India hopes Pak will grant MFN status by June-July

The government on Thursday expressed hope that Pakistan will move ahead with the proposal of granting MNF status to India after the elections in the neighbouring country.

Updated: Mar 14, 2013, 21:08 PM IST

New Delhi: The government on Thursday expressed hope that Pakistan will move ahead with the proposal of granting MNF status to India after the elections in the neighbouring country.

"Hopefully by June-July, a new government will assume office in Pakistan and I am sure that the first priority of the new government would be perhaps giving the (MFN) status," Commerce Secretary S R Rao said here at a ICRIER function.

Elections in Pakistan are expected to take place in May this year.

The neighbouring country has missed the deadline of December 31, 2012 for granting the status to India.

In March last year, Pakistan had moved to a negative list regime for trade from the positive list regime.

This has opened Pakistani market for about 7,000 Indian goods against about 2,000 earlier. It has said that it would remove the negative list, which contains 1,209 items, by December 2012 -- technically which would mean grant of MFN status to India.

Allaying concerns of Pakistan businessmen that after this status Indian products would swamp Pakistani market, Rao said that enough safeguards are available in the SAARC agreement to protect domestic industries.

"In the SAARC agreement, we have safeguard clause which is over and above the safeguards present under the WTO regime. ..An authority can do due diligence if any injury is happening to its domestic players and it can protect the industry by raising the tariffs," he said.

On visa issue, he said both the sides have signed the agreement for visa liberalisation.

"Business visas are going to be normalised as the agreement has been signed and only notifications are awaited from both the sides," he said adding "work visas would also come" as the both the sides have now permitted FDI.

The bilateral trade between the countries stood at about USD 2 billion 2011-12.

Rao said that the visa liberalisation process between India and Pakistan was held up due to the unfortunate incident at the borders.

"Some unfortunate incidents happened on the borders which takes up the entire dialogue of reconstruction...I think both sides need to exhibit sagacity...Incidents were serious at the borders. It is about (loss of) human beings...What is required is trust. Mutual trust is the only way forward," he added.

Earlier this year, there was tension between the two countries over ceasefire violations along the Line of Control (LoC) by Pakistan.

"...Incidents at borders should not deter us (from) normalising the things as early as possible," Rao said.

The Secretary said business visas would be liberalised and would be issued for the whole country, and not city-specific.

Rao also said there is a need to work in the telecom sector as mobile roaming is still not allowed between both the countries.

He said Double Taxation Avoidance Agreement is also one of the areas "which we need to look at".

In August last year, India decided to allow foreign direct investment (FDI) from Pakistan in a move to boost bilateral economic relations.

Further, on the concerns of Pakistani side regarding Indian agriculture sector, he said the government would reduce the number of items from the sensitive list which it has with SAARC region.

It will be reduced to 100 from 634 and the peak tariff rates on the agri products would be 5 percent.

"Out of these 100 items, 75 will be from agri sector and remaining from tobacco and liquor," he said, adding the neighbouring countries should not raise concerns as India's agri exports is mostly out of the SAARC region.

Pakistani side have raised concerns for mainly three sectors - agriculture, pharmaceutical and automobile. They have stated that India provides subsidies in the range of USD 50 billion to its agri sector.

Rao said that he is open to discussing the issues with Pakistani industry to allay their concerns.

"We are not looking at increasing exports as India has its traditional partners...India has not exported manufactured goods, we export mainly raw materials (to our neighbours) and that number is also insignificant," he said.

Further, he added that it is important for both the countries to increase trade and enhance economic co-operation.

He asked if France and Germany, which were at loggerheads in the nineteenth century, can normalise trade relations, "why can't India and Pakistan".

Meanwhile in a presentation, Professor Nisha Taneja from think-tank ICRIER said that huge potential exists in both the countries to enhance trade ties.

She said that there is a need to remove all non-trade barriers that include opening up of sea route for trade, smoothening of rail services, efforts to open all the possible channels for trade and creation of significant business environment.

Besides, she said that testing facilities are not available, there is a lack on information on regulatory regimes and excessive checks on grounds of security.

All the experts present in the function called for opening of more trade routes and removal of non-trade barriers to enhance economic relations between the countries.

"Gains are significant only if productivity in logistics improves," Sanjib Pohit, senior principal scientist at the National Institute of Science, said.

Manzoor Ahmed, senior fellow at ICTSD Geneva said that adopting measures like streamlining border procedures, harmonisation and simplification of documents, automated processes and information availability would help both the dies in reducing transaction costs.

Ahmed said that besides Wagah-Attari, other trade routes which could be opened include Lahore-Patti, Kasur-Ferozpur and Munabao-khokhrapar and direct shipping route between Karachi and Mumbai. He said that reduction in supply chain barriers would have a larger effect that removing tariffs.

Sharing similar views, Aisha Ghaus Pasha, Director, Institute of Public Policy, Lahore, said impressed upon the need for less documentation at the customs station.

Pasha said that the major NTBs reported by Indian exporters in Pakistan include restricted list (only 137 items) of export through Wagah besides weak infrastructure at land customs stations and banking issues.

Professor Mahendra Lama from Jawaharlal Nehru University said that energy security is fundamental for both the nations.

He suggested four way approach to initiate energy cooperation and that includes formulation of policy and institutional framework for increasing cooperation in power trade and development of grid interconnection infrastructure.

Further, Professor Rupa Chanda from IIM Bangalore emphasised on the need to increase trade in services.

"Overall regulatory and business environment in each country will play a key role in shaping bilateral relations in services as investment presence, movement of factors," Chanda said in her presentation.