Indo-Pakistan trade

Pakistan's textiles and interior ministries have expressed their reservations on granting India the "Most-favored Nation" (MFN) status, according to Pakistani Information Minister, Firdous Ashiq Awan. Speaking to reporters at a press conference, Awan said, “all stakeholders were not on board,” because of which the decision to allow free entry of Indian goods to Pakistan has been put off.

Earlier, an official statement by Pakistan’s cabinet said that Pakistan’s Prime Minister Yusuf Raza Gilani had “directed the ministry of commerce to consult all stakeholders before the preparation and finalization” of the “negatives” list. The “negatives” list refers to products that have not been approved by Pakistan’s government for import from India. The Indian news agency PTI reported Awan as saying that the proposal regarding the MFN had not been sufficiently worked out, which is why the prime minister decided to defer the decision.

The Pakistani cabinet has, however, given its approval for signing agreements on cooperation in customs and mutual recognition of standards. The countries are also working toward resolving trade grievances.

Indian dismay

The Indian commerce minister Anand Sharma is touring Lahore, Karachi and Islamabad with a delegation of industry and business experts from India. He declined to comment on Pakistan’s decision, saying he would take up the matter with leaders in Islamabad.

Business leaders in the Indian delegation have expressed their dismay at the possible failure of reaching an agreement. The president of the Confederation of Indian Industries (CII), B. Muthuraman, said, “Yes, I am disappointed. There are some political reservations that need to be resolved. Political will is very important to boost bilateral economic relations.”

India has no restrictions on goods imported from Pakistan. Trade between the two rival neighbors currently amounts to 2.7 billion dollars.


Back and forth

Last year after talks with India, Pakistan had said it would allow the import of all Indian goods from February 2012. Leading Indian newspaper Times of India reported the deal would have allowed the entry of all products from India except 636 items in the “negatives list.” These include food and agricultural products, minerals, chemicals, iron, steel and textiles, among others. Currently, Pakistan follows a “positive list” regime and permits only the import of 1,900 goods from India.
Last year’s talk about granting India MFN was seen as a major step towards peace between the warring nations.

India and Pakistan have been at political loggerheads since 1947, when Pakistan separated from India, which was a colony of the British Empire at the time. The two countries have been involved in border disputes, especially along Kashmir, which both rivals claim for their own.

India and Pakistan engaged in three wars with each other, in 1965, 1971 and in 1999. Relations between the neighbors reached an all-time low after terrorist attacks carried out by Lashkar e Taiba, a terrorist organization based in Pakistan, shook Mumbai in 2008. More than 200 people were killed in the attack. Bilateral relations between the two countries were restored only in 2009.

Prominent economists like Mohsin S. Khan have said that mutual trade could be the most effective way to improve relations. In a 2009 policy brief for the Peterson Institute for International Economics, Khan wrote, “Improving economic ties may help to resolve larger political issues that have bedeviled” India-Pakistan relations for over 60 years. Khan said easing visa restrictions, especially for businesspeople, could help facilitate trade and increase public support for peace initiatives.

Author: Manasi Gopalakrishnan (PTI)
Editor: Sarah Berning