Trade liberalisation: PBC urges government to negotiate reciprocal treatment with Indian counterparts
April 22, 2014
In light of the recent negotiations between the governments of Pakistan and India on trade normalisation, a study conducted by the Pakistan Business Council (PBC) titled “Preliminary analysis of Pakistan and India trade and a viable roadmap for trade liberalisation” identifies areas of potential growth opportunities and urges the government of Pakistan to negotiate reciprocal treatment with its Indian counterparts to achieve level-playing field in trade on both sides.
The study has estimated potential bilateral trade of US $18 billion using current trade statistics between Pakistan and India. Of this potential, US $3.6 billion is Pakistan’s potential to export to India whereas the balance represents India’s potential export to Pakistan. Recent talks suggest that once Pakistan grants MFN (Most Favoured Nation) or NDMA (Non-discriminatory market access) status to India and opens the Wagah-Attari land route for all items (137 currently allowed), India will reduce its sensitive list down to 100 select items. With the grant of MFN, SAFTA regime will also kick in where Pakistan would give concessionary treatment to India along all products except items in Pakistan’s sensitive list.
The PBC study, however, argues that Pakistan cannot benefit from a simple pruning down of India’s sensitive list, as majority of Pakistan’s potential to export lies along products that are not protected by India under its sensitive list. It is in fact; India’s para-tariffs and strategically placed non-tariff barriers that are in some cases specific to sectors such as textile, agriculture and automobiles that largely restrict market access for Pakistani exporters.
At present, Pakistan protects its domestic interests through the sensitive list and the negative list but the latter will no longer be operative once MFN to India is granted. The concerns of the agricultural lobby and domestic producers, particularly automobiles and pharmaceuticals thus appear to be reasonable. With only a limited number of products allowed on the sensitive list under the SAFTA regime, the cheaper Indian products could hurt domestic interests. India on the other hand is expected to continue to protect its interests with its systematic network of Para-tariffs, non-tariff barriers and subsidies, not offering reciprocal treatment to Pakistan.
The PBC study recommends that the Government of Pakistan as a prelude to trade normalisation with India establish a strong regulatory and safeguard mechanism and strengthen regulatory bodies such as NTC and PSQCA to protect its local interests, while negotiating with the Indian side for a level-playing field for Pakistan’s exports into the Indian market. Such a level-playing field can be achieved if Pakistan’s decision to grant MFN/NDMA status to India and opening of the Wagah border for all items is reciprocated by India categorically addressing its non-tariff barriers that have played a significant role in limiting Pakistan’s export potential.