Fifteen years late, Pakistan on Wednesday reciprocated India?s offer to conduct trade between the two nations on ?most favoured nation? (MFN) terms.
Pakistan information minister Firdous Ashiq Awan told reporters in Islamabad the proposal was cleared by the Cabinet ?after a lengthy discussion and a briefing by the commerce secretary?. The decision comes ahead of an expected meeting between Prime Minister Manmohan Singh and his Pakistani counterpart Yousaf Raza Gilani during the Saarc summit in Maldives next week.
Experts said the move will infuse predictability and certainty in trade ties. At present, most of India?s exports to Pakistan is routed through Dubai, making the UAE India?s largest export destination with nearly $35 billion in volumes in 2010-11. Direct trade between India and Pakistan is just $2.5 billion.
India?s petrochemicals, textiles and engineering companies will gain most from the move.
Pakistan’s MFN decision is the biggest trade liberalisation measure made by it in more than six decades. Talking to FE Commerce Secretary Rahul Khullar said: ?It is a very good and encouraging sign highlighting that (Pakistan) is working towards the agenda decided in April.? Pakistan has already bestowed the MFN status on more than 100 countries, including China ? Islamabad’s closest ally and India’s key rival.
World Trade Organisation expert Biswajit Dhar said the next step will be replacing the positive (allowed for trade) list that India has offered Pakistan and vice versa to a small, mutually agreed negative list. Currently, India exports only over 1,900 items to Pakistan, while trade in over 850 items is banned. The MFN status will imply no special treatment, but will ensure that the country won’t be discriminated against when it comes to giving market access to its goods.
?Given India’s enhanced manufacturing prowess and the fact that the Pakistani market for goods has grown substantially in recent years, Islamabad’s gesture indeed makes Indian exporters stand in good stead,? Federation of Indian Export Organisations (FIEO) president Ramu Deora said.
?In the short term, it might make the Pakistan’s business community work harder, but in the longer run, it will help the country’s economy,? said Deloitte, Haskin & Sells director Anis Chakravarty.
?Improved trade ties will inevitably give impetus to investment flows between the two countries,? he added.
During his India visit in September, Pakistani commerce minister Amin Fahim had said that his nation was analysing the implications of MFN status for India, and might soon grant it, besides improving business relationships between the neighbours.
India and Pakistan this year resumed formal peace talks, broken off after the 2008 Mumbai terror attacks.