Pulwama terror attack: India revokes most favoured nation status accorded to Pakistan

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New Delhi | Updated: February 16, 2019 6:34:53 AM

A day after the deadliest terror attack in Kashmir killed over 40 CRPF troops, India on Friday stripped Pakistan of the most favoured nation (MFN) status in trade it had unilaterally granted in 1996.

india, pakistan, pulwama terror attack, mfn statusThe government is also considering punitive trade measures such as a sharp hike in customs duties or a ban on goods imported from Pakistan and curbs on ports from which trade with the neighbour can be undertaken.

A day after the deadliest terror attack in Kashmir killed over 40 CRPF troops, India on Friday stripped Pakistan of the most favoured nation (MFN) status in trade it had unilaterally granted in 1996.
The government is also considering punitive trade measures such as a sharp hike in customs duties or a ban on goods imported from Pakistan and curbs on ports from which trade with the neighbour can be undertaken. The decision to revoke the MFN tag was taken at a meeting of the Cabinet Committee on Security, chaired by Prime Minister Narendra Modi, finance minister Arun Jaitley said after the meeting while listing a raft of steps to punish Pakistan for its involvement in the terrorist attack.

The commercial impact of the withdrawal of the MFN status — a trade jargon for giving equal treatment to all trading partners under the WTO framework — will be limited for India due to low-level of bilateral trade. However, symbolically, the move is seen as the strongest retaliation in trade yet, given that the MFN status was not revoked even after the Kargil war and the 26/11 Mumbai attacks.

For its part, Pakistan hasn’t granted the MFN status to India and continues to trade with New Delhi with a negative list of 1,209 products. This means barring those products on the list, India can ship out other items to the neighbour.

However, New Delhi’s retaliation may offer Pakistan an excuse to raise its negative list of tradable items with India. In 2012, the neighbour had committed to granting India the MFN status but retracted later due to domestic opposition.

Official sources said it was not obligatory for India to inform the WTO about the decision, as it had invoked Article 21 of the WTO, which provides for security exceptions for the MFN withdrawal. The government would soon come out with a list of Pakistani items which would face the punitive measures.

India’s merchandise exports to Pakistan touched $1.41 billion from April to November 2018, constituting just 0.6% of the country’s total exports. Similarly, India’s imports from Pakistan stood at $381 million, making up for 0.1% of New Delhi’s overall purchases from overseas. For Pakistan, though, the impact will be greater, as the neighbour’s purchases from India stood at over 3% in 2017-18.

Biswajit Dhar, noted trade economist and professor at Jawaharlal Nehru University, said New Delhi also needs to target Pakistani supplies routed to India via Dubai and Singapore.
India mainly exported cotton and organic chemicals (these two made up for a half of our supplies in FY19), plastics and fruit and vegetable, while its imports from Pakistan include fruit, some mineral fuels, salt and cement.

India had last reviewed the MFN status after the 2016 Uri attacks —which were traced to militant outfits based in Pakistan — but refrained from revoking it.

Also read: Here’s what Pakistan stands to lose as India withdraws MFN status after Pulwama attack

In 2012, Pakistan announced the negative list, departing from its decades-old practice of trading on the basis of a positive list that had severely restricted prospects of Indian exports to that country.
PTI adds: Pakistan will not make any “emotional decision” following India’s withdrawal of MFN status to the country and respond to it after due deliberation, a senior official said on Friday. Adviser to Pakistan prime minister on trade Abdul Razzak Dawood told reporters in Islamabad that a response to Indian decision would come after due deliberation.

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