India and Pakistan are in many ways very similar and yet in other ways very dissimilar. The socio cultural over lap is visible. Sharing a history of many traditions and values emphasising the role of families and women and sharing the hierarchical legacy of the British raj, both countries after converging for many years, have started diverging distinctly. While India has traditionally been a more closed to the world political system where the communistic thinking dominated for quite some decades. Pakistan, with its open market philosophy, has always been trade and foreign investment friendly. However, of late India has changed its stance and has really opened up its huge economy to foreigners who have queued up to enjoy the product hungry sizable Indian middle class. Pakistan meanwhile has found it difficult to invite investors or to find a ready market for it products overseas due to its huge security and stability problems.
With this situation, the decision to grant the MFN status to India has received a mixed reaction. For economists MFN should be a logical reciprocation by Pakistan. If a country has given one to us we must equate the balance by doing the same. For the politicians MFN is not that simple and since the political relationship has been fractured for quite sometime granting a concession like this will make them unpopular with the public. For the public the literal meaning of this status is not acceptable. In their minds how can we declare India as our favorite nation since India has been so allegatory and condescending about Pakistan. In truth MFN is just a reciprocal arrangement where by member countries prefer to trade with each other on concessionary basis to boost up trade with all around.
The issue of Indo-Pak trade has been debated and discussed too many times. Every time the conclusion is the same. They should. They can raise the trade from a paltry billion to six billion and more. Yet there are always the skeptics. Some feel that the Indian goods will flood the markets and result in a loss of business and a loss of jobs. The recent protest by the Pakistani cinema industry on the free import of Bollywood cinema is based on the premise that the presence of Indian movies has seriously dented the development of Pakistani movie industry. This argument though true is really a fear-based protest that just contradicts the stance of the free trade proponents. Any industry protected from competition becomes retarded. In the case of Pakistani movies it is not the Indian movies but their own inefficiency that has destroyed the industry. The standard of movies had become so low and crude that the masses preferred to stay away from them. Whenever a good movie has been made it has brought accolade and revenues. The latest movie by ShoaibMansoori.e BOL has beaten all records in the country and has actually been hailed as an Oscar qualifier not only at home but in India as well. Thus the lesson is that quality will always win over any competition and market forces are the true test of any trading activity.
However, the issue of trade in today’s era is not just of tarrifs being high or low but of trade being free and fair. Though India has been propagating that they have granted Pakistan MFN status Pakistan’s entry into Indian markets is still not fair and free. The reason being that India has cleverly used non tariff barriers to make the trade difficult and hindered. Non tariff barriers are not an imposition of duties and taxes but of standards and documentation that make it difficult for the foreigners to enter and compete with Indian competitors. Pakistani cement exports have been lying on Indian ports for months due to product standards and testing being imposed on them which not only cost time but money as well deterring further imports in the country. Most clever countries like Japan have used non-tariffs to ward off rice and many other imports in the country
The see saw relationship of Indo Pakistan has done a lot of damage to the trade potential of this region. The solution to this problem is not to abstain from granting MFN status to India but to grant it and then prepare a strategy of negotiating on removing non-tariffs on Pakistani exports. In case the Indians are not receptive to this idea, the solution is not to condemn MFN but to also reciprocate with imposing non-tariffs on selective Indian imports. After all when you cannot join them beat them.
The writer is ananalyst, consultant and CEO of FranklinCovey Pakistan and can be reached at [email protected]
