The government of Pakistan's recent decision to grant Most Favoured Nation (MFN) status to India has been warmly welcomed by the representatives of trade and industry as they strongly believe that this positive development, which was being demanded by the business communities of both countries, will not only help in enhancing the low trade volume between the two countries but would also open up new avenues for various sectors of Pakistan's economy, particularly the textile sector.
Trade between the two countries remains largely restricted due to the fact that there have been high non-tariff barriers which have restricted import from Pakistan. However, the latest composite dialogue between the two countries seems to provide a glimmer of hope as India gave assurances that it would effectively deal with Non-tariff Barriers being faced by Pakistani businessmen which include liberalisation of the visa regime, logistic constraints, simplifying trade procedures, removal of quotas and specific duties etc. While talking of Non-tariff barriers, the point of view of India is that these are not just for Pakistan, however if they are a tumbling block in having the smooth flow of trade between the two countries we can have it resolved by joint meetings.
A World Bank report indicated that there are three options for Pakistan which are, gradually expanding the positive list; replacing the positive list with a short negative list, or completely eliminating the positive list to India. As far as India is concerned, it needs to take measures to remove Indian non-tariff barriers that at present are hindering Pakistani traders from exploiting the Indian market. It also needs to ensure anti-smuggling measures whereby Indian products are smuggled into the Pakistani market. Converting informal trade to formal trade therefore remains to be the key in this regard.
Another positive outcome of the recent spell of meetings between the Commerce Ministers of both countries was India's decision to withdraw its objections to the EU unilateral trade concession offered to Pakistan last year in the wake of the devastating floods. The EU offered Pakistan specific tariff concessions in the form of autonomous trade preferences under which 75 Pakistani products, mainly textile related products, would benefit from duty free access to European markets.
In order to take full benefit from the aforementioned developments, the Pakistani business community, particularly the textile sector, must get ready for enhanced exports to India and the European Union. In this regard, experts strongly believe that the textile sector must focus on enhancing their production, improving quality of goods, and value addition while the government should facilitate them by ensuring availability of adequate infrastructure. We need to effectively develop modern infrastructure and manage a state-of-the-art industrial zones in the textile sector, thereby greatly enhancing Pakistan's earning potential, employment opportunities and skill development at all levels. This will provide Pakistani businessmen opportunities to effectively optimise their growth potential in this major industrial sector of Pakistan.
The total trade between the neighbouring countries of India and Pakistan has a potential to increase to a phenomenal $42 billion from the current levels of $2.1 billion if certain roadblocks are sincerely addressed. Besides granting MFN status to each other, both countries must also focus on improving the transport linkages that remain relatively poor and make trade costly. These include railway and road connections, which remain to be inadequate along with sea shipment that is mainly constrained by bureaucratic inertia, red tape and political opposition. Furthermore visa constraints and regulations on modes of payments and cumbersome customs procedures further limit the scope of trade. Pakistan accounts for less than 0.5 per cent of India's trade while India accounts for a little over 1 per cent of Pakistan's total trade. Relationship between Pakistan and India has remained fragile over the years however it needs to be understood that there is great potential for trade between the neighbouring states.
The trade growth between India and Pakistan will also add growth to the manufacturing sector in both countries, and should not be seen as a limiting factor and as a threat by the manufacturing sectors in India and Pakistan. Imagine the possibilities with a market of almost 1.4 billion people. Trade should be opened up and the time is right to seize this opportunity for the prosperity and well-being of almost one-sixth of the worlds population.
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