Leaving behind decades old acrimony, Pakistan has declared India as the most favored nation. How much would this affect the bi-lateral trade relations of the two nations?
A federal cabinet meeting chaired by the Honorable Prime Minister Yousaf Raza Gilani in Islamabad has arrived at the decision. The cabinet has unanimously decided to grant the MFN status to India. This is expected to normalize, and even create a friendlier atmosphere for Indians in Pakistan. Though the declaration is not expected to create any changes in the relations of both the countries in a dramatic manner, still it would have a positive impact in the trade relations between the two nuclear-armed South Asian counterparts.
Earlier, in 1996, India granted MFN (Most Favored Nation) status to Pakistan, but the country did not respond to it. 15 years have passed since then, for Pakistan to resolve itself, and agree with India's offer. Times of India reports Pakistani information minister Firdos Ashiq Awan saying, "This was a decision taken in the national interest and all stakeholders, including our defense institutions, were on board."
Following the Mumbai attacks, Indian businessmen have avoided traveling to Pakistan even to sign the previously agreed contracts. Pakistanis were showing similar reluctance in traveling to India. During the SAARC conference, officials from India and Pakistan met in New Delhi, but the meeting failed to break the ice. India had successfully entered into trade pacts with neighboring countries including the violence-ridden counterpart; Sri Lanka.
The Trade Effects:
Pakistan's declaration is predicted by industry analysts to create direct trade alliance between the two neighboring countries. India will acquire a formal trading status with Pakistan, resulting in a noticeable increase in its trade activities. There would be free flow of goods, ideas, and capital across the border. During 2009-10 exports from India to Pakistan were $1.2 billion, while imports were $268 million. Trade value between the two nations is expected to grow from the current $2.5 billion to a whooping $5 billion.
A federal cabinet meeting chaired by the Honorable Prime Minister Yousaf Raza Gilani in Islamabad has arrived at the decision. The cabinet has unanimously decided to grant the MFN status to India. This is expected to normalize, and even create a friendlier atmosphere for Indians in Pakistan. Though the declaration is not expected to create any changes in the relations of both the countries in a dramatic manner, still it would have a positive impact in the trade relations between the two nuclear-armed South Asian counterparts.
Earlier, in 1996, India granted MFN (Most Favored Nation) status to Pakistan, but the country did not respond to it. 15 years have passed since then, for Pakistan to resolve itself, and agree with India's offer. Times of India reports Pakistani information minister Firdos Ashiq Awan saying, "This was a decision taken in the national interest and all stakeholders, including our defense institutions, were on board."
Following the Mumbai attacks, Indian businessmen have avoided traveling to Pakistan even to sign the previously agreed contracts. Pakistanis were showing similar reluctance in traveling to India. During the SAARC conference, officials from India and Pakistan met in New Delhi, but the meeting failed to break the ice. India had successfully entered into trade pacts with neighboring countries including the violence-ridden counterpart; Sri Lanka.
The Trade Effects:
Pakistan's declaration is predicted by industry analysts to create direct trade alliance between the two neighboring countries. India will acquire a formal trading status with Pakistan, resulting in a noticeable increase in its trade activities. There would be free flow of goods, ideas, and capital across the border. During 2009-10 exports from India to Pakistan were $1.2 billion, while imports were $268 million. Trade value between the two nations is expected to grow from the current $2.5 billion to a whooping $5 billion.
Pakistan had earlier criticized that the quality standards and customs procedures of India are hindering exports from Pakistan into India. The current declaration would remove all non-tariff barriers and restrictive trade practices. Currently Pakistan allows the import of only 1,946 items from India, and India has restricted the export of 850 items to Pakistan. The current declaration is likely to eliminate these restrictions. Key sectors that are likely to get influenced with the declaration include textiles, apparels, cotton, textile machinery, agricultural products, steel and chemicals.
Despite all the bitterness in their relations, the MFN declaration gives positive hopes to remove trade barriers between the two countries, and prospective trade benefits are likely to spring in the coming years.
References:
1) Economictimes.indiatimes.com
2) Dnaindia.com
3) Timesofindia.indiatimes.com
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