MFN status to India beneficial for Pakistan
ISLAMABAD: Local and international trade research studies have revealed that restoration of normal trade relations or grant of the Most Favoured Nation (MFN) status to India could be beneficial to Pakistan in broader terms.
A presentation, made to the International Monetary Fund’s (IMF) Mission on Pak-India Trade Relations last week, analysed negative and positive aspects of the issue and summed up that perceptions against grant of the MFN status to India were based on fears, a government official told Daily Times on Monday.
The official said that it has been a consistent stand of the government that resolution of the core issue of Kashmir is a cornerstone of Pakistan’s policy for India. The Ministry of Commerce, however, could not make any comments on this aspect of foreign policy, he added.
**The arguments in favour of grant of the MFN status to India are as follow: **
—> Pakistan needs to caste aside its defensive approach viz-a-viz trade with India and should engage India commercially with confidence. The fears are exaggerated and benefits to the economy in the long run will far outweigh the costs.
—> Consumers will benefit form liberalisation of the trade regime with India because some cheaper Indian products will be available to them.
—> The local manufacturers, due to competition with Indian products will be required to be more efficient, which will make them competitive even in the international market, boosting our exports in the long run.
—> The manufacturing sector will be able to procure raw materials and intermediary goods form India at lower prices, which may enable them to compete with India in its domestic market as well as internationally.
—> A liberalised trade regime with India will be appreciated by world buyers and will make it easier for Pakistan to join important regional blocs such as Bangkok Agreement and ASEAN. India has been blocking our entry into regional trading arrangements with the argument that Pakistan has not granted the MFN status to India.
The views against grant of the full MFN status to India are as follows:
—> India is a large economy with exportable surplus and diversified products. The export of textile is only 20 percent of the global Indian exports where 60-70 percent of our exports consist of textiles. India will export a large number of items, including consumer goods, which will disrupt the local industry, resulting in loss of jobs and an increase in poverty.
—> In case the manufacturers of Pakistan make India their major source of supply of raw materials, it might give India room to manipulate supplies at critical times, resulting in commercial as well as a strategic damage.
—> The balance of trade will heavily tilt in favour of India. Although World Bank studies indicate that the global balance of trade of Pakistan will be positively affected (for the import of cheaper raw materials), it has to be seen whether the balance of trade in favour India will be acceptable optically.
—> India provides subsidies to agriculture as well as to many other exported items, resulting in unfair trade practices, which will enable the Indian goods to have a larger market share in Pakistan.
An analysis of the arguments reveals that the perceptions against grant of the MFN status to India are based on fears. The analysis of the arguments can be summed up as follows:
—> Grant of the MFN status to India may simultaneously be coupled with effectively putting in place unfair trade remedial measures to combat dumping, subsidies on exports and certain surge in imports, causing or threatening to cause serious injury to local manufacturers/producers. International laws of these aspects are already in place, which may be activated by the National Tariff Commission (NTC) to enable the government to take appropriate measures promptly.
—> Major manufacturers always keep alternative sources of supplies and it is not likely that India will become the only source of the supply of raw materials and intermediary goods to the local industry.
—> The balance of trade may not be viewed only in the context of bilateral trade with India. In case our global balance of trade becomes more favourable, Pakistan will be a gainer. The argument of the World Bank in this respect has substantial merits.
Courtesy: Daily Times, Lahore, August 23, 2005 ( By Sajid Chaudhry )
