Daily Times

Despite pressing economic imperatives and strong geo-strategic compulsions, the issue of trade between Pakistan and India has always been overly politicised. The latest example of this is the undue criticism directed at Pakistan’s decision to grant Most Favoured Nation (MFN) status to India. The issue had been under consideration of the government of Pakistan for quite some time as the two countries went ahead with resumed peace talks, which also included talks on trade and economic cooperation. On October 12, 2011, Foreign Minister Hina Rabbani Khar had said in a statement that the decision had been taken in principle to grant MFN status to India. Anticipating an adverse reaction from the pro-jihadi lobby in the country, she had also tried to assure that increasing trade and dialogue with India would not sideline Pakistan’s principled stand on Kashmir. On November 2, 2011, Information Minister Dr Firdous Ashiq Awan announced in a press conference in Islamabad that the federal cabinet had unanimously decided to grant MFN status to India. She also said that the issue was decided in view of national and geo-strategic interests, taking all “stakeholders, including our military and defence institutions, into confidence”. But within a couple of days, confusing signals began to emanate from apparently contradictory statements by the information minister, commerce secretary and even by the prime minister, who on November 5 denied that the cabinet had decided to grant MFN status to India. Instead, he said, the cabinet had unanimously empowered the Ministry of Commerce to negotiate trade with India. “We will give it a go-ahead if the situation is quite favourable and in the national interest; otherwise, proceedings on it would be withheld.” The statement by Prime Minister Gilani has given rise to fears, both inside and outside the country, that the federal government might backtrack on its decision to grant MFN status to India under pressure from the pro-jihadi lobby and certain business sections who feel threatened in an open Pakistan-India trade regime.

Quite understandably, the criticism is led by those elements that had before this opposed the operation of the Muzaffarabad-Srinagar bus service and trans-LoC trade between the two parts of Kashmir. These Kashmir-specific CBMs are not only functioning successfully but there is also a strong public demand for expanding these measures.

There is nothing unusual or special about MFN status for carrying out trade with any country. It only means that a country would treat another country equally with other countries with which it has trade relations. It is a trade practice on non-discriminatory basis agreed to voluntarily by a state under the World Trade Organisation (WTO) rules. Pakistan’s practice in trading with India is as old as the history of the country itself. This was dictated by historical, geographic and economic compulsions. The two countries at the start of their independent lives were bound in a sort of customs union under which Pakistan allowed India to import kerosene oil and petrol through the Karachi port without import duties; and India permitted the export of Pakistani jute from Kolkata (then Calcutta) without paying export duties. Despite the war over Kashmir in 1948, open trade continued between the two countries, only to be disrupted following the 1965 war. Trade was restored after the two countries signed the Simla Agreement in 1972, but it was carried out on the basis of a positive list. India granted MFN status to Pakistan in 1996 and demanded a similar facility on a reciprocal basis.

But successive governments in Pakistan took the position that open trade with India on the basis of the negative list would not be allowed unless the issue of Kashmir was resolved. Later, Pakistan moderated its position offering to consider MFN status and a transit trade facility for India to trade with Afghanistan and the Central Asian Republics provided there was a tangible move on the resolution of the Kashmir dispute.

Whenever the issue came under consideration, the jihadi elements supported by their allies in the media and some political parties, raised a hue and cry against it, asserting that if Pakistan took a decision in favour of MFN status for India, it would lose the leverage with which India could be forced to settle the Kashmir issue. The current spate of criticism levelled against Pakistan’s move to grant MFN status to India smacks of the same old reasoning. For example, Maulana Fazlur Rehman, chief of the JUI-F and Chairman Parliamentary Kashmir Committee, while admitting that increased Pakistan-India trade is in the interest of both countries, has demanded that it (trade) should follow and not precede an initiative by India to resolve the Kashmir dispute. Reservations on trade with India have also been expressed by a group of Pakistani manufacturers and businessmen, particularly the textile and pharmaceutical industry. India has tried to remove these apprehensions and an Indian textile delegation recently visited Pakistan and held talks with the Pakistani businessmen and manufacturers in Lahore on expanding trade and business relations with Pakistan.

Despite persistent ambivalence, the prime minister, the information minister and the commerce secretary have stoutly supported increased trade with India on economic and strategic grounds, implying that Pakistan can no longer drag its feet on the MFN issue. The probability is further enhanced in view of certain positive developments, which will go a long way to improve a friendly atmosphere and remove mistrust between the two countries, like the decision by the Indian government to drop its opposition to the European Union (EU) waiver package for Pakistan, Indian support for Pakistan for a non-permanent seat in the UN Security Council (UNSC), Pakistan’s support for another term for India’s Kamlesh Sharma as Secretary-General of the Commonwealth of Nations, sending back by the Pakistani authorities of an Indian military helicopter that had mistakenly intruded into Pakistani airspace and Pakistan’s acceptance of the Indian offer to sell electricity. The move for MFN status for India forms part of a much wider process of Pakistan’s endeavour to improve relations with its neighbouring countries, especially with our eastern neighbour with whom we share the longest border. It is a visionary move by the democratic government of President Zardari and Prime Minister Gilani, which will benefit the national economy and strengthen peace and promote prosperity in the region.

The writer is a professor of International Relations at Sargodha University. He can be reached at rashid_khan192@yahoo.com