It is official now that the government of Pakistan has postponed
granting of "Non-Discriminatory Market Access (NDMA)" to India, at
least, till new Union government takes over in Delhi after next month’s
general elections. “Pakistan does not want to be seen as favouring the
Congress Party in general elections (which is perceived to be losing to
BJP) by granting NDMA at this juncture,” is the reason quoted by
Another argument is that even if Pakistan grants this status right
now, Manmohan Singh government would not be in a position to reciprocate
any favour for Pakistan as once the election schedule is announced the
sitting government would have to go to Election Commission of India for
any major policy decision. So, it is better to wait for next month’s
elections in India.
NDMA is a politically palatable name for "Most-Favoured Nation" (MFN)
status. In WTO terminology, MFN is nothing but treating all trade
partners equally without any discrimination. Both India and Pakistan are
among the founder members of WTO. India granted MFN status to Pakistan
in 1995 when the GATT was reincarnated into WTO.
Pakistan used the clause of “settling bilateral disputes” and, thus,
refrained from reciprocating MFN to India. India never challenged this
decision at the WTO but kept on putting diplomatic pressures on Pakistan
for an MFN.
Till 2012, Pakistan traded with India on a "positive list" approach,
i.e., trading in restricted items; only the commodities mentioned on
positive list were allowed to trade. In 2012, Pakistan agreed to trade
with India on a negative list basis. From a narrow base of positive
list, Pakistan decided to apply a broader negative list approach in
2012. As against earlier approach of allowing trade in just about 1,800
tariff lines (under positive list), this base has increased to all
product lines except about 1,200 (part of negative list).
In other words, earlier just over 20 per cent tariff lines (products)
were allowed for trade between India and Pakistan. Now, about 15 per
cent are barred from being traded — a new opportunity of trade
potentiality in almost 65 per cent tariff lines. This, in fact, is a de
facto MFN status granted by the PPP government to India. The Nawaz
government also endorsed the policy of its predecessors on trade
normalisation with India. However, to avoid any backlash, it decided to
offer NDMA instead of MFN to India.
Pakistan complains about non-tariff barriers by India. It also
complains about high tariffs that India applies on its textile and
garments. The number of trucks queuing across Wagha-Attari border is a
clear manifestation of the need of round-the-clock crossing arrangement
at border. Granting of NDMA status to India was to be reciprocated by
reduction in tariffs on textile and garments; by round-the-clock
operations at Wagha; and a reduction in Indian negative list.
Earlier this year, commerce minister of Pakistan had announced in New
Delhi that Pakistan was willing to grant NDMA to India. The decision
was to be announced in Lahore during the visit of Indian commerce
minister. However, millions of consumers in both countries got
disappointed when Pakistan deferred its decision to announce NDMA and
Indian commerce minister decided not to visit Pakistan.
Granting of NDMA to India was to be an agenda item during the cabinet
meeting in Islamabad last Friday, but the meeting got “postponed”. Now
the Prime Minister of Pakistan has publicly announced that a consensus
on NDMA could not be arrived among domestic stakeholders.
On the other hand, Narendra Modi (who is being tipped as the next
prime minister by many analysts) has publicly accused Pakistan of
sponsoring terrorism in Indian-administrated Kashmir in one of his
In the context of South Asia, much debate has taken place whether
people-to-people contacts lead to more trade or vice versa. We have also
debated intensively whether trade normalisation will lead to normal
bilateral relation; or one should wait for relations to be normal to
start bilateral trade.
There are enough examples showing how treaties of sharing river
waters, cross-border infrastructure projects and nuclear rapprochement
have partially bridged divides between hitherto not-so-friendly or even
belligerent nations. The Indus Water Treaty of 1960 has ironically
survived more than 54 years of conflict over Kashmir.
The war between Cambodia and Vietnam has not prevented them from
reaping the fruits of a 1500-kilometre long cross-border highway
project. Similarly, the Middle East Regional Cooperation projects have
encouraged trade and cooperation, and thereby peace and prosperity, in
The Argentina-Brazilian nuclear rapprochement is an example worth
emulating. They initiated bilateral efforts towards nuclear
rapprochement in early 1980s. During 1985-88, they pursued the issue
bilaterally and signed an agreement that was made legally binding in
1989. Subsequently, they became members of the regional and global
non-proliferation regimes by taking the issue to the international fora.
This agreement encouraged the two countries to seek cooperation in the
economic sphere as well.
Having realised that closer and deeper economic relations facilitated
by free trade would further strengthen understanding and mutual
cooperation, the two countries successfully persuaded Paraguay and
Uruguay to form the South American Common Market (MERCOSUR) in 1991.
Later, they were joined by Chile in 1996 and Bolivia in 1997. The common
market was formed with an objective to enhance trade and investment
among these countries.
In a similar way, trade normalisation between Pakistan and India not
only offers an opportunity to promote peace and prosperity, but also an
opportunity to reap the benefits of South Asia Free Trade Agreement for
all of South Asian nations.
It is a pity that the potential for trade between India and Pakistan
is not being tapped fully, despite the fact that entrepreneurship has
flourished on both sides of the border. The history is about to repeat
itself. The then Nawaz-Vajpayee governments took some important
decisions to normalise relations in 90s. Let us wait for few more months
and see how things unfold after general elections in India.
Some surprises may be there if BJP forms the government in India and
we have two "right to the center" parties across the border talking
about mending relations, without the fear of bashing from their
respective "progressive" opposition parties. Till then, the delay in
trade normalisation is at the cost of welfare of consumers.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.