Ministry of Industries (MoI) has finally flexed its muscles to fight with Ministry of Commerce over the controversial negative list for India and its phasing out plan. "We have forwarded our reservations based on the complaints of different industrial sectors over the negative list of items for trade with India," said an official statement issued by the MoI here on Thursday.
MoI has opposed Commerce Ministry at a time when Commerce Ministry has re-initiated its efforts to evolve consensus amongst the stakeholders. Commerce Ministry officials accuses three sectors, ie auto sector, pharmaceutical sector and textile sector of manipulating the some ministries including the Ministry of Interior against the proposed negative list for India and the pace of implementation.
MoI said that the industries in Pakistan want to include more items in the negative list of tradable items for a certain period so that they can take necessary measures to upgrade their industry to compete with the Indian products. "MoI has recommended that negative list should be phased out in five years which implies that India should wait for MFN for five years more," commented one of the officials in the same Ministry. According to official statement, MoI is fully cognisant of the multiple benefits implicit in liberalisation of trade.
However, in order for such measures to succeed from the point of view of promoting the growth of Pakistan, complimentary measure in terms of assured supply of energy and mark up at par with regional neighbours is a sine qua non. The industry needs a level playing field and consistency in all policies to gain multiplier gains from trade openings.
"It is felt by the industry that while this liberalisation is welcome yet will be only beneficial for both sides if undertaken in a structured manner providing space to upcoming industry most of all in the back drop of unprecedented energy crunch and other industry hostile environment like two floods in as many years, law and order and one of the highest interest rates in the region.
The rising unemployment rate also cannot be ignored," the Ministry added. The Ministry of Industries has used the following parameters while preparing the negative list: (i) industrial sector remarks/input; (ii).production data analysis; (iii) Pakistan''s imports from the world; (iv) Pakistan''s exports to world;(v) Indian exports to world; (vi) TLs already in Positive List (PL) but requested by industry to be placed in negative list have not been analysed as per principle decision of MoC; (vii) TLs that are included in Safta sensitive list have been recommended for the negative list for the very sensitive/emerging sectors; and (viii) items having 5 percent tariff have generally not been included as the industry has requested it be allowed raw material to be imported from India to cut down input costs
The proposed negative list is the bare minimum and absolutely necessary to mitigate to some extent the effects of a sudden transition that doubtless entails huge economic implications for the industry. The Safta impact should also be factored in to comprehend the actual economic impact. The Ministry recommends the following structured Phase-out Plan:
i) The negative list should be phased out over a period of 5 years having a staggered approach
ii) The phasing out should start after a period of 03 years.
iii) The phasing out should be in consonance with the sensitivity levels of the TLs in order of least to highly sensitive. A year wise percentage reduction plan may be followed starting with 25 percent in the 3rd and 4th year each, and the remaining 50 percent in the 5th year.
iv) The phasing out should be linked to proportionate measures by India towards reduction of NTBs etc. In case India fails to remove the trade barriers as committed for a given duration, phasing out should not be allowed for that year/period.
v) Phasing out at each level will be carried out after in-depth consultation with the Ministry of Industries and other stakeholders.
vi)The phasing out in each year is not to be automatically allowed but should be weighed against similar commensurate measures by India.