NEW DELHI: India on Friday withdrew the ‘most-favoured nation‘ or to Pakistan after a terror attack which took lives of at least 40 CRPF (Central Reserve Police Force) personnel in Jammu and Kashmir. The country is considering punitive actions like significant hike in customs duties, port curbs and ban on goods imported from Pakistan.
This is one of the deadliest terror attacks in Jammu and Kashmir when a suicide bomber rammed a vehicle carrying over 100 kg of explosives into their bus in .
The move to remove MFN status would enable India to increase customs duty on goods coming from the neighbouring nation.
When was it given to Pakistan:
India granted the MFN status to Pakistan way back in in 1996, but the neighbouring country has not yet reciprocated.
In 2012, Pakistan had committed to giving the MFN status to India but retracted later. Instead of MFN, Pakistan said it was working on granting Non-Discriminatory Market Access (NDMA) status to India but that also was not announced.
The MFN status was accorded under WTO‘s General Agreement on Tariffs and Trade (GATT). Both India and Pakistan are signatories to this; and are members of the World Trade Organisation (WTO), which means they have to treat each other and the other WTO member countries as favoured trading partners in terms of imposing customs duties on goods.
What happens when India removes MFN status:
Removal of this status means India can now enhance customs duties to any level on goods coming from Pakistan, a trade expert said.
Withdrawal of the MFN status would significantly hit Pakistan‘s exports to India, which stood at $488.5 million (around Rs 3,482.3 crore) in 2017-18.
Last year in November, a senior aide to Pakistan‘s Prime Minister Imran Khan had said that the country has “no immediate plans” to grant MFN status to India. Pakistan allows only 137 products to be exported from India through the Wagah border land route.
Total India-Pakistan trade has increased marginally to $2.41 billion in 2017-18 as against $2.27 billion in 2016-17. India imported goods worth $488.5 million in 2017-18 and exported goods worth $1.92 billion in that fiscal.
Under MFN pact, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies.
What India imports and exports:
India mainly exports cotton, dyes, chemicals, plastics, vegetables and iron and steel; while it imports fruits, cement, leather and spices.
The main items which Pakistan exports to India include fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather.
The CCS meet was chaired by Prime Minister Narendra Modi to discuss the security scenario in J&K in the wake of the terror attack.
Pros of MFN:
MFN status is helpful for the developing nations. The countries with the status have broader access to a market for trade goods, reduced cost of export items owing to highly reduced tariffs and trade barriers.
It also reduces the bureaucratic hurdles and varied kinds of other tariffs for imports. It then increases demands for the goods and giving a boost to the economy and export sector.
What commerce ministry said:
The commerce ministry would soon notify to the (WTO) its decision to revoke the MFN status to Pakistan on security grounds, an official said. The ministry would work on a list of goods imported from Pakistan over which India would increase the customs duties.
(With agency inputs)