MFN status to India: Pakistan proposes safeguards for local industry

Commerce secretary says local exporters will get level playing field.

ISLAMABAD:

Pakistan has asked India to sign three pacts to ensure level playing field for its exporters before implementing free trade regime, as Islamabad decides to ensure “effective protection” for local industries against threats of Indian products capturing Pakistani markets.

Taking parliamentarians into confidence for the first time since the government’s in-principle decision to grant Most-Favoured Nation status to India, Zafar Mahmood Secretary Commerce said on Thursday that Pakistan would not implement the free trade regime without ensuring level playing field for its exporters.

He was briefing the Senate Standing Committee on Commerce about the MFN status to India.

Islamabad has proposed three agreements be signed with New Delhi. The first is the Customs Cooperation Agreement to address Pakistani exporters’ complaints of Indians charging high taxes, Mutual Recognition Agreement for standardisation of quality standards and Grievances Agreements to address consumer protection issues, said Mahmood.

He said the demand was made after exporters complained about Indian non-tariff barriers which could hinder trade. He however, said “there are no Pakistan-specific non-tariff barriers but India is strict in applying (quality control) standards”.

After complaints of non-tariff barriers, New Delhi asked Islamabad to come up with Pakistan-specific non-tariff barriers and the Industry said that the Indian Customs delay clearance of Pakistani goods, cause dispute over valuation of goods for determination of duties, strictly apply Indian standardization laws and charge composite tariffs on textile products, said Zafar Mahmood.

Mahmood said India would respond after consultations at the ministerial level.

In September this year Pakistan decided to replace trade-able list, known as positive list currently comprising 1,958 items, with non-trade-able list, known as Negative list, by February 2012. He said Industry has proposed to add 600 items to the negative list.

Mahmood said due to application of positive list Pakistan is losing $300 million to $700 million annually. “Timing of phasing out negative list will be determined in February and the Ministry of Commerce will not take anything to cabinet unless it ensures effective protection to local industry during the interim period”, he added.

Before announcing to phase out negative list the government should take input from those industries that would be immediately exposed to competition, said Senator Ishaq Dar.

“Trust deficit within Pakistan is ten times more than trust deficit between India and Pakistan. We will take forward the process of free trade regime by protecting industries,” said Mahmood.

In 1996 India removed restrictive regime and gave Pakistan MFN status and since then it has remained subject of immense debate based on political considerations rather than purely on trade and economics.

India did not contest MFN status in WTO providing an opportunity to Pakistan to walk away despite violation of international trade laws. “Had India gone to the WTO, it would have embarrassed Pakistan”, said Mahmood.

In case Pakistan grants MFN, Indian exports would immediately increase due to legalization of illegal Indian imports to Pakistan, said Mahmood. Currently, the trade is in favour of India as Pakistan’s exports to New Delhi are $264 million against imports of $1.7 billion.

The MFN would be in benefit of India and there will be replication of China syndrome, said Senator Haroon Akhtar of PML.

Published in The Express Tribune, December 23^rd, 2011.