Pak nod to negative list, Indias MFN status not far

Now almost 90% items can be traded with Pakistan as opposed to 17% earlier The Pakistan Governments decision to switch over to a negative list regime for trade with India has paved the way for formally according the Most Favoured Nation status to the latter by the end of this year The negative list would be phased out by December 31, 2012 to complete the process of normalisation of trade between the two countries

NEW DELHI: Pakistan's cabinet on Wednesday approved a proposal to ease trade with India by switching to a negative list-based import regime and following it up with a most-favoured-nation (MFN) trade status by the year-end. The move will increase the number of items Indian exporters can sell to Pakistan by nearly three times. India had given MFN status to Pakistan 16 years ago, though Ismalabad claims there are still several non-tariff barriers that its exporters face. "The federal cabinet unanimously approved the phasing out of the negative list existing between Pakistan and India by December 2012," an official release from the prime minister's secretariat in Pakistan said, adding, "After that, the process of trade normalisation between the two countries will be completed." The development drew cheers from New Delhi, which was disappointed when the Pakistani cabinet could not approve the negative list during Indian Commerce Minister Anand Sharma's visit earlier this month because of objections from its textile ministry. "It reaffirms the commitment of both governments for trade normalisation as per the roadmap drawn during the visit of Pakistan commerce minister in September last year," Sharma said, adding that it will mark a dramatic shift in imports as now almost 90% items can be traded with Pakistan, as opposed to 17% earlier. The two ministers had set a deadline of discarding the positive list in favour of a negative list by February 2012, and phasing out the negative list by the end of the year. However, key items like automobiles and pharmaceuticals are likely to be on the negative list till the time the MFN status is given. Pakistan has avoided use of the sensitive term to pre-empt a reaction from hardline groups. Lashkar-e-Taiba founder Hafiz Mohammad Saeed has reportedly said the grouping will oppose any move to open up Pakistani markets and give MFN status to India. Pakistan's commerce ministry had to almost double the number of items on its proposed negative list from 636 to more than 1,200 to accommodate concerns of certain sectors such as textiles. However, the progress on trade ties has drawn praises from experts.

"The most important point is that they (the Pakistanis) are sticking to deadlines. Maybe, they have compromised a bit by increasing the negative list, but it is only an attempt to take everybody along so that there is no opposition at a later stage," said Nisha Taneja, professor at Delhi-based think-tank ICRIER.

Taneja said the size of the negative list should not matter, as within a year everything would be phased out. The negative list mostly includes items from sectors such as automobiles, textiles, pharmaceuticals and chemicals. Pakistan currently imports just 1963 items from India based on a small positive list, as against more than 9,000 items it imports from other countries. It is obliged under the WTO rules and the South Asia Free Trade Agreement to confer the MFN status on India by allowing import of all items it buys from other countries. India exported goods worth $2.33 billion to Pakistan last year, while imports from the neighbour stood at $330 million. India and Pakistan are also working on liberalising their bilateral visa regime and allowing bank branches to be opened up in each other's countries. The two nations have set up groups to discuss trade in petroleum products and electricity, too.