MFN doesn't translate to BFF

Giving an MFN status to another country does not mean that Pakistan is becoming their BFF.

Adnan Rasool December 07, 2011
Recently there has been a lot of debate on the issue of granting India the Most Favoured Nation status (MFN). The debate has primarily garnered negative responses from all sides and has actually put the government under a lot of pressure. Initially what was seen as a straightforward gesture has turned into a political hot potato, causing the prime minister and foreign minister to give statements periodically defending their stance.

The reason this whole MFN status for India has become such a big deal is primarily due to the fact that most people debating it are immature and do not know much about economics or international trade. Add to this the overzealous media in Pakistan, and you have a political issue which should have been a purely economic one.

I hope to dispel rumours and clarify ignorant remarks with an explanation of what the Most Favoured Nation is, below:

Firstly, the term is Most Favoured Nation not "Most Favourite Nation". The MFN status is something that is granted under the World Trade Organisation agreement, and more specifically, as a direct result of the Uruguay Round. Being an economist, I can go into details of the mechanics of the MFN, but that is irrelevant here.

So, in the simplest of terms, the MFN status is given to countries for trade purposes only and guarantees that the country being granted the status will not be treated any differently from all other countries that are trading partners of the host country. This means India would have the same trading benefits with Pakistan as, say for example, the United Arab Emirates or Iran do. MFN is not a free trade agreement; it is just a status that helps boost trade within two countries. So knowing this, you need to ask why there is so much noise about something that Pakistan has granted to over 20 other countries. The answer is simple; illiterate people have been discussing these issues without economic sense or knowledge.

Secondly, giving the MFN status to another country does not mean that Pakistan is becoming their Best Friend Forever (BFF). It simply means that Pakistan is trying to improve its international trade by providing countries better terms of trade than the ones currently in effect. The focus is simply to boost Pakistan’s trade and have a larger share of international trade.

So when the Jamaatud Dawa says that it is against this decision, it needs to be rational because unless the JuD is among the top ranked exporters in Pakistan, its opinion on international trade does not matter. Also, all other critics who are in opposition to the MFN deal need to understand what it means first before making statements and saying it is a "compromise on Kashmir". What these people need to realize is that Kashmir is a political issue, whereas MFN is an economic issue - two totally different things.

Lastly, while the MFN status does not guarantee improvement in trade volume, it is a positive step in the right direction. Countries around the world clamor to sign Free Trade Agreements as well as gain MFN statuses, so Pakistan doing the exact same thing is a natural response. Our international trade share is about 0.13% based on WTO data of 2009. Think about it, a country like ours with a population of about 180 million people has a trade share of  only 0.13%. That is how poor our economic situation is; in these circumstances, signing a Free Trade Agreements and giving MFN statuses to other countries is something we badly need to do in order to help ourselves.

The lesson here is that we should avoid discussing economic issues on political platforms. We need to put up more informed persons to give their opinions to the media. The whole MFN status episode has taught Pakistan the crucial lesson that our correspondents should be better trained on issues they report on so they do not forget the context of things while reporting.

In short, granting the MFN status to India is good for us; it will help our economy and anyone who says otherwise is welcome to present an alternative plan that will generate the same or a bit more amount of money than this.
Adnan Rasool Currently the Deputy Executive Director Center for Enterprise, Trade and Development, Adnan is also a political analyst working mainly on electoral politics and political campaign management. He tweets at @adnanrasool
The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.


abhi | 12 years ago | Reply JuD is a very big exporter and their trade is hurt by non tariff bariars put up by India. that is why they are opposing this move. Muhammad Faysal's comment and quoted message of asia andrabi indicates that JuD is losing potential customers because of these non tariff bariars.
sadia wajid | 12 years ago | Reply Great, its literally a conceptual and logical Article. and yes blindly agree with it that its the need of time to take such initiatives to bring regional peace and co operation because without the regional co-operation economic envelopment for any state is difficult phenomenon. and people are busy in protests just on the basis of emotional sentiments...
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