Pak may hike duties to cut MFN benefit

Written by Kirtika Suneja | New Delhi | Updated: Feb 11 2013, 05:51am hrs
Islamabad is not only delaying grant of the promised most-favoured nation (MFN) status to India in trade, but may also reduce the favour by hiking tariff on items of export interest to India under the new regime.

An MFN status doesn't mean any special favour being accorded, but merely lack of discriminatory treatment in giving access to the goods and services from the country concrened. New Delhi is unhappy with Pakistan for not honouring its commitment of granting it the MFN status by December 31, 2012, and mounting tensions at the border have added to woes.

According to senior government officials, Pakistan might impose standards on imports or raise duties on items in cases where India can be a major supplier.

In products like automobile components, machinery and other electronic and electrical equipment, Indias neighbour is likely to protect its domestic industry with these measures. Products like motorcycle parts, flat enrolled products, machinery products, diesel generating sets and plastics are of Indias export interest, which may also see tariff barriers.

Even if they do open up, they will put restrictions on products whose export is beneficial to India. They can raise tariff barriers on these products though the applied rates will not go beyond the bound rates as prescribed by WTO. These are the most sought after products in Pakistan and their industry is thinking on these lines, said M Rafeeque Ahmed, president, Federation of Indian Exports Organisations.

As per the WTO, bound rates are the ceiling rates beyond which tariffs cant be increased while applied rates refer to the rates at which import taxes are levied, which can be lower than the bound rates.

During April-December 2012, Pakistans exports to India rose more than 50% from the year-ago period while those from India to Pakistan declined by 10%. The number of cargo trucks from Pakistan to India increased by 101%.

It was agreed that after Pakistan notified its removal of all restrictions on trade by Wagah-Attari land route, the Indian side would bring down its Safta sensitive list by 30% before December, 2012. Once the MFN status is given to it, India is bound to bring down its Safta Sensitive List to 100 tariff lines.

Experts say this kind of protectionism by Pakistan may benefit China as it has an FTA with China, which offers tariff concessions to the latter. However, the commerce ministry is unfazed with this development. By opening the MFN, you accept certain bound duties and those are mandatory. Besides, importing from India will save them transhipment costs so, they will get a better deal, said a commerce ministry official.