As the debate surfaces again, there are supporters and detractors on both sides . ILLUSTRATION: JAMAL KHURSHID
KARACHI:
With the new government in power, there is once again a lot of debate on the issue of trade with India and the process of further liberalising trade regime after granting MFN status.
While there are supporters of this on both sides, there are still a lot of detractors who believe that MFN status, and opening up trade with India will be bad for Pakistan.
Many say it will be a death knell for the Pakistan economy.
The actual situation is not really that extreme. Perhaps one reason for this opposition is the fact that many people think that MFN status means giving special status to a country and as a result imports with no duties or no regulatory controls.
That is not the case. MFN status only suggests that for trade purposes a WTO member country will not be discriminated with other member countries. Any privileges that may or may not be accorded to that country are at the discretion of the respective governments.
Some of the biggest opponents of liberalising trade with India are in the industrial sector and in agriculture. From industry, the usual argument is that we are still an undeveloped and nascent industry and opening up the local market to Indian good will hurt the domestic sector.
The flip side to this argument is that Pakistan has for the most part been able to survive the onslaught of an even bigger manufacturing giant, China, we should be able to handle India.
But a lot of local industrialists are also drooling at the prospects. Local textiles hope to do very well in India as does the Pakistani shoe industry.
While the auto sector at large may be worried about cheap Indian imports, especially bike-makers which are mostly in the SME sector, Pak Suzuki looks to be welcoming the move because it hopes to revive the Alto once trade with India opens.
Then there are also those who oppose the opening of trade because the balance of trade will weigh heavily in favour of India. But this is primarily because while India granted MFN status to Pakistan many years ago, it did not really do much to remove non-tariff barriers which are still a bone of contention between the two governments.
Unless these barriers are removed, and Pakistan moves forward, the net-gainer will be India. This is something that needs to be kept in mind by all those in favour of trade liberalisation.
One of the most significant concerns raised by detractors is strategic. They say, and to a degree rightly so that the delicate relationship between India and Pakistan and the ever-present risk of a conflict are valid reasons for limiting any kind of economic dependence on India.
The increased flow of manpower across the border is cited by the same critics saying this will increase the risk of infiltration. In India, such apprehensions regarding the gas pipeline crossing Pakistan have also been shown.
However, one also has to take into account that the entire bulk of imports from India will not be detrimental to our economy or be disadvantageous to us. A lot of these imports, if they are cheap enough will simply replace imports from other countries. This is especially the case with auto parts, pharmaceuticals and electronics.
We also have to keep in mind that being a predominantly import-based industrial economy, cheaper imports will in the long run mean lower costs for our industries. The two main beneficiaries in this situation will be the end consumer and the government in the form of revenues.
And one has to keep in mind that the opening of trade in no way suggests unrestricted flow of goods. And the consumer is also a part of the Pakistan economy. Why do we disregard any benefit to the consumer as no benefit at all? So if some Indian goods are cheaper than domestically produced items even after paying import duties, why not allow them?
Published in The Express Tribune, July 22nd, 2013.
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COMMENTS (17)
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@romm: "Opening up of routes to Central Asia for Indian goods has to be conditioned with the resolution of long standing issue of Kashmir"
No thanks. we have other options...
Opening up of routes to Central Asia for Indian goods has to be conditioned with the resolution of long standing issue of Kashmir.
Every country in the World has non tariff barriers alongside tariff barriers, the situation is not peculiar to any country. Indian non tariff barriers have not been created for Pakistan but apply to the same goods imported from anywhere. Pakistan may also have non tariff barriers. There is a conscious effort to peddle a line that non tariff barriers apply only to Pakistani goods, a falsehood couched as a lie. The same barrier applies universally to all countries.
In stead of exporting Oil to Pak , Indian gov should concentrate on renewables to end dependence on middle-east . India should try to implement many projects in off-shore wind power since it is sorrounded by sea. Solar energy also will help . This will help us to end dependency on Middle-east and enhance political clout.
@S: Necessity is the mother of invention , when petrol jumped from Rs15 per liter 30 i with my scooter that gave 25kmpl thought it was the end of the world but then we got motorcycles which give 80kmpl . Today petrol is at Rs70 if it goes to 140 the world will not come to an end ,man will innovate maybe the mode of transportation will change i do not know but we will pull through . Open your industry to competition (not necessarily Indian ) it will only become more efficient .
@Waseem Ch: The bias is not in ET articles. It's in some people's head. They just find it a very painstaking enterprise to understand and digest facts. They find it easier to go by slogans where they don't have to exercise their brains.
I take this opportunity to invite interested Pak friends to visit India and see for themselves how this Economy works.MFN will only help in cost saving for Consumers as well as Producers by making available alternative choices.Import of Agriculture products from Pak is a real possibility given the size of Markets in India,whatever your surplus will be easily absorbed in India.Regarding imports into Pak , the GOP can always step in and stop the flow if it is not beneficial to Pak citizens.No body should have any apprehensions about this trade as Deals happen if both the Partys stand to gain.Consider Indo China Trade of $70 bn in the face of unresolved Border Tensions. Pak has to start looking at India as an Opportunity and not as an adversary as India does for China.Peace and Prosperity comes thru Trade only and not by shuting out the beneficial ideas.Pak has to work on its strengths in Textiles, Cement , Agro products, Tourism and market them in India to generate Em ployment for its people.Obviously, Hafeez Saeed and Kasab can not be of any help here.
Pakistan has become too reliant on China. So much that Chinese products enjoy an almost monopoly in every sector in Pakistan. This has not only adversely affected Pakistan's inner industrial development, but the normal public is suffering from having access to cheap BUT low quality products. Unlike China, the case is different about India. Indian companies, wherever they go, they give preference to the local people and not only do they supply the markets with cheap products but they do it without affecting quality. Opening Pakistan's market to India will have a certain effect on Pakistan's current market which will not be 'preferred' by some people who will believe it is going to destroy Pakistan's inner industry. But it is not the case actually - Pakistan's industry has already been destroyed by Chinese "investments", in which local partners don't have any work. Allowing access to Indian firms to operate in Pakistan will lead to a sustainable development of Pakistan by forcing the local firms to upgrade their quality standards to remain competent. This will not only result in providing better quality goods at competitive prices to the end consumer, but it will also reduce the dependency on Chinese low-quality products which have resulted in gradual death of Pakistan's industry.
Why is ET the unofficial lobbyist for MFN for India, i've read over 100 mostly biased articles on ET trying to alleviate Pakistani concerns for MFN with India. I urge all readers to kindly study what happened to the local Bangladeshi economy after they granted MFN to India.
we are already swamped with goods from China, the last thing we need is more Indian products.
You want to improve relations with India - trade. When in doubt look at what has happened with USA/China and China/India - once trade volume gets to critical mass the military paranoia takes a back seat.
I agree with trade liberalisation. However I think the author is very short sighted. Cheaper products may be good for consumers in the short run but in the long run our industries not being able to compete hence not being able to turn them selves in to giants will be really bad for the same consumers.
Don't forget India also had restrictions until their local industries established themselves
Cut out the politics and sentiment buy from the cheapest source and sell to the one who gives you the best price .That is plain business sense.
Opening trade with Indian goods are very good for pakistan.Consumers have better choice and quality.Moreover a trade liberilization will enable pakistan to improve its Pharmaceutical,Textile,Information technology,electronics,automobile,Petroleum,agricultural goods,construction materials and other product ranges and also to improve the educational sector to international standards.This will certainly uplift the living condition of all citizens of pakistan and also the realestate market.
MFN ( Most Favoured NATION) status means that Pakistan will not discriminate India i.e. will not either teat the country at par and the same tariff will be applicable which iare being applied to other countries . Pakistan has already accorded MFN status to more than 120 countries including China & western countries. Both the countries can apply non tariff barrier on many items if the same are against their interests. some of Indian goods are being presently imported to Dubai and then marked as manufactured in Dubai and shipped to Karachi. which increases the landed cost in Pakistan and the government also looses some revenue. Pakistani textiles, Cement, leather goods have very high potentials for export to India and similarly India's pharmaceutical products, medicines and automobile products will be cheaper in Pakistan tha the existing imports from other countries. . If some imports which are hitherto being imported from western countries and now imported from India , then Pakistan will simply be replacing the import from one country to another and it will not increase the total import. And lastly and most important once the trade volume increases people from the both the countries will have stake / interest in each other and then efforts will continue from both sides to keep the relation harmonious and small incidents will not derail the improvement in relations. A prosperous and stable Pakistan will continue to be in the best interest of India..
The most promising part would be to import petrol and diesel from India. The Reliance Refinery is 6 hours away by ship. Bhatinda Refinery is about 4hours away from Lahore... Given the transportation costs and eliminating middlemen....huge savings for Pakistan.. But do our planners have any BRAINS, outside the realm of "shortcut to getting rich"!!!!
IF we will export onions,tomato from India what will our formers do? as we need to remember our 65% populations depends upon agriculture