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MFN status to Pakistan remains fruitless for agri sector: USAID

The News International, Pakistan

MFN status to Pakistan remains fruitless for agri sector: USAID

By Munawar Hasan

16 January 2013

LAHORE: The Most Favoured Nation status to Pakistan could not prove instrumental in increasing agriculture exports to India, observed a report sponsored by the United States Agency for International Development (USAID).

Despite liberalisation of trade between India and Pakistan and granting of MFN status to Pakistan, agriculture-based exports from the latter face exorbitantly high tariff walls in India.

According to the study titled “Pakistan-India Trade Relations, A Sectoral Analysis”, despite the recent reduction by India of its South Asian Free Trade Area (Safta) sensitive list, revised last in September 2012, some of Pakistan’s major exports including rice, cotton yarn, gent’s shirts and bed and table linen continue to be in India’s sensitive list. It is estimated that 44 percent of major products that Pakistan exports are now outside the sensitive list, while 58 percent continue to remain in the list. Clearly, Pakistan must negotiate for further liberalisation in key export items.

As per contents of the report, Pakistan’s exports to India are severely constrained by high tariffs on agricultural products by India. The neighbouring country has a customs duty of 100 percent on wheat, 70 to 80 percent on rice and 30 percent on other commodities. In addition, it is stated, there are state sales tax and cesses.

In the bilateral trade negotiations, Pakistan must emphasise to India the need to open up its agricultural commodity markets. What matters is not the number of items in India’s Safta sensitive list but most important thing is which items.

Against almost closed door for Pakistan’s agri products in India, there has been almost complete liberalisation of trade by Pakistan for Indian products. Items like onions, leguminous vegetables, rape or colza seeds and seeds are totally exempted from customs duty. On other products, the maximum rate of duty is currently 25 percent.

As far as Indian exports to Pakistan are concerned, 18 products at the HS 6 digit level have been included in the estimation, excluding products in which it is assessed that scope for trade diversion does not exist or which Pakistan does not import currently. Within these products, there are products, which were in the original positive list, some of which have been placed outside the Safta sensitive list and importing from India will become more attractive after the reduction of duties under the Safta regime.

The other types of products are those which did not feature in the positive list and will become importable from India after MFN status to India. Some of these products will also receive preferential treatment under Safta. The overall import of the first type of products covers almost 60 percent of Pakistan’s existing imports from India.

Keeping in view latest trade data, for example, out of the 11 major agricultural items imported by Pakistan, India will be given a tariff reduction under Safta in seven items. But, such reflection is not visible in Indian trade mechanism in place for Pakistani products.

The agricultural trade policy of India appears to be primarily geared to protecting the interests of farmers. Not only are import tariffs very high but there is a very large subsidy on agricultural inputs, noted the assessment.