M A I N   N E W S

Pak nod to ‘negative list’, India’s MFN status not far
Ashok Tuteja/TNS

New Delhi, February 29
In a significant move to normalise bilateral economic relations, Pakistan today announced its decision to switch over to a ‘negative list’ regime for trade with India, paving the way for formally according the Most Favoured Nation (MFN) status to this country by year-end.

Pakistan has, thus, fulfilled the commitment its Commerce Minister Makhdoom Amin Fahim had made to his Indian counterpart Anand Sharma during the latter’s recent visit to the neighbouring country earlier this month as the head of the biggest ever business delegation from India.

A meeting of the Pakistan Cabinet, chaired by Prime Minister Yousuf Raza Gilani, approved the introduction of a negative list with 1,209 items that cannot be traded with India. The negative list would be phased out by December 31, 2012 to complete the process of normalisation of trade with India.

The Pakistan Commerce Ministry had earlier finalised a negative list of about 650 items but this has been expanded to 1,209 items.

The decision will allow Pakistan to trade with India in more than 5,600 items, up from 1,963 items currently in the positive list. There were apprehensions in India that Pakistan would back out of its commitment to accord it the MFN status in view of the stiff opposition from hardliners in the business community. Various ‘jihadi’ organisations had also started a campaign against granting this status to India. Incidentally, India had accorded Pakistan the MFN status in 1996.

Even when Anand Sharma was in Pakistan, the Pakistan Cabinet had met to approve the negative list but deferred a decision on the issue in view of the opposition by ministers of key portfolios like textiles, who had expressed reservations over the move.

Welcoming Pakistan’s decision, Anand Sharma said: “We believe that strengthening economic engagement between India and Pakistan lies at the heart of building enduring peace and stability in this region.” He said flourishing trade would be the biggest confidence-building measure between any two nations.

Direct trade between the two countries constitutes less than one per cent of their respective global trade. India exported goods worth about $ 2.33 billion to Pakistan last year while its imports were to the tune of some $ 330 million. However, trade between them through a third country, particularly Dubai and Singapore, is almost ten times more than the direct trade. This obviously deprives both the governments of the benefit of mutual trade. Now, almost 90 per cent items can be traded with Pakistan as opposed to 17 per cent earlier.

Pakistanis, however, feel that normalisation of bilateral trade is possible only after some legal procedures are completed. The textile sector in Pakistan believes that India must reduce the tariff on the textiles imported from Pakistan. Similarly, they also want New Delhi to amend the rules to allow Pakistanis to invest in India. Pakistan does not have any restrictions on allowing Indian investments. A Commerce Ministry official had recently stated that India was considering amending the Foreign Exchange Management Act (FEMA) to permit investments from Pakistan.

The two countries have already announced that the integrated check-post at the Attari-Wagah border would be operational for trade by April. They are also exploring the possibility of opening the Munabao-Khokharapar route for trade. Talks are also on between the sides for trade in petroleum products, electricity.

Various trade organisations in India also welcomed Pakistan’s decision to move from the positive list to the negative list. 

Positive trade winds

• Now almost 90% items can be traded with Pakistan as opposed to 17% earlier
• The Pakistan Government’s decision to switch over to a ‘negative list’ regime for trade with India has paved the way for formally according the Most Favoured Nation status to the latter by the end of this year
• The negative list would be phased out by December 31, 2012 to complete the process of normalisation of trade between the two countries