Pakistan grants India MFN status

Pakistan’s cabinet on Wednesday unanimously agreed to grant India most favoured nation (MFN) status, a long-pending move which is expected to strengthen trade and bilateral ties between the two fractious neighbours and provide a boost to the peace process. Following the announcement, Pakistan will now allow trade in more goods by shifting to a system of negative list, which will only restrict shipments of products mentioned on this list. At present, it uses a system of positive list, which means trade is permitted only in a handful of products, resulting in consignments getting routed through third countries such as the UAE. Strained relations between the two nuclear-armed neighbours had cast a shadow on bilateral trade and hurt economic engagement. But over the past few months, New Delhi and Islamabad have taken tentative steps to mend relations and deepen trade and economic ties. More than boosting trade, Pakistan’s decision is being seen as a major confidence-building measure to help improve the frosty relations. “This was a decision taken in national interest and all stakeholders, including our military and defence institutions, were on board,” Pakistan’s information minister Firdous Ashiq Awan told reporters in Islamabad. Across the border, commerce, industry and textiles minister Anand Sharma said, “It will be beneficial for both countries.” According to the World Trade Organization, MFN status means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners—whether rich or poor, weak or strong. India granted MFN status to Pakistan in 1996 and has been demanding that Islamabad reciprocate but political developments hurt progress on the issue. India policymakers and industry groups welcomed the move but said roadblocks like stringent visa rules, non-tariff barriers, difficulty in communication and opening of more trade routes like Wagah remained to be addressed. In September, during a meeting between the two commerce ministers, India and Pakistan agreed to work to more than double bilateral trade within three years, from the current level of $2.7 billion per annum to about $6 billion.