Pakistan’s trade delegation to India, led by Commerce Minister Amin Fahim, has been successful in getting India to de-link Pakistan’s EU trade deal with the MFN conditionality, according to sources in the commerce ministry. Pakistan will move forward on the MFN issue once New Delhi takes steps to reduce Pakistan-specific trade barriers.
Rational approach
“It is encouraging to see that India has taken a rational approach by not linking the EU waiver on trade preferences with Pakistan granting the former the MFN status,” the sources said while talking to Profit. While Pakistan has assured India that it will ‘positively’ consider granting the MFN status to the latter, sources claimed it would be conditional to India removing Pakistan specific trade barriers, which would allow greater trade flow between the two countries. Thus they concluded that the outcome of the ‘composite dialogue’ between trade ministers has led to a win-win situation for Pakistan.
“Supportive and constructive” were the words used by Anand Sharma, India’s commerce and industry minister, to describe the Indian stance towards the trade package being announced for Pakistan. Commerce ministry sources had previously revealed to Profit in a report published in the newspaper, (India to withdraw objection over Pak-EU trade deal, Sept 9, 2011) that India has assured Pakistan it would not raise any further objections at the World Trade Organisation’s (WTO) Council for Trade in Goods on the time-bound European Union (EU) waiver on trade preferences.
Low-hanging fruit
It has further been revealed that the two countries have decided to liberalise the trade regime by creasing out issues such as the visa processes, softening of stance on bilateral investment along with the Indian announcement of the removal of objection on the trade-aid package by the EU for Pakistan at the WTO general council.
It is expected that the meetings between the two ministers will allow the restructuring of trade ties between the two countries, while ensuring the Kashmir issue is not sidelined. The source said recent developments will “work to dampen the acrimonious relationship between the estranged neighbours”. “There is no direct linkage between a successful trade meeting and success on the political front, or the Kashmir front, but eventually these things will feed into that wider process,” Hindu newspaper Editor, Siddharth Varadarajan a well known foreign policy expert was quoted as saying. “I think both sides, for better or worse, have decided to press ahead with the low-hanging fruit,” he continued.
India and Pakistan have also jointly agreed to work towards doubling bilateral trade to $6 billion annually by 2014, from the current level of $2.7 billion. It is pertinent to mention that presently India accounts for a total of over one per cent of Pakistan’s total trade, while Pakistan accounts for a negligible 0.5 per cent of India’s trade. According to a study employing the Peterson Institute for International Economics (PIIE) gravity model, total trade between the neighbouring countries could increase to a phenomenal $42 billion if certain roadblocks were sincerely addressed.
Cricket diplomacy
“The issue of the removal of Indian objection from the EU unilateral trade concession was first taken up by Prime Minister Yousaf Raza Gilani at Mohali, in his meeting with the Indian Prime Minister Manmohan Singh during the ICC World Cup Semi Final. While the Indian prime minister assured of full cooperation in this regard, the delay in the materialisation of this stance could mainly be attributed to the Indian bureaucracy,” the source added. It is expected that India will incorporate its stance in the next meeting of the committee of trade in goods expected to take place on the 9th of October, however the committee has to be notified one month prior to the decision, therefore it will incorporate this softening of stance by India by November.
Pakistan Foreign Minister Hina Rabbani Khar, during her visit to India, was highly successful in achieving desired results, and with the current composite dialogue in place, one can certainly hope for better trade ties between the two countries. While other countries have also raised objections over the proposed trade package by the EU, sources claimed that these differences are expected to be chalked out before the next meeting of the World Trade Organisation’s (WTO).
A new era
In a joint statement issued after the talks between Anand Sharma and Makhdoom Amin Fahim, both sides have claimed that India and Pakistan have entered a new phase of full normalisation of bilateral trade relations which, augurs well for enhancing mutual trust and understanding. It has also been decided that the two countries’ commerce secretaries would meet in November to take forward what has been agreed in the present talks. The ministers agreed to work towards the development of preferential trade relations under the framework of the South Asia Free Trade Agreement (SAFTA). They also agreed that all mutual obligations under SAFTA would be implemented with full sincerity. The statement also mentioned that when the commerce ministers of the two countries meet next, they would also work towards laying down specific timelines to normalise all trade relationships, which include the dismantling of non-tariff barriers.