Ministry of Textile Industry (MoTI), has, reportedly joined the club of public and private sector entities expressing concern over the Commerce Ministry's 'undue haste' in normalisation of trade ties with India, sources close to Textile Minister, Makhdoom Shahab-ud-Din told Business Recorder.
"Sudden change in the dynamics of India-Pakistan trade relation, ie, from 80% ban on imports to almost zero rated imports on more than 80% of items within a timeframe of a few months appears to be an extreme measure," the sources added. Ministry Foreign Affairs, Establishment, Ministry of Industries and private sector have already conveyed their disagreement over the pace of 'trade reconciliation' with neighbouring India, whose Minister for Commerce and Industry, Anand Sharma is reaching Pakistan on a five-day official visit from February 13-17.
MoTI has conveyed its concerns to the hosting Ministry just five days before the Indian Minister is arriving Pakistan on the invitation of Senior Commerce Minister, Makhdoom Amin Fahim. The Commerce Minister Amin Fahim and Secretary Commerce Zafar Mahmood are busy in Karachi finalising arrangements to welcome the guests at the border.
"We have written a very strongly worded letter to the Commerce Ministry for what is tailored in the name of normalisation of trade ties," the sources added. A couple of months ago, Federal Cabinet had given the mandate to the Commerce Ministry for complete normalisation of trade ties with India. The Ministry has for now opted to replace positive list by a negative list (appendix-G) Import Policy Order.
"Yes, we have written a letter to the Commerce Ministry and expressed our views on their pace of the proposed normalisation of trade ties with India," said an official of Textile Ministry on condition of anonymity. The official stated that the negative list earlier received from the Ministry of Commerce was discussed with the Textile Associations and it was observed that different Associations have divergent viewpoints on the proposed tariff lines.
As is known, textile value chain consists of ten industrial sub-sectors which are highly integrated and interdependent. The final product of one sub sector is the basic raw material for the other sub-sector industry. Similarly, the interests of a commercial exporter, importer, manufacturer and exporter, vendor industry and composite units differ immensely. At this point of time, appendix G only allows import of yarn and very few technical fabric items limited to 102 textile tariff lines.
Secretary Ministry of Textile Industry, Shahid Rashid who recently heard the viewpoints of textile industry on the Commerce Ministry's trade normalisation move is also unhappy over the pace of developments. India claims that Pakistan has been granted MFN status since 1996 and it has no discriminatory technical and/or non-tariff barriers for Pakistan. Also, more than 80 per cent of our exports are getting preferential tariff rates due to SAFTA.
We have still not been able to export more than US $272 million to India whereas India has exported around US $1,500 million worth of commodities while only being allowed 1,900 tariff lines. In case of textiles, which is our main export sector, Pakistan only exported US $45 million worth of textile products to India whereas India exported US $566 million worth of textiles to Pakistan in calendar year 2010 in the presence of Appendix G.
" Looking at the excitement of getting zero tariff in nearly 75 lines in EU out of which 20 have quotas, we must consider the vast opportunity being provided to Indian industry by removing the Appendix G while having SAFTA on ground with a small sensitive list," the sources quoted Secretary Textile Industry as saying in his letter to Commerce Ministry.
According to him India has still yet to share the SAFTA reduced sensitive for NLDCs. Indian subsidy programmes are highly budgeted. At present, they have non-advalorem duties on major export items, eg, Indian Rs 350 on cotton shirts. India also has huge state-owned textile mills and has controlled cotton trade. Only two years back, Indian Government procured around 9 million bales of cotton. Similarly, India has various technical barriers to trade for protection of their industry as a whole and has repeatedly used anti-dumping measures.
On the other hand, Pakistan's industry is facing acute shortage of electricity and gas with appreciating input costs. The quantum of non-performing loans is increasing while exports have shown a declining trend. Government of Pakistan also has limited experience in handling defence trade mechanism and has a very small set-up to implement such measures. A highly skilled well budgeted and resourced organisation along with organised domestic sector may take years to develop and till such time there would be no mechanism available for the domestic industry.
The proposal of mutual recognition arrangements will help Pakistani exporters to understand the non-tariff barriers of India but will not in any case erode technical barriers. It may take our industry some time to recognise, learn and educate itself on standards. Further, in absence of any Tariff Policy and textiles standards we would not be on a level playing field with the Indian industry.
MoTI is also of the view that opening of land route will affect inter-Pakistan trade dynamics as well. The road map for normalisation of trade should include a separate NLDC sensitive list in SAFTA containing all tariff lines which are not currently part of Appendix G. The list may be reduced in a phased manner in five years which may then equal our present sensitive list for SAFTA. The other option can be to have a PTA with India while abolishing Appendix G. This will give Pakistan an option to give limited preference on tariff rates thus avoiding full impact of SAFTA 0% to 5% tariff.