Pak Promises MFN Status to India by Year End

Pakistan is on track for granting its neighbour - and often political rival - India most favoured nation (MFN) status by year’s end, Pakistan’s commerce secretary confirmed last week. The two sides also recently outlined a timeline for reducing their sensitive lists for each others’ imports under the South Asia Free Trade Area (SAFTA) Agreement, as part of their ongoing efforts to boost bilateral trade ties.

According to comments made by Pakistani Commerce Secretary Munir Qureshi on Thursday, Islamabad is well on its way to removing its ‘negative list’ for products from New Delhi - in other words, those items that India cannot export to Pakistan - by the end of December and give India MFN status.

Back in March, Pakistani officials announced that this negative list would be replacing Islamabad’s long-standing ‘positive list’, which had allowed imports of fewer than 2,000 items from India.

Required of all WTO members, MFN status mandates that each nation must treat trade with all members equally. Although India granted MFN status to Pakistan in 1996, Islamabad had previously refused to reciprocate due to ongoing disagreements between the two neighbours over the Kashmir region. Last November, however, Pakistan’s cabinet unanimously agreed to begin the process of granting India MFN treatment.

Qureshi also confirmed last week that Islamabad plans to reduce its sensitive list under SAFTA - which specifies which items a country can exclude from tariff concessions - from approximately 1000 products from India to 100 by 2017, in line with statements made by officials from both sides last month.

India, in turn, plans to bring its sensitive list of products from Pakistan down to 100 items by 2013.

Along with India and Pakistan, SAFTA also includes Bangladesh, Bhutan, the Maldives, Nepal, and Sri Lanka.

Ongoing efforts to boost bilateral trade spark scepticism among some industries

The Pakistani commerce minister’s remarks last Thursday come just weeks after the two sides inked three new agreements at removing trade barriers. However, some industry officials have lately expressed concern over the possible adverse effects of boosting the currently limited trade between the two neighbours.

The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), for instance, has argued that - unless India reduces its own non-tariff barriers - the removal of the negative list and reduction in the sensitive list will lead to disastrous results for the country’s auto industry.

Islamabad “has not prepared itself for phasing out the negative list,” PAAPAM Chairman Munir Bana told Pakistani newspaper The Nation last week. Furthermore, the government is not ready “to face the onslaught of Indian products” that could result from the proposed reduction to Pakistan’s sensitive list, the official continued.

According to Qureshi, however, the timeline of the sensitive list reduction is meant to give Pakistani businesses five years to prepare to compete against Indian imports.