country’s Commerce & Textile Industry Minister Khurram Dastagir Khan, believed to be pushing hard for grant of the MFN status, now also referred to as Non-Discriminatory Market Access, to India.

At present, Pakistan maintains a negative list of 1,209 items that India cannot export there. This mainly includes agricultural goods, textile items and automobile parts, which are items of significant export interest for India. At the Cabinet meeting, Pakistan is likely to do away with this list, while maintaining only the sensitive list under the South Asia Free Trade Agreement (Safta).

The Cabinet, to also be attended by Pakistan’s former commerce minister Makhdoom Amin Fahim and former commerce secretary Zafar Mahmood, is going to give its much-awaited approval to allow all items to be traded through the Attari-Wagah land Customs stations. At present, only 137 items are allowed to be traded through the land border.

The trade normalisation process between the two neighbours had started in 2011. Minister Fahim and secretary Mahmood were instrumental in initiating a dialogue with India in 2011. Before that, Pakistan maintained a positive list and a negative list for doing trade with India. Under the positive list, there were only 1,946 items that India could export to that country.

In 2012, the positive list was removed and the negative list trimmed. As a result, India was allowed to export over 8,000 items.

Pakistan was to grant the MFN status to India by December 2012. But the process got delayed due to active lobbying by Pakistan’s agricultural group and textile and automobile industries, which feared India would flood their markets, rendering them jobless.

“Pakistan need not fear about India penetrating its sensitive sectors, as most of the important items will largely remain in the sensitive list under Safta. Granting the MFN status to India is the only logical solution to the blueprint agreed upon in 2011,” said Icrier Professor Nisha Taneja.

India, in turn, will prune its sensitive list of items from the present 614 to 100 for all least-developed countries, including Pakistan and Sri Lanka. Pakistan will also reduce the list to 100 items under the Safta framework from 840 items but that will be done over five years. These steps were decided between the two countries during a commerce-secretary-level meeting in September 2012. However, following that meeting, Pakistan headed for an election and a new government was subsequently formed under Nawaz Sharif. In between, tensions along the borders also delayed the process.

The new government has now given a fresh lease of life to the stalled trade normalisation process.