It's On: MFN status for India by December next year

NEW DELHI: Taking the first step towards granting the most favoured nation (MFN) status to India, Pakistan has agreed to allow import of all items, barring a few hundred on the negative list that will be ready by February 2012. This list, too, will be phased out by the end of year, resulting in grant of MFN status. However, the joint statement issued at the end of two-day trade secretary-level talks did not say so in as many words.

"The move to full normalisation of trade relations shall be sequenced. In the first stage, Pakistan will transition from the current positive list (PL) to a negative list," the joint statement issued on Tuesday said.

The negative list will be finalised and ratified by February 2012. "Thereafter, all items other than those on the negative list shall be freely exportable from India to Pakistan," the statement said.

MFN status is part of the normalisation process that is to happen gradually, Pakistan commerce secretary Zafar Mahmood said.

"It is not a degree or award that I will award to Dr Khullar," Mahmood said, referring to his Indian counterpart Rahul Khullar who got the MFN ball rolling in April this year.

Grant of MFN status would require Pakistan to put India on a par with other countries and allow import of all items, instead of just 1,933 items currently in the positive list. India had given MFN status to Pakistan in 1996.

The Pakistan Cabinet cleared grant of MFN status for establishing a non-discriminatory trade regime with India earlier this month, but the foreign office clarified the next day that clearance was for normalisation of bilateral trade relations that will 'culminate' in MFN.

It led to confusion on whether Pakistan had back-tracked on its resolution and had no intention of going ahead with the Cabinet decision.

Mahmood said the negative list would have a few hundred items. This means that India would be allowed to export more than 7,000 items next year instead of less than 2,000 items at present.

"We have put in new timelines for everything and would move according to it," Khullar said.

Both sides have also agreed to move towards, enhancing the preferential trading arrangements under the Safta process by extending tariff concessions on products of commercial interest.

Both India and Pakistan are signatories of Safta, but have not given significant concessions to each other under it.

On the issue of allowing trade of petroleum products, Khullar said a working group had been formed which would soon meet and look at items that hold potential.

Khullar said an agreement on liberalising business visa regime may be sealed during the home secretary talks in December. Both sides want multiple-entry and multiple-point visas to be given to business visitors.

Allowing investments from Pakistan, which is a tricky issue as the country features in the Fema negative list of countries, is also something that India is looking into. The commerce department is holding inter-ministerial discussions on the issue, Khullar said.

India can export a host of items, including petroleum products, textile machinery, farm products, chemicals, pharmaceuticals and a whole range of consumer goods once it gets MFN status.