Pakistan has finalised a negative list of 636 items (tariff lines) with India to be phased out in three installments by December 2012, which implies that for the time being Most Favoured Nation (MFN) status to India has been withheld, official sources told Business Recorder. "Commerce Ministry will progressively phase out the negative list in three installments on quarterly basis after approval of the cabinet with quarters ending June 30, September 30 and December 31, 2012. This exercise will be conducted with IBA and all other stakeholders," the sources added.
The sources said Commerce Ministry was also being allowed in principle to make appropriate changes in trade defence laws in consultation with the stakeholders to allay apprehensions of the industrial sector for using these laws more effectively against any unfair practices or injury to local industry because of Indian imports.
According to sources, Federal Cabinet will approve the negative list in its meeting to be held on Tuesday (today) with Prime Minister Syed Yousaf Raza Gilani in the chair.
Official documents, exclusively made available to this correspondent, reveal that the World Trade Organisation (WTO) trading arrangement was based on the principle of MFN, which implied non-discriminatory treatment among the member countries in terms of tariff as well as the number of tariff lines traded between the countries. Pakistan being the signatory to WTO is obliged to observe this principle. However, the trading arrangement with India is still discriminatory.
Although the tariff applied on imports from India is the same as for any other WTO member state but Pakistan has India specific goods restriction in its Import Policy Order 2010-11 (Positive List of items) thereby allowing import of only 1,963 tariff lines from India.
In a briefing given by the Ministry of Commerce, the Cabinet in its meeting held on November 2, 2011 "endorsed the efforts of the Ministry of Commerce for full normalisation of trade relations with India and directed the Ministry to complete the process of trade normalisation for grant of Most Favoured Nation (MFN) status to India".
During the sixth round of Commerce Secretary level talks held from November 14-16, 2011 at New Delhi, it was agreed between India and Pakistan that a move to full normalisation of trade relations will be sequenced. First, the Negative List would be announced by February, 2012 and then it would be phased-out after approval by the Cabinet.
The process to formulate negative list was initiated in April 2011. An extensive consultation process was carried out by the Ministry of Commerce both with public and private sectors of Pakistan.
Commerce Ministry claims that it requested all the stakeholders including industry, chambers of commerce and trade associations of Pakistan to recommend items with justification to be included in the negative list.
Secretary Commerce held meetings with the chambers of commerce and trade associations across the country to get their input. Sector specific meetings were organised to provide opportunity to all the stakeholders to express their views and concerns.
Although the cutoff date for recommending items for the negative list was October 15, 2011, the stakeholders kept on sending items for inclusion in the negative list till January 26, 2012 culminating in 1,335 tariff lines in total.
The list was internally examined and analyzed by the Ministry of Commerce based on the following criteria: (i) Does India export the product? If yes, then what is the volume of global export of this product; (ii) Is Pakistan manufacturing the product ;(iii) Does Pakistan also export the product;(iv) Does Pakistan import the product, if yes what is the volume of global import of the product;(v) Is the product imported duty free or through concessionary arrangements under FTAs by Pakistan; (vi) Is the product included in the Appendix G to the Import Policy Order, 2010-11; and (vii) Comparative MFN tariff of India and Pakistan for the product.
For the sake of academic neutrality and transparency, Institute of Business Administration (IBA), Karachi was assigned the task to examine the wish list/tariff lines recommended by the stakeholders and propose a final negative list of items for India after critical examination of all tariff lines. IBA examined the wish list given by the stakeholders, held extensive discussions with them and did not recommend the inclusion of 699 tariff lines at eight-digit on the basis of following justification: - Tariff lines already allowed in the Positive List; - Tariff lines not exported by India globally; - Tariff lines not imported by Pakistan; - Tariff lines in which Pakistan is more competitive than India; - Tariff lines having applied tariff for India higher by five percent and more, as compared to tariff for other regional countries; - Tariff lines having Pakistan's global export more than 25 million dollars.
This led IBA to propose a negative list of 636 tariff lines at eight-digit.
The sectors and respective number of items in the proposed negative list are as follows: (i) food and agriculture 16; (ii) minerals 3; (iii) chemical 4; (iv) pharmaceutical 32; (v) plastics 74; (vi) rubber 24; (vii) paper & wood 55; (viii) textile & clothing 77; (ix) ceramics 15; (x) iron & steel 25 and; (xi) auto sectors 311.
Commerce Ministry maintains that for normalisation of trade, the proposed negative list must ultimately be phased out. The justification for this proposal is as follows: (i) Pakistan signed the Agreement on South Asian Free Trade Area under Saarc in 2004 which became operational in 2006. Under this arrangement all member states have allowed concessions except those items included in their respective sensitive lists. Gradual reduction of these lists is underway and lists would also be ultimately phased out by all member countries. India specific negative list would be a violation of article 17 of the Safta agreement, which clearly restricts countries from adopting any measure that diminishes or nullifies any concession already agreed; (ii) under the WTO law, Pakistan is obligated to adopt a non-discriminatory approach towards all WTO members. There is no legal provision in WTO laws that allow a member country to use any such measure. Therefore, India specific Negative List is a violation of the WTO obligations and WTO trading arrangement provides for trade defence measures in case of unfair trade practices or any threat to local industry.
Fortunately Pakistan has all these trade defence laws in place i.e. National Tariff Commission Act, 1990; Antidumping Duties Ordinance, 2000; Countervailing Duties Ordinance, 2001; and Safeguard Measures Ordinance, 2002 for provision of protection to the domestic industry in case of injury due to dumping, subsidies and surge in imports of certain products. The Ministry of Commerce in coordination with NTC is already conducting seminars and workshops to specifically educate stakeholders on the trade defence measures available. As Pakistan has the WTO compliant legal instruments available to counter possible threat from Indian imports, there is no justification for adopting a measure (India specific negative list) which makes us non compliant to the Global trading arrangements.
"We have recommended to the Cabinet that the Commerce Ministry may be allowed to replace the positive list in appendix G of the Import Policy Order 2010-11 by the negative list for imports from India comprising 636 tariff lines at eight-digits," said an official of Commerce Ministry on condition of anonymity.
MUSHTAQ GHUMMAN
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