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Pakistani cabinets decision of
granting the Most Favoured Nation
(MFN) status to India is the most
talked-about issue in the corridors of
trade and commerce. It can be called
the most important chapter in the
history of both the countries because
it has been a social and political
taboo on both sides of the Indo-Pak
border since many decades. Tonnes
of conciliatory and contradictory
material have been printed over the
economic issue that has been
dragged into the realm of politics.
Responding to a massive campaign
against the pact on the Pakistani
side of Indo-Pak borders, Pakistan
government has linked the
implementation of the pact to more
agreements as an exercise to ensure
level playing field to protect the
interests of Pakistani traders who
are threatened by the export
potentials of a huge economy like
India.
Reciprocal in nature
It is to be remembered that back in
1996 India gave Pakistan the MFN
status and since then it has
remained a subject of immense
debate. As per WTO rules, Pakistan
was obliged to reciprocate the Indian
move and grant status to India but it
declined to do so since 1996.
General benefits
Generally speaking, trade experts
consider MFN clauses to have the
following benefits:
n A country that grants MFN on
imports will have its imports
provided by the most efficient
supplier. This may not be the case if
tariffs differ by country.
n MFN allows smaller countries, in
particular, to participate in the
advantages that larger countries
often grant to each other, whereas
on their own, smaller countries
would often not be powerful enough
to negotiate such advantages by
themselves.
n Granting MFN has domestic
benefits: having one set of for all
countries simplifies the rules and
makes them more transparent. It
also lessens the frustrating problem
of having to establish to determine
which country a product (that may
contain parts from all over the
world) must be attributed to for
customs purposes.
n MFN restrains domestic special
interests from obtaining measures.
For example, butter producers in
country A may not be able to lobby
for high tariffs on butter to prevent
cheap imports from developing
country B, because, as the higher
tariffs would apply to every country,
the interests of As principal ally C
might get impaired.
Spirit of MFN
As a general rule, MFN clauses
promote non-discrimination among
countries. Therefore, they also aim
to promote the objective of free
trade in general. In international
economic relations and international
politics MFN is a status or level of
treatment accorded by one to
another in . The term means the
country which is the recipient of this
treatment must, nominally, receive
equal trade advantages as the most
favoured nation by the country
granting such treatment. Trade
advantages, among other things,
include low or high. In effect, a
country that has been accorded MFN
status may not be treated less
advantageously than any other
country with MFN status by the
promising country. There is a
debate in legal circles whether MFN
clauses include only substantive
rules or also procedural protections.
The members of the World Trade
Organization (WTO ) agree to accord
MFN status to each other.
Exceptions allow for preferential
treatment of developing countries,
regional free trade areas and
customs unions. Together with the
principle of national treatment, MFN
is one of the cornerstones of WTO.
Governments stance
Briefing the Senate Standing
Committee on Commerce about the
MFN status to India Commerce
Secretary Zafar Mahmood took the
parliamentarians into confidence for
the first time since the
governments decision. He was
unequivocal that Pakistan would not
implement the free trade regime
without ensuring level playing field
for its exporters. Islamabad has
proposed three agreements be
signed with New Delhi. The first is
the Customs Cooperation Agreement
to address Pakistani exporters
complaints of Indians charging high
taxes, Mutual Recognition
Agreement for standardisation of
quality standards and Grievances
Agreements to address consumer
protection issues, said Mahmood. It
is learnt that the demand was made
after exporters complained about
Indian Non-Tariff Barriers (NTBs )
which could hinder trade.
NTBs
Generally speaking, Non Tariff
Barriers refer to a range of actions,
other than tariffs, that governments
apply to restrict imported goods.
Often bureaucratic in nature, the
intention of Non-Tarriff Barriers is
to raise the prices of imported
products to make them less
attractive to consumers, or to restrict
their availability in favour of
domestically produced versions of
the same goods. Although most non-
tariff barriers violate World Trade
Organisation rules, their use is
increasing. Pakistans trade and
industry sources repeatedly criticise
the deliberate impediments
enforced by the Indian authorities in
the name of formalities. They call it
NTBs that included inordinate
delays in customs clearance of
Pakistani goods, frequent dispute
over valuation of goods for
determination of duties, strictly
applying Indian standardisation
laws and charging composite tariffs
on textile and hardships in issuing
visas to Pakistani traders. In
September this year Pakistan
decided to replace trade-able list,
known as positive list currently
comprising 1,958 items, with non-
trade-able list, known as Negative
list by February 2012. Pakistani
traders have proposed to add 600
items to the negative list.
Projected gains
Pakistan is losing $300 million to
$700 million annually due to the
application of positive list.
Currently, the balance of trade is in
favour of India as Pakistans exports
to New Delhi are $264 million
against imports of $1. 7 billion. At
present many products are coming
to Pakistan from India via Dubai
with different brand names. This
cost addition amount of $300 million
to $700 million annually. Direct
import of such raw materials and
machinery from India would reduce
its cost for the local industries.
However, the trade balance would
remain in favour of India. Before
announcing to phase out negative
list the government should take
input from those industries that
would be immediately exposed to
competition.
Trust deficit
Pakistani officials have openly
admitted that trust deficit within
Pakistan is ten times more than
trust deficit between India and
Pakistan. They suggest that a full
fledge campaign must be launched
soon to abreast local industries of
the challenges and opportunities in
the post-MFN trade regime with
India.
Equal level playing
Pakistani traders have suggested
ministry of commerce to probe the
issue of state subsidy to Indian
exporters. They are afraid that this
could hurt the interest of local
industries. They also pointed out
that cost of production in Pakistan
was much higher than that of India.
It is also anticipated that giving
MFN status to India would lead to
flooding of local markets with Indian
goods. But the supporters of MFN
say that trade and economic
activities with the neighboring
country would benefit public by
providing them with cheaper Indian
products. They are positive that it
would create a competitive
environment for the industry and
cheaper Indian products would be a
relief for people. The industrialists,
concerned about the dismal
situation of power, fuel and poor
infrastructure of industrial sector in
the country, feared that giving
incentives to India under the MFN
would further damage economy of
the country. They see it from
another angle, taking it as a
disadvantage. They argue that
Pakistan need to protect its industry
as international forces are
facilitating India to capture the
market of Afghanistan. Although
giving MFN status to India has
prohibited discrimination in trade,
but still Pakistan needs to be careful
as India may try to transit items to
Afghanistan.
Mixed opinions
Ordinary consumers think that the
opponents are inefficient
businessmen; lacking drive to
compete and would resist MFN
status to India. They plead that MFN
status would take the country
towards liberalisation and hoped
that both countries would get
benefits form it. Agriculture,
pharmaceuticals and auto sectors
are likely to bear the burnt of MFN
because Indian products in these
sectors are much cheaper. But the
plus point is that it will definitely
benefit consumers and give them a
choice and a sense of cost-quality
scrutiny. A narrow slice of wise
consumers believe that industrial
development in Pakistan has only
benefited the producers and these
benefits of infrastructure
development have not channeled to
the grassroots of the society. They
think that there must be a holistic
approach to study the cons of MFN.
It is because there are only two
quarters who are against the
promotio
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Name Email Website (optional)
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Submit Comment
Pakistani cabinets decision of
granting the Most Favoured Nation
(MFN) status to India is the most
talked-about issue in the corridors of
trade and commerce. It can be called
the most important chapter in the
history of both the countries because
it has been a social and political
taboo on both sides of the Indo-Pak
border since many decades. Tonnes
of conciliatory and contradictory
material have been printed over the
economic issue that has been
dragged into the realm of politics.
Responding to a massive campaign
against the pact on the Pakistani
side of Indo-Pak borders, Pakistan
government has linked the
implementation of the pact to more
agreements as an exercise to ensure
level playing field to protect the
interests of Pakistani traders who
are threatened by the export
potentials of a huge economy like
India.
Reciprocal in nature
It is to be remembered that back in
1996 India gave Pakistan the MFN
status and since then it has
remained a subject of immense
debate. As per WTO rules, Pakistan
was obliged to reciprocate the Indian
move and grant status to India but it
declined to do so since 1996.
General benefits
Generally speaking, trade experts
consider MFN clauses to have the
following benefits:
n A country that grants MFN on
imports will have its imports
provided by the most efficient
supplier. This may not be the case if
tariffs differ by country.
n MFN allows smaller countries, in
particular, to participate in the
advantages that larger countries
often grant to each other, whereas
on their own, smaller countries
would often not be powerful enough
to negotiate such advantages by
themselves.
n Granting MFN has domestic
benefits: having one set of for all
countries simplifies the rules and
makes them more transparent. It
also lessens the frustrating problem
of having to establish to determine
which country a product (that may
contain parts from all over the
world) must be attributed to for
customs purposes.
n MFN restrains domestic special
interests from obtaining measures.
For example, butter producers in
country A may not be able to lobby
for high tariffs on butter to prevent
cheap imports from developing
country B, because, as the higher
tariffs would apply to every country,
the interests of As principal ally C
might get impaired.
Spirit of MFN
As a general rule, MFN clauses
promote non-discrimination among
countries. Therefore, they also aim
to promote the objective of free
trade in general. In international
economic relations and international
politics MFN is a status or level of
treatment accorded by one to
another in . The term means the
country which is the recipient of this
treatment must, nominally, receive
equal trade advantages as the most
favoured nation by the country
granting such treatment. Trade
advantages, among other things,
include low or high. In effect, a
country that has been accorded MFN
status may not be treated less
advantageously than any other
country with MFN status by the
promising country. There is a
debate in legal circles whether MFN
clauses include only substantive
rules or also procedural protections.
The members of the World Trade
Organization (WTO ) agree to accord
MFN status to each other.
Exceptions allow for preferential
treatment of developing countries,
regional free trade areas and
customs unions. Together with the
principle of national treatment, MFN
is one of the cornerstones of WTO.
Governments stance
Briefing the Senate Standing
Committee on Commerce about the
MFN status to India Commerce
Secretary Zafar Mahmood took the
parliamentarians into confidence for
the first time since the
governments decision. He was
unequivocal that Pakistan would not
implement the free trade regime
without ensuring level playing field
for its exporters. Islamabad has
proposed three agreements be
signed with New Delhi. The first is
the Customs Cooperation Agreement
to address Pakistani exporters
complaints of Indians charging high
taxes, Mutual Recognition
Agreement for standardisation of
quality standards and Grievances
Agreements to address consumer
protection issues, said Mahmood. It
is learnt that the demand was made
after exporters complained about
Indian Non-Tariff Barriers (NTBs )
which could hinder trade.
NTBs
Generally speaking, Non Tariff
Barriers refer to a range of actions,
other than tariffs, that governments
apply to restrict imported goods.
Often bureaucratic in nature, the
intention of Non-Tarriff Barriers is
to raise the prices of imported
products to make them less
attractive to consumers, or to restrict
their availability in favour of
domestically produced versions of
the same goods. Although most non-
tariff barriers violate World Trade
Organisation rules, their use is
increasing. Pakistans trade and
industry sources repeatedly criticise
the deliberate impediments
enforced by the Indian authorities in
the name of formalities. They call it
NTBs that included inordinate
delays in customs clearance of
Pakistani goods, frequent dispute
over valuation of goods for
determination of duties, strictly
applying Indian standardisation
laws and charging composite tariffs
on textile and hardships in issuing
visas to Pakistani traders. In
September this year Pakistan
decided to replace trade-able list,
known as positive list currently
comprising 1,958 items, with non-
trade-able list, known as Negative
list by February 2012. Pakistani
traders have proposed to add 600
items to the negative list.
Projected gains
Pakistan is losing $300 million to
$700 million annually due to the
application of positive list.
Currently, the balance of trade is in
favour of India as Pakistans exports
to New Delhi are $264 million
against imports of $1. 7 billion. At
present many products are coming
to Pakistan from India via Dubai
with different brand names. This
cost addition amount of $300 million
to $700 million annually. Direct
import of such raw materials and
machinery from India would reduce
its cost for the local industries.
However, the trade balance would
remain in favour of India. Before
announcing to phase out negative
list the government should take
input from those industries that
would be immediately exposed to
competition.
Trust deficit
Pakistani officials have openly
admitted that trust deficit within
Pakistan is ten times more than
trust deficit between India and
Pakistan. They suggest that a full
fledge campaign must be launched
soon to abreast local industries of
the challenges and opportunities in
the post-MFN trade regime with
India.
Equal level playing
Pakistani traders have suggested
ministry of commerce to probe the
issue of state subsidy to Indian
exporters. They are afraid that this
could hurt the interest of local
industries. They also pointed out
that cost of production in Pakistan
was much higher than that of India.
It is also anticipated that giving
MFN status to India would lead to
flooding of local markets with Indian
goods. But the supporters of MFN
say that trade and economic
activities with the neighboring
country would benefit public by
providing them with cheaper Indian
products. They are positive that it
would create a competitive
environment for the industry and
cheaper Indian products would be a
relief for people. The industrialists,
concerned about the dismal
situation of power, fuel and poor
infrastructure of industrial sector in
the country, feared that giving
incentives to India under the MFN
would further damage economy of
the country. They see it from
another angle, taking it as a
disadvantage. They argue that
Pakistan need to protect its industry
as international forces are
facilitating India to capture the
market of Afghanistan. Although
giving MFN status to India has
prohibited discrimination in trade,
but still Pakistan needs to be careful
as India may try to transit items to
Afghanistan.
Mixed opinions
Ordinary consumers think that the
opponents are inefficient
businessmen; lacking drive to
compete and would resist MFN
status to India. They plead that MFN
status would take the country
towards liberalisation and hoped
that both countries would get
benefits form it. Agriculture,
pharmaceuticals and auto sectors
are likely to bear the burnt of MFN
because Indian products in these
sectors are much cheaper. But the
plus point is that it will definitely
benefit consumers and give them a
choice and a sense of cost-quality
scrutiny. A narrow slice of wise
consumers believe that industrial
development in Pakistan has only
benefited the producers and these
benefits of infrastructure
development have not channeled to
the grassroots of the society. They
think that there must be a holistic
approach to study the cons of MFN.
It is because there are only two
quarters who are against the
promotio
What is it exactly that we import?
