Out of the frying pan...into trade liberalisation: SAFTA a disaster for Pakistan’s agriculture sector

Published: January 27, 2013
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Water losses have already hit Pakistan’s agricultural sector and the MFN status is said to be the threat for the sector with fears that Indian farm goods will flood the domestic market. PHOTO: FILE

Water losses have already hit Pakistan’s agricultural sector and the MFN status is said to be the threat for the sector with fears that Indian farm goods will flood the domestic market. PHOTO: FILE

ISLAMABAD: 

The South Asia Free Trade Agreement (Safta) appears to be a ‘disaster’ for Pakistan’s agricultural sector and is backed only by the industrial lobby.

Safta was signed at the cost of agriculture in an attempt to trade goods at concessionary rates with India, senior officials familiar with the development revealed during deliberations on the expected grant of most-favoured nation (MFN) status to India.

After granting MFN status, Safta will be implemented, paving way for import of Indian goods at extremely low tariff rates in the range of 0-5%, excluding items placed in sensitive list.

Members of the South Asian Association for Regional Cooperation (Saarc) reached an understanding on Safta on January 6, 2004 in Islamabad aimed at slashing customs duties on all traded goods to zero by 2016.

According to officials, the commerce ministry was reluctant to push ahead with Safta during Musharraf’s rule, arguing that India was a closed economy and free trade would only benefit Delhi as it would be able to send its products to central Asian states via Pakistan.

“Safta was a disaster which was signed during the Musharraf regime. It was only a political move, opposed by the commerce ministry at that time,” an official familiar with the development said at that time.

At the time of signing Safta, the Musharraf government intended to protect the industry because this lobby was strong.

“The agriculture lobby was not that strong and Safta was inked in haste as well as at the cost of agriculture,” the official said, adding it would not be possible to implement the accord in the wake of fierce resistance from farmers this time.

Officials revealed that the International Monetary Fund (IMF) was also pushing for signing the free trade agreement at that time, but the commerce ministry insisted that land route should not be opened because it would benefit India only, enabling it to reach central Asian states.

Under Safta, tariffs would be in the range of 0-5%, but in the free trade accord with China, tariff concessions stood at 8%, they said.

Experts suggested that China should be given the status of observer in Saarc. Later, it could become member of the grouping and safeguard Pakistan’s interests.

Sources argued that the MFN status would also help India spread its presence in Afghanistan, particularly after the US pulls its forces out of the landlocked country in 2014. “After 2014, the US will not need to depend on Pakistan. The MFN status is a strategic move which will ensure presence of India in Afghanistan,” an expert remarked.

Experts pointed out that the US had not played any role in resolving water disputes between Pakistan and India as Pakistan had lost 30% of water following construction of dams by India on Pakistani rivers.

Water losses had hit Pakistan’s agricultural sector and the MFN status would destroy the sector with fears that Indian farm goods would flood the domestic market, they cautioned.

Published in The Express Tribune, January 27th, 2013.

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Reader Comments (6)

  • gp65
    Jan 27, 2013 - 6:38AM

    “Experts pointed out that the US had not played any role in resolving water disputes between Pakistan and India as Pakistan had lost 30% of water following construction of dams by India on Pakistani rivers.”

    Who is a bigger expert that the water commissioner of Pakistan who said that India had not stolen any water and was therefore removed from his post for telling his truth? http://tribune.com.pk/story/473751/target-jamaat-ali-shah/

    Linking the MFN which is obligatory to grant as per WTO norms to Safta which is entirely optional is simply a deliberate way to confuse the issue.

    Musharraf signed Safta because it would give accessto PAkistan not just of Indian market but that of Sri Lanka, Bangladesh, Nepal also. If Pakistan does not want o participate that is just fine.

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  • A Khan
    Jan 27, 2013 - 8:15AM

    One part of me says that competition is good and should drive down prices. Other part says that this will result in massive unemployment as cheaper goods will become available. My hope is that this makes businesses improve efficiency in the food growth to production supply chain so that competition is meaningful. My fear is that all this leads to is more subsidies to local farmers, driven by the fact that most landowners sit in the government.

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  • John B
    Jan 27, 2013 - 9:06AM

    The beneficiary of free trade are the consumers. In any country, consumers are more than the producers and if consumers get a cheaper product, it reduces inflation and consumers are left with disposable income for other things.

    Restricting free trade protects the producers and the goods and services are high, disposable income become scarce for consumers and tax collection for state also become poor.

    By restricting free trade with India, PAK may limit India goods but it is only going to drive up the cost for PAK consumers. India may also restrict PAK goods but keep free trade with others without affecting her domestic consumers.

    Pak alone cannot supply for both PAK and central Asian states. She does not have the capacity to meet the demands for both markets and she will only increase the food cost for her populace by making PAK producers rich.

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  • dev maiti
    Jan 27, 2013 - 9:51AM

    who are these “experts” and “officials”?

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  • Jan 27, 2013 - 11:37AM

    This is simple propaganda with zero economic sense.

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  • Ghulam Mustafa Chaniho
    Jan 27, 2013 - 11:07PM

    i am a farmer and i know how the trade of agricultural commodiities esecially vegetables is proving disastrous for the farmers, particularly the small farmers. the prices of vegetables have not come down because our harvesting time usually co-incides with the indians, and we cannot compete with the prices of indian products because their agriculture is heavily subsidised and they have better per acre production than us primarily because of better seeds and research. we don’t mind agriculture tax if we are also treated as an industry with the same opportunities and facilities enjoyed by the industries in our country. unfortunately most of the representatives of our farmers are either incompetent or merely interested to gain the limelight rather than to resolve the problems of farmers.

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