29.4.11

Pakistan talks trade

India and Pakistan announced a path-breaking blueprint to spur trade between the two nations at the end of a two-day meeting of the commerce secretaries of the two countries in Islamabad. Pakistan agreed that extending the most favoured nation, or MFN, status to India will spur trade, giving up its long-held stance of linking the issue to the resolution of the Kashmir problem. The two countries will also set up groups of experts for expanding trade in petroleum products and to enable trade in electricity. The joint declaration issued at the end of the fifth round of talks on commercial and economic cooperation put firm timeline to every proposal and set up a mechanism to review the progress through biannual secretary level consultations. "This can be viewed as a breakthrough in the mind set,” said Sunil Sinha, senior economist, Crisil. Exporters’ body FIEO is positive that the initiatives mark a new beginning in bilateral economic relations. "The biggest achievement for us is recognition by Pakistan that grant of MFN status would expand bilateral trade," Fieo president Ramu Deora said. The Pakistan side, led by its commerce secretary Zafar Mehmood, said it would take immediate steps to ensure that non-discriminatory trade regime is operationalised at the earliest. The Indian contingent was headed by commerce secretary Rahul Khullar. The trade secretary level talks were held after a gap of more than two years following the break in all interaction in the wake of Mumbai terror attacks. An ongoing study by the think tank ICRIER pegs the potential of India-Pakistan trade at $14.3 billion with India exporting about $11 billion worth of goods to Pakistan and importing $3 billion. The current level of bilateral trade between the two countries is about $2 billion. Indirect trade between the two routed through third countries is estimated at another $2 billion. "This is a significant development that will increase normal trade and curb trade through third-countries. Over a period of time, this could provide momentum to the political side as people from both sides begin to benefit," Biswajit Dhar, director general, RIS said. India has been seeking MFN status from Pakistan for a long time, which would lead to the country getting the same treatment as other countries in terms of allowing exports. Pakistan so far has been allowing exports from India on the basis of a small positive list of items instead of trading the normal way using a negative list of excluded items. Pakistan said it will move to a system of trade-based on negative list as opposed to the current positive list. India has already given the MFN status to Pakistan, allowing trade to be done on the basis of a negative list. Pakistan said consultations with business chambers have already begun on replacing the positive list with a negative list and the process would be concluded by October 2011. Agreeing to work out ways to expand trade in petroleum, both sides decided to set up an expert group before June 15 to discuss trade arrangements, building of crossborder pipelines, and use of road and rail route, including the Monabao-Khokrapar route.

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