MFN Sta­tus for In­dia

*Dr. Ah­mad Rashid Ma­lik

The Diplomatic Insight - - Contents - *The writer is an Is­lam­abad-based ex­pert on Ja­pan and po­lit­i­cal econ­omy.

There was not a unan­i­mous view­point pre­vail­ing on the is­sue of grant­ing the Most Fa­vored Na­tion (MFN) sta­tus to In­dia among dif­fer­ent stake­hold­ers but the Fed­eral Cabi­net ap­proved the MFN sta­tus for In­dia on 2 Novem­ber en­com­pass­ing a 20 per­cent re­duc­tion on 233 tar­iff lines in the sen­si­tive list. The MFN sta­tus yet has to get ap­proval of the Par­lia­ment. Atus­sle has ap­peared. For all counts, it would be detri­men­tal to Pak­istan's in­ter­ests to grant the MFN to In­dia. This was for the first time that talks about grant­ing the MFN sta­tus to In­dia have come up from the Gov­ern­ment cir­cle. Hith­erto, Gov­ern­ment lead­ers strongly ob­jected grat­ing such a sta­tus to In­dia in­clud­ing the pre­vi­ous regime for out­stand­ing rea­sons. This time, how­ever, in a sur­pris­ing move, For­eign Min­is­ter Hina Rab­bani Khar clearly hinted out at the Par­lia­ment on 12Oc­to­ber to be­stowMFNs­ta­tus to In­dia. She did not make a de­tailed, crit­i­cal, and log­i­cal re­view of the of­fer, how­ever. Ear­lier, Com­merce Min­is­ter Makhdoom Amin Fahim in­di­cated that there was a strong opinion in Pak­istan that In­dia should be given the MFNs­ta­tus dur­ing his visit to In­dia in Septem­ber (2011). It ap­pears that the de­ci­sion was taken in haste and with less dis­cus­sion. Many busi­ness and po­lit­i­cal cir­cles have or­ga­nized protests and crit­i­cized the Gov­ern­ment of grant­ing MFN sta­tus to In­dia by call­ing for the with­drawal of MFN sta­tus forth­with. Par­lia­men­tary ap­proval has to be taken yet. They viewed that the Gov­ern­ment has to re­visit its de­ci­sion of grant­ing MFN sta­tus to In­dia. TheMFNs­ta­tus for In­dia came in re­turn af­ter lift­ing non­tar­iff re­stric­tions on im­ports from Pak­istan. The visit of Com­merce Min­is­ter to In­dia was an­other rea­son. Think­ing that the core is­sue would be re­solved af­ter be­stow­ing MFN sta­tus to In­dia looks pre­ma­ture. Core is­sues such as the Kash­mir dis­pute, wa­ter dis­tri­bu­tion, Si­achin, and Sir Greek should come all the way first to ride on a free trade drive in SouthAsia. Some cir­cles view this of­fer by Pak­istan in the back­drop of the Pak­istan-US fast de­te­ri­o­rat­ing re­la­tions where US is backing In­dia. Pak­istan may like to at­tract In­dia by lur­ing it with a MFN sta­tus. Oth­ers will con­sider a pos­i­tive of­fer by Pak­istan to achieve­more com­mon goals of trade in the re­gion. Sup­port­ing In­dia's stance, crit­ics view that bour­geon­ing In­dian econ­omy and its in­flu­ence over Amer­ica, Eu­ro­pean, and Chi­nese econ­omy has been com­pelling Pak­istan to en­hance its stakes in the In­dian mar­ket. This would also show a mod­er­ate stance of Pak­istan toward In­dia. The con­ser­va­tive school views In­dia's po­si­tion by stat­ing that In­dia has not moved back a sin­gle inch on var­i­ous is­sues where core is­sue is Kash­mir and why Pak­istan is of­fer­ing such a sta­tus to In­dia. They view a com­plete con­fu­sion over Pak­istan's pol­icy toward In­dia. Kash­miris inside Jammu and Kash­mir and di­as­pora in the United King­dom have launched ral­lies against the de­ci­sion of grant­ing MFN sta­tus to In­dia. Kash­miris are of view that grat­ing of MFN sta­tus to In­dia is equal to stab­bing in the back of Kash­mir free­dom move­ment and negat­ing the ide­ol­ogy of Pak­istan and pol­icy of the found­ing fa­ther of the coun­try Quaid-e- Azam Muham­mad Ali Jin­nah. They think that the move would ad­versely af­fect the Kash­miri peo­ples' strug­gle for their right to self-de­ter­mi­na­tion and would cause ir­repara­ble dam­age to Kash­mir's strug­gle for right to selfdeter­mi­na­tion. Th­ese pub­lic sen­ti­ments should not be by­passed. Pak­istan must see the MFN sta­tus in the Kash­mir per­spec­tive. Bi­lat­eral trade could be highly risky in view of any even­tu­al­ity of thekash­mir sit­u­a­tion. So eco­nomic lib­er­al­ism can­not work in view of po­lit­i­cal op­pres­sion inside Kash­mir, which is main con­cern for Pak­istan. A lib­eral mar­ket is thus vul­ner­a­ble to po­lit­i­cal back­lash overkash­mir and other is­sues. The free trade school views not to mix up pol­i­tics with the econ­omy and let eco­nomic forces to play their role. This would also lead to de­crease po­lit­i­cal ten­sion and helps re­solve prob­lems. They say that coun­tries can en­hance eco­nomic stakes without hurt­ing their po­lit­i­cal stances. At the mo­ment, Pak­istan-in­dia bi­lat­eral trade is be­ing car­ried out on the ba­sis of Pos­i­tive List that al­lowed the im­port and ex­port of com­modi­ties be­tween the two na­tions. The list has in­creased over the years by in­clud­ing more items for trad­ing pur­poses. In­dia granted MFN sta­tus to Pak­istan in 1995. The fore­most in­cen­tive was that MFN would in­crease ex­ports of Pak­istan to In­dia. Re­al­ity is, how­ever, oth­er­wise. Re­cently Pak­istan ex­ported goods worth of US$ 287 mil­lion­while ex­ported In­dian goods worth US$ 1.5 bil­lion. In­dian goods will fur­ther flood into Pak­istani mar­kets and ruin lo­cal man­u­fac­tures who are fac­ing, in­ter alia, elec­tric­ity and gas short­ages. Pak­istan Econ­o­my­watch (PEW) re­ported that lo­cal in­dus­tri­al­ists held the view that grant­ing of MFN sta­tus to In­dia will dam­age lo­cal value-added tex­tile sec­tor, which is pro­vid­ing jobs to mil­lions and con­tribut­ing more than any other sec­tor to the ex­port earn­ings. Pak­istan should fo­cus on im­prov­ing its tex­tile in­dus­try. There are non-tar­iff is­sues and many other trade bar­ri­ers elected on Pak­istan's ex­ports to In­dia. Th­ese sit­u­a­tions make Pak­istan's ex­ports ex­pen­sive and re­stric­tive to the In­dian mar­ket. They must be re­solved first such is­sues be­fore con­sid­er­ing mfns tatus for In­dia.

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