Given the paltry trade, revoking Pakistan’s MFN tag will only be symbolic

The government is building a case for scrapping the most-favoured nation (MFN) status granted to Pakistan, though it doesn’t mean much in trading terms even if the country doesn’t take action to curb cross-border terrorism.
Given the paltry bilateral trade, revoking the MFN tag will only be a symbolic gesture.(Raj K Raj/HT File Photo)
Given the paltry bilateral trade, revoking the MFN tag will only be a symbolic gesture.(Raj K Raj/HT File Photo)
Updated on Sep 28, 2016 07:33 AM IST
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Hindustan Times | ByJayanth Jacob, New Delhi

The government is building a case for scrapping the most-favoured nation (MFN) status granted to Pakistan, though it doesn’t mean much in trading terms even if the country doesn’t take action to curb cross-border terrorism.

The India-Pakistan bilateral trade came up to a paltry $2.6 billion in 2015-16 — tilted largely in India’s favour.

Indian exports to Pakistan accounted for $2.2 billion during this period. Given that India has an overall goods trade of $643.3 billion, business relations with its neighbour is negligible at best.

So, any decision to revoke the MFN status will be nothing more than a symbolic – and political – gesture. India had accorded the MFN status to Pakistan in 1996. “No decision has been taken on the MFN status. But don’t forget that it was a friendly gesture by India to its neighbour, something that has not been reciprocated in all these years,” said an Indian official.

Read | PM Modi pulls out of Saarc meet in Islamabad citing cross-border terror

The MFN status was also given in accordance with India’s commitments as a member of the World Trade Organisation (WTO). The status, in principle, means WTO members should “treat all the others in the grouping equally as most-favoured trading partners”.

“Scrapping the status is no big deal, considering that the trade volume is so low. And Pakistan hasn’t reciprocated India’s gesture so far,” said former career diplomat MK Bhadrakumar.

However, it remains to be seen whether India will go to the extent of invoking a security exception under the General Agreement on Trade and Tariff (GATT) to deny Pakistan the MFN status. “Member states are empowered to invoke the relevant section to protect security interests in rare situations. Continual cross-border terrorism is a serious security situation,” a source pointed out.

“Nothing in this agreement shall be construed to prevent any contracting party from taking action it considers necessary for the protection of its essential security interests… Such measures can be taken under the UN charter for maintenance of peace and security,” says Article 21(b)(iii) of GATT.

Read | India opts for utilitarian diplomacy over military action against Pakistan

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