Pakistan finally granted Most Favoured Nation status to India this week as prime minister Gilani told his cabinet that the country could not "continue to live in isolation" and regional trade will bring visible benefits to the country. The decision to grant MFN status to India essentially means that Pakistan will no longer discriminate against India and treat it the same as it treats over 100 other countries. It does not mean an automatic removal of the barriers that currently exist to trade with India, though it makes removing them easier, say analaysts.
There are economic and political reasons for the move which has come at a time when opposition parties said that Pakistan should not increase trade until the Kashmir dispute is resolved between the two countries. Opposition leader Chaudhry Nisar Ali Khan of the PML-N said that India was against Pakistan and such concessions would hurt Pakistan. Ironically, PML-N leader Mian Nawaz Sharif is one of the biggest supporters of open trade with India. Observers see the PML-N remarks as mere posturing.
Within Gilani's cabinet, opposition to the move came predictably from the defence minister and the industries minister. The defence minister said that enhanced trade with India brought with it security risks while the indsutries minister took the plea that local industry will suffer.The commerce secretary, however, downplayed the idea that opening up to more trade with India would harm domestic producers. "Trade was already taking place illegally. We have just regularised it."
Pakistan's public use of the American phrase for MFN "normal trading relations" caused confusion among some as to what trade status had been granted.
The sectors that are most visible in their opposition to trade with India include the pharmaceutical sector, automobiles, the telecom sector and the cement and sugar lobbies. "These sectors have benefitted from trade barriers with India," says Aziz Memon, a local businessmen.
However, fears of dumping of Indian goods and its effect on local industries are now not a factor, say analysts, given that Pakistan has been a dumping ground for Chinese goods. "The damage to local industry has been done. Only those industries that had distinct advantages were able to survive the Chinese onslaught," says Aziz Memon, a local businessman who trades and exports textiles.
The move by Prime Minister Gilani's government has to do with inflation and food scarcity in Pakistan. "India has always been the first source for agriculture produce when there is a local shortage," says analyst Khurram Husain. The resistence to India also come from lobbies like sugar industries who benefit when there is a shortage at home as the make windfall profits.
But trade will not go up automatically, say government officials. At the same time, the MFN status also remains to finalized. The challenges already seemed to be mounting. Senator Haroon Akhtar Khan, a member of the Senate Commerce Committee, said that he would be pushing his panel to summon the government to Parliament to explain its decision.
The WTO regime does not make it binding to grant a bilateral MFN status to every country, he told reporters.