India may drag Pakistan to WTO over denial
of MFN status
S Venkitachalam
New Delhi, Jan 2: Given the present situation, New
Delhi believes that it is “expedient” to raise the issue of
Pakistan denying the most-favoured-nation (MFN) treatment
to it at the World Trade Organisation review of Pakistan’s
trade policy slated for later this month and take a final
decision on dragging Islamabad to the WTO dispute settlement
body in the first quarter of this year.
New Delhi has already granted the MFN status to Islamabad and
its failure to reciprocate the same violates the WTO principle
of non-discrimination. Though aware of this, New Delhi has not
so far raised the issue at the dispute settlement forum of the
world trade body mainly because of the favourable trade balance
it has been enjoying during the past few years, even though
it is confident of a decision in its favour.
The MFN treatment entails WTO member-states not to discriminate
between goods on the basis of their origin/destination. In
other words, the most favoured-nation clause has been a pillar
of the multilateral trading system since the inception of
Gatt (general agreement on tariff and trade) way back in 1947.
The signatories of Gatt were bound to grant to the products
of other contracting parties treatment no less favourable
than which was being accorded to products of any other country.
Discrimination among the Gatt-members was not, therefore,
permitted.
Official sources said on the MFN issue New Delhi has been
adopting a strategy to negotiate bilaterally with Islamabad
for an amicable solution. In a two-pronged approach, the Prime
Minister had approved involving discussions with Pakistan
at the Saarc (South Asian association for regional cooperation)
forum followed by intensification of diplomatic pressure for
seeking formal consultations with Pakistan under the Gatt
rules.
The commerce secretary had in 1993 called the Pakistani high
commissioner for talks on this matter and even a demarche
was issued to Pakistan in 1994, but there was no response
from Islamabad.
New Delhi has also several other options to deal with the
issue. One is to invoke article XXI (XXI.b.(iii) to deny the
MFN status to Pakistan for security reasons and seek more
time till the conclusion of the fourth round of Sapta ((South
Asia preferential trade arrangement) from the Cabinet. It
is, however, felt that even with a favourable ruling from
the WTO body, New Delhi can only take retaliatory measures
if Pakistan does not carry out the ruling. This will again
defeat the objective of Islamabad opening up its trade with
New Delhi.
New Delhi can also unilaterally stop preferential imports
from Pakistan under Sapta, but this may lead to the charge
of New Delhi short-circuiting the Sapta process. Moreover,
banning imports from Pakistan is also not likely to be of
much help.
Barring 1998-99, India has been enjoying a favourable trade
balance with Pakistan for all the years since 1993-94. While
Indian exports to Pakistan were valued at Rs 848.41 crore
during 2000-01, its imports were only worth Rs 299.45 crore.
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