Textile ministry questions transparency of MFN to India

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Ministry of Textile Industry (MoTI) has proved the government claim false which was about the rigorous consultations with different stakeholders on liberalising trade with India. Textile ministry, in its observations, indicates that the Ministry of Commerce (MoC) kept textile ministry in dark about its dialogues with India, Profit learnt on Friday.
MoTI’s official summary made available to Profit raises questions on the hasty policy making on liberalising trade with India by the Ministry of Commerce. Textile ministry has warned that the sudden change in dynamics of India-Pakistan trade relation i.e. from 80 per cent ban on imports to almost zero rated imports on more than 80 per cent of items within a time frame of few months appears to be an extreme measure. Further, opening of land route will affect inter-Pakistan trade dynamics as well. This summary, if approved, will not only result in GMFN status for India, but a Free Trade Agreement with the most immense impact on Pakistan’s industry. Further, Ministry of Commerce has not mentioned any economic benefit emanating from this new arrangement.
It has also not mentioned how this initiative will increase our exports to India, which currently is at $272 million, with the availability of MFN and SAFTA reduced rates. MoT has pointed out, “Though the cabinet had endorsed the efforts of Ministry of Commerce after reviewing the presentation by the ministry, no summary was presented to the cabinet and views of line ministries were not obtained on the roadmap. Further, the Ministry of Commerce did not consult with the Ministry of Textile Industry before or after any secretary level talks with the Indian counterpart for negotiating normalisation of trade, whereas, The Rules of Business of 1973 Section 2 Para 1 (ii) of the Ministry of Commerce clearly stipulates that Ministry of Textile Industry should be consulted in trade negotiations.”
It has further underscored that it is mandatory for commerce ministry to consult MoTI, however, the textile ministry, which represents the largest manufacturing sector of Pakistan, was not consulted on the approach or criteria for preparation of these negative lists. It points out that the incomplete negative list earlier received from the commerce ministry was discussed with the textiles associations and it was observed that different associations have divergent viewpoints on similar tariff lines. As is known, textiles value chain consists of ten industrial sub-sectors, which are highly integrated and interdependent. The final product of one sub-sector is the basic raw material for the other sub-sector industry. Similarly, the interests of a commercial exporter, importer, manufacturer and exporter vendor industry, and composite units differ immensely. At this point of time, Import Policy only allows import of yam and very few technical fabric items limited to 102 textile tariff lines. Textile ministry states, “India claims that Pakistan has been given the General Most Favoured Nation (GMFN) status since 1996 and has no discriminatory technical and/or non-tariff barriers for Pakistan. Also, more than 80 per cent of our exports are getting preferential tariff rates due to South Asian Free Trade Area (SAFTA). We have still not been able to export more than $272 million to India, whereas, India has exported around $1,500 million worth of commodities while only being allowed 1,900 tariff lines. In case of textiles, the main exporting sector, Pakistan only exported $45 million worth of textiles products to India, whereas, India exported $566 million worth of textile products in the calendar year 2010.” “Looking at the excitement of getting zero tariffs in merely 75 lines in EU out of which 20 have quotas, we must consider the vast opportunity being provided to the Indian industry by removing Appendix G, while having SAFTA on ground with a small sensitive list.” Official summary indicates that India has a separate sensitive list for Least Developed Countries (LDCs) and Non-Least Developed Countries (NLDCs) and has still not shared the SAFTA reduced sensitive NLDCs.
It further highlights that India subsidy programmes are highly budgeted. At present, they have non-ad valorem duties on major export items e.g. Indian Rs350 on cotton shirts. India also has huge state-owned textile mills and has controlled cotton trade. Only two years back, Indian government procured around nine million bales of cotton. Similarly, India has various technical barriers to trade already intact for protection of their industry as a whole and has repeatedly used antidumping measures. On the other hand, textile ministry points out, Pakistani Industry is facing acute shortage of electricity and gas with appreciating input costs. The quantum of non-performing loans is increasing, while exports have shown a declining trend. Pakistan has only single sensitive list for SAFTA unlike India having separate lists for LDCs and NLDCs. Official summary underscores that the proposal of mutual recognition arrangements will help Pakistani exporters to understand the non-tariff barriers of India but will not in any case erode technical barriers. It may take our industry some time to recognise, learn and educate itself on standards. Further, in absence of any Tariff Policy and textiles standards we would not be on a level playing field with the Indian Industry.
Textile ministry says that the tariff applied on imports from India is not same as fur any other WTO member state. Pakistan and India are signatories of SAFTA and other than the sensitive list i.e. more than 80 per cent tariff lines, the rates have reduced drastically during the last six years. The Ministry of Textile further objects that the criteria for analysing negative lists do not appear appropriate as the impact of open trade with India on industry (especially SME sector) at tariff rates below six per cent on 80 per cent of commodity tariff lines after 2012, which are lesser than GMFN, is not calculated. It points out that the SAFTA is more liberal agreement than China-Pakistan Free Trade Agreement (FTA) Phase-1, but the Ministry of Commerce does not evaluate the impact of previous FTAs on domestic industry. The Ministry of Textile Industry is of the view that moving from positive list to negative list should be read with the SAFTA implications in which 80 per cent of the tariff lines would be opened on 0-5 per cent.

1 COMMENT

  1. I have serious doubts about sincerity of Indian MFN claims and have been saying it for a long time. The first step should be to ask India to open trade for Pakistan exports and then go to next level. Pakistan should demand removal of all NTB on Indian side before activating MFN.

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