Pakistan Grants India Most Favored Nation Status

Posted by Reading Time: 2 minutes

Oct. 18 – Pakistan has decided to grant Most Favored Nation (MFN) status to India. The discussion process with India had been initiated after a gap of two years. According to the Pakistan government, the foremost priority of the country is to ensure uninterrupted dialogue with India so that the resolution of Kashmir can be ensured.

The MFN status could be a big step forward in increasing trade ties between the two countries. Once MFN status is granted, Pakistan will have to treat India on par with its other favored trading partners. India has already granted most favored nation status to Pakistan and is treating it on par with other trading partners.

India granted Pakistan MFN status some 15 years ago, the way for Pakistanis wanting to do business in India has remained largely blocked because of a number of non-tariff and tariff barriers. Pakistan has been indecisive for all these years on reciprocating with an MFN status for India, and has been accused of not following the current economic draft as articulated by the World Trade Organization.

Nevertheless, Islamabad has been giving concessions to imports from India by adding ever-newer items to the positive list of trade items from across Wagah over the years. This sets theory apart from practice.

Each nation has its own well-being to protect. As a result, it was not completely unexpected that Pakistan’s decision to award MFN status to India would coincide with the preparation of a negative list of items by the Commerce Ministry in Islamabad. These items will not be allowed to be imported from India to protect domestic interests, such as the all-important textile sector.

The Pakistani Commerce Minister`s recent visit to India after 35 years indicated a readiness to try the alternative to old conflict. However, it is not that Pakistan is not getting anything of immediate value from the MFN decision. New Delhi is willing to not oppose tariff concessions for Pakistani exporters in the European market that we so very much require. This give-and-take is one reasonable reason why local businessmen appear to have softened their old position on the MFN for India. Conversely, their disposition will be defined by the entries on the negative list that is in the making at the Commerce Ministry.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. To contact the firm, please email india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.