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Ignorance rules

Print edition : Dec 02, 2011

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The Pakistani street links MFN status to the Kashmir issue despite the fact that both countries gave each other the status until 1965.

in Islamabad

JUST how difficult it is for either Pakistan or India to extend an olive branch to the other was in full evidence early in November when Pakistan's federal Cabinet decided in principle to extend the Most Favoured Nation (MFN) status to India.

Even as Information Minister Firdous Ashiq Awan and Commerce Secretary Zafar Mahmood tried to make the announcement at the Cabinet briefing, the local media were baying for blood, suggesting that the Pakistan People's Party-led government was weakening the long-held national position on Kashmir by granting MFN which many a journalist insists on calling Most Favourite' (sic) Nation status to India. The argument is that there can be no normalisation of relations with India without resolving the Kashmir issue.

When Mahmood tried to set it in historical perspective pointing out that Pakistan had granted MFN status to India in the days of Quaid-e-Azam Muhammad Ali Jinnah itself the Secretary was accused of unnecessarily dragging in the founding father's name to legitimise this anti-Pakistan move. The fact that both countries had given MFN status to each other soon after Partition until 1965 and that India had restored that status to Pakistan unilaterally in 1996 made little dent on a national narrative built on animosity to and fear of India.

Consequently, for the next four days, a decision that has been in the making for some time now given a series of deliberations the government held with stakeholders remained mired in confusion to the extent that Prime Minister Syed Yusuf Raza Gilani and Foreign Minister Hina Rabbani Khar had to step in to clear the air and state categorically that the Commerce Ministry had been authorised to normalise trade with India and that extending MFN status was just one part of the process.

This once again showed how difficult it would be for both countries to resolve issues such as Sir Creek, Siachen and Kashmir, where yielding even an inch of land or water will be seen as abject surrender.

Part of the problem lay in the term MFN itself, which many interpret in the literal sense and see as some special status being accorded to India.

With hostilities having dominated the India-Pakistan relationship, few on both sides know that India and Pakistan were among the 23 countries that were the original signatories to the General Agreement on Tariffs and Trade (GATT), which included the MFN provision.

Writing in Dawn, Abid Hussain Imam, Associate Professor of Law and Policy at Lahore University of Management Sciences, said: In fact, recognising that the two countries had previously constituted the same economic unit, the original GATT included an exceptional clause permitting the two newly independent countries to enter into special arrangements with respect to trade' with each other.

What's more, India and Pakistan signed 12 trade agreements between 1947 and 1965, as a result of which there were four points for border trade in Punjab, including one each in Bahawalpur and Sindh and a customs point on the Chenab river for timber trade. The 1965 war ended all this until the signing of the Simla Agreement in 1972resulted in a nominal resumption of trade by putting four items on the positive list.

When the World Trade Organisation replaced GATT as the international structure overseeing the multilateral trading system, India granted MFN status to Pakistan and moved to a negative list approach. Pakistan still maintains a positive list for trade with India. Under this list, trade is permitted in fewer than 2,000 items. India has time and again pointed out to Pakistan that maintaining the positive list approach goes against the spirit of the South Asian Free Trade Agreement (SAFTA). Pakistan has now indicated that it is open to switching to a negative list approach vis-a-vis India but is looking for some reciprocity.

Though the street narrative, including rallies organised by banned jehadi outfits in Islamabad, against MFN status to India suggests that Pakistan was succumbing to U.S. pressure, several reports in recent years have stressed the need to exploit the potential offered by regional trade. In its report on the medium-term development imperatives and strategy for Pakistan, a panel of economists entrusted with the task by the Planning Commission stressed the need to build strong constituencies for peace through considering first granting India MFN basis and abandoning the positive list approach, easing visa processing to facilitate freer movement of people, an institutional arrangement for banks opening up of new transportation routes better information exchange, reduction in NTBs [non-tariff barriers], and creating an enabling environment for investment in joint ventures.

Admitting that holding back MFN status to India was in itself an NTB, Pakistani Ministers and officials are hoping for some relaxation from India on the NTBs to make normalising trade with India an idea that can be sold to the people. Though Indian High Commissioner Sharat Sabharwal has repeatedly sought to assure Pakistani officials and business community that the so-called NTBs are not Pakistan-specific, the perception here even among keen advocates of resumption of normal trade with India is that they smack of an anti-Pakistan bias.

While trying to address misgivings within the business community about MFN status to India by arguing that it does not mean sleeping with the enemy, the former chairman of the Karachi Chamber of Commerce and Industry, Majyd Aziz, insisted that India should address Pakistan's concerns regarding the NTBs. They may not be Pakistan-specific, but they seem to be. The way shipment from Pakistan is inspected by your Customs and police, it would seem that the entire consignment is filled with bombs.

In several interactions with the business community, Sabharwal has sought to drive home the point that the examples of NTBs and Para-Tariff Barriers quoted include requirements of technical standard certification, standard of quality, labelling, marking, packaging, and sanitary and health regulations. Such regulations are not unique to India and prevail in all countries. And such regulations in India apply to all our trading partners and are not specific to Pakistani exports.

Also, according to Indian officials, some of the problems being faced by Pakistani traders will be addressed once the Integrated Check Post (ICP)at Attari becomes fully operational. Conceding that facilities on the Indian side were poor compared with that on the Pakistani end, they said the ICP would have full-body scanners for trucks, warehouse and cold storage facilities, quarantine laboratories, and so on. As for the major irritant of visas, particularly the restrictive regime and the insistence on police reporting on arrival and before departure, the hope that is being held out is that businessmen will stand to benefit the most from the relaxations that have been agreed to by officials on both sides. The joint working group set up for the purpose as part of the resumed dialogue process is understood to have suggested a relaxed visa regime for businessmen and it now awaits political clearance.

Given the entrenched mistrust, these promises have failed to cut ice with the naysayers, some of whom have gone way back into history to cite India's refusal to pay Rs.55 crore due to Pakistan at the time of Partition. Add to this the fear of being swamped by Indian goods the way Pakistan has been by Chinese stuff. India's contention is that since Pakistani goods are competing with Indian goods elsewhere, it will be able to do so domestically also.

Seeking to address some of these fears, the leading economist S. Akbar Zaidi maintains that MFN status to India will favour Pakistan more than India. Research has shown that if trade between the two countries grows, since Pakistan's is the much smaller economy, the gains which accrue to Pakistan will be far greater, he wrote in Dawn, adding that bilateral trade is expected to double from $2.5 billion in the next three years on account of this decision. `While not such a big deal for India, this will mean a huge change for Pakistan.

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