Big breakthrough
by
Javed Hafiz |
Full marks to India and Pakistan for ending zero sum games
Pakistan has decided, in principle, to extend the Most Favoured Nation (MFN) trade status to India. This was stated by Makhdoom Amin Faheem, the commerce minister during his recent visit to India. The two sides have also agreed to grant mutiple entry visas to the businessmen. On its side, India has verbally undertaken to withdraw its objections, at the World Trade Organisation(WTO), to Pakistan being given preferencial treatment in its exports to the European Union. This was a good quid pro quo which is the basis of win win situations in business. Full marks to both sides for stopping playing zero sum games. I hope this trend continues for it would bring peace and prosperity in our region.
India had granted MNF trade status to Pakistan in the mid 1990’s.This status means that the granting state would accord the same treatment to the other state as it has done to any other favoured nation. MFN status ultimately leads to equal trade concessions and level playing field as more and more countries enter into such agreements. WTO rules also stipulate that the nation being given MFN status will have to, sooner or later, resiprocate to the other party. All this while, Pakistan has invoked articles 20 and 21 of the General Agreement on Trade and Tarrif (Gatt ).These articles pertain to the security aspect. Pakistani argument was that bilateral Indo-Pak security issues should be resolved first.
So what could have changed the Pakistani stance? The war on terror has inflicted heavy losses to human lives and the Pakistani economy. Tension on both borders is a situation which ought to be avoided. Enhanced trade with India could help in peaceful resolution of disputes and could open huge economic possibilities by unleashing potential on both sides. Both sides have resolved to tripple the current two billion dollars worth of bilateral trade in three years and this is easily doable. When tarrif and non tarrif barriers are eliminated or reduced there would be an inducement for this trade to enter the formal channels. This would mean higher revenue figures on both sides through custom duties.
Protectionism discourages competition and breeds inefficiencies. It also produces a class that thrives on monoply or oligopoly-like situations. India practised protectionism for four decades but higher rates of growth started only when it opened up its economy in 1990’s. In case of Pakistan too protectionism has lead to economic distortions. The Pakistani economy needs to change structurally by shifting to manufacturing with higher technological inputs. Business exposure to India would mean that Pakistani entrepreneurs would learn to produce better quality goods at lesser cost and would have to sell at competitive prices. The consumers would have more choice. To begin with, trade in agricultural produce would keep prices in check and enhance food security in our two countries. For example, the bumper rice crop in India this year has reduced rice prices in India. If rice imports from India were allowed today, prices of this vital food item in Pakistan would come down too.
Terrorism, a threat both to India and Pakistan, can be best tackled through education, employment and economic development. If this positive trend continues, Pakistan would become a transit route for Indian goods going to Central Asia. As Indian energy needs increase, Pakistan could become an energy corridor for the Iranian and Central Asian gas going to India. Indian investments could come to Pakitan where foreign direct investments have come to a virtual halt due to the security situation. Just imagine the benefits that could accrue to the allied businesses like trucking, gas stations, hotels and restaurants along the Grand Trunk road from Waha to Torkham as trade activity picks up. The unemployed youth who are exploited today as suicide bombers would get ample employment avenues. When India and Pakistan trade through Dubai and Singapore, the prices go up due to additional transport costs .Direct trade will make the goods ,traded now through third countries ,much cheaper.
The Indian promise of lifting its objections to the Generalised System of Preferences (GSP)plus status for Pakistan will give a boost to Pakistani exports to the EU. Pakistan expects to get GSP plus treatment to its exports in January 2014. The EU is Pakistan’s foremost trading partner and accounts for 27.4per cent of Pakistani exports .In 2001, while I was posted at Athens as ambassador, a 15 per cent increase in Pakistani textile quota in the EU had made a lot of difference. Textiles account for 60 per cent of Pakistani exports to the EU. The 2014 possibility will apply to other tarrif lines as well.
I do hope India and Pakistan will follow through on their undertakings for these are in the interest of our two peoples. |
Other comment for Javed Hafiz
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