Even though Pakistan seems inclined to grant the Most Favoured Nation (MFN) status to arch rival India, which gave the status to Islamabad in 1996, both countries still need to overcome hurdles stopping them from accepting each other as trading partners with tangible actions.
The government is consulting chambers of commerce to thrash out the issues for opening trade with India. However, the government has itself not carried out any to assess the impact on the manufacturing sector and job losses after opening up trade with India.
The advantages to Pakistan include low cost raw material that will boost manufacturing, controlling inflation and more investment opportunities to tap a larger market. The disadvantages include low cost imports which might hurt the steel, automobile and pharma sectors, resulting in loss of jobs.
The non-tariff barriers or NTBs are the obstacles that restrict imports but are not in the usual form of a tariff.
Some NTBs are expressly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect depletable natural resources.
The NTBs include import quotas, special licences, unreasonable standards for the quality of goods, customs duty, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phyto-sanitary measures, rules of origin. Sometimes in this list they include macroeconomic measures affecting trade.
Former commerce secretary Tasneem Noorani told Pakistan Today that the government should have conducted a scientific survey to assess the impact on Pakistani products, which could benefit or which could get affected from the bilateral trade. He said merely having a negative list would not be the best option as this would have to be under World Trade Organisation (WTO) rules.
He said India was a large market but it had a very protective regime, besides it had also systematically applied NTBs against all its trading partners to restrict imports. The government has initiated consultation process with the chambers but they lack the required research to assess the impact of opening trade with India, which could hit the local manufacturing sector. A detailed survey would have provided the exact details of NTBs which would have provided Pakistan to conclude a better trade deal with India.
Principal consultant at Impact Consulting, Zubair Faisal Abbasi, said removing Indian NTBs would be a tedious exercise and many rounds of parleys would be required to resolve issues for even one product. Giving an example, he said the Pakistani cement sector faced the arduous NTBs removal, which took years. Firstly, Indian officials wanted to visit the plants to take samples, which they said could only be certified from an Indian lab. They accept certificate only of an Indian lab even though Pakistani labs are also internationally recognised. Later, Pakistani cement manufactures realised it was better to export to some other country instead of India.
According to Commerce Ministry officials, the steel, auto and pharmaceutical sector products were likely to be placed under the negative list until agreement on NTBs was reached.
A negative list for imports contains those items which the country considers could hurt its local manufacturing or create other problems.
Under WTO rules, there should be proper reason for placing a product in the list otherwise any trading partner could challenge it with the WTO. But overall, it would allow imports of a majority of items, provided they meet the quality and standard requirements of the country.
The scale of Pakistani manufacturing sector is small as compared to India and they are not competitive due to power crisis and quality issues. However, Pakistan’s main industry, textiles, is thought to be competitive enough to make inroads in Indian markets, provided NTBs are removed. Other than NTBs, India also employs technical barriers to trade.
If one product has completed all the quality and standard certifications, they would put the file on hold for weeks and even after approval, they would restrict the number of trucks to lift the product from the border. Faisal Abbasi said the government should conduct detailed studies on sunrise and sunset industries due to trade with India. He said the scope for agri-business in Pakistan would be immense by opening up trade with India, but it was also essential that NTBs on flimsy grounds be curtailed.
Pakistan and India will have to address many issues even after MFN status
