MFN - right or wrong?

Enterprise - - Region -

In 1996, In­dia granted Pak­istan the sta­tus of Most Fa­vored Na­tion ( MFN). Sub­se­quently, Pak­istan ex­pe­ri­enced prob­lems re­gard­ing the stan­dard of In­dian prod­ucts, strict li­cence in­spec­tion and the rigid cus­toms rules.

Now Pak­istan has granted In­dia MFN sta­tus to lib­er­alise trade be­tween the neigh­bours. Trade be­tween In­dia and Pak­istan has al­ways been in­ter­wo­ven with pol­i­tics, which has ham­pered eco­nomic ben­e­fits from be­ing ex­ploited to the full po­ten­tial. Many be­lieve that new trade ties be­tween the two coun­tries will not only fa­cil­i­tate trade but will also di­min­ish the trust deficit, bring­ing the re­gion closer to a more peace­ful en­vi­ron­ment.

It is il­log­i­cal to do trade with coun­tries that are ge­o­graph­i­cally at a dis­tance while ig­nor­ing our neigh­bours who can sup­ply the same ma­te­ri­als at a lower cost. Ac­cord­ing to a study un­der­taken by the State Bank of Pak­istan, the re­moval of non- tar­iff bar­ri­ers, would al­low the bi­lat­eral trade be­tween In­dia and Pak­istan to in­crease five­fold.

Some Pak­istani busi­ness­men feel that the time has also come to re­lax the strict visa regime. The two way MFN sta­tus would lead to smoother trade and Pak­istan can set its sights on the wider global mar­ket through es­tab­lish­ing their in­dus­tries in In­dia.

While Karachi is the largest in­dus­trial base in Pak­istan, with its on- go­ing prob­lems, it does not com­pete with the highly sta­ble and global In­dian mar­ket. Keep­ing a strictly busi­ness per­spec­tive in view, set­ting up in­dus­tries in In­dia rather than con­tin­u­ing to suf­fer un­der the preva­lent law and or­der con­di­tions, would be a log­i­cal and prac­ti­cal ap­proach for Pak­istani busi­ness­men.

While many would view such an ini­tia­tive in a pos­i­tive light, there are many who would dis­agree. The rate of un­em­ploy­ment in Pak­istan al­most dou­bled from 7.4 per­cent in 2008 to 14 per­cent in 2009 and con­tin­ues to rise ever since. It is, there­fore, im­por­tant to cre­ate greater job op­por­tu­ni­ties for Pak­istani work­ers. By set­ting up in­dus­tries in In­dia our busi­ness­men would be em­ploy­ing In­dian work­ers while the rate of un­em­ploy­ment in Pak­istan would continue to rise. Such an even­tu­al­ity would, there­fore ag­gra­vate the prob­lems stem­ming from un­em­ploy­ment.

An­other com­mon fear as­so­ci­ated with the de­ci­sion of grant­ing MFN sta­tus to In­dia, is that In­dian goods would take over the do­mes­tic Pak­istani mar­ket. The idea is said to be slightly ex­ag­ger­ated be­cause if In­dian goods dam­age the sales of do­mes­tic pro­duc­ers, then Pak­istan can evoke Trade De­fence Laws to negate those ef­fects. These laws in­clude Anti- Dump­ing Du­ties Or­di­nance, Coun­ter­vail­ing Du­ties Or­di­nance and Safe­guards Or­di­nance.

What is re­quired is a sharp fo­cus on the ways to speed up the process of smoother trade be­tween the two coun­tries. Since one of the main ad­van­tages of hav­ing cor­dial re­la­tions with neigh­bours is in­creased trade at a lower trans­porta­tion cost, we need to up­grade our age­ing and in­ad­e­quate in­fra­struc­ture, fo­cus­ing specif­i­cally on im­prov­ing road, rail and train ser­vices, along with air links.

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