During January 16-17, 2014 visit to New Delhi to attend the SAARC Business Conclave, Pakistan State Minister for Commerce and Textiles Khurram Dastagir Khan will meet his Indian counterpart Anand Sharma to discuss issues related to the Most Favoured Nation status, non-tariff barriers, operationalising the three agreements signed between the two countries in 2012 and trade across the Wagah border. In an interview to The Hindu on January 15, 2014, Mr. Khan said while the grant of MFN status may take some time, Pakistan wants more market access in India. Excerpts from the interview:
The big question is the MFN status. What are the main areas which need clarity and which you will be talking about?
There is a sense that India, which gave MFN to Pakistan in 1996, did not give it market access. These two go together unfortunately. Pakistan on the other hand might not have given MFN to India but has given substantial market access and this has now been reflected in our trade figures. The trade balance has, in fact, increased manifold in favour of India. Pakistan’s exports last year were $327.496 million while Pakistan’s imports from India totalled $1809.867.
MFN is a designation and a technical term WTO and India can ask for, but we have been talking to the Indian government to say let’s call it non-discriminatory access (NDA), or as some call it, non-discriminatory market access. NDA is good enough, it’s a more useful and workable term.
In Pakistan there are certain sectors that have reservations on trading with India. Agriculture is one of them. The others are pharmaceutical, auto parts and automobiles, the synthetic fibre-based clothing or fabric. We have to find some way ultimately — the NDA is something we are going towards and I don’t think it will take long, the Nawaz Sharif government is keen and the Indian government is also talking about it.
The other issue, of course, is that trade does not happen in a vacuum. It is also affected by the political differences which the two countries are very adept at raising again and again in so many different contexts. In order for trade to be established on a firm footing, an equally crucial part, which people tend to forget, is investment. Trade and investment must flow across the borders and for investment to take place there must be a certain comfort level. That can only come from the peace and the political side.
MFN is also connected with that — how the Pakistani nation perceives India as conducting itself and similarly, and how the Indian people perceive the Pakistani government as conducting itself. MFN, as I said, maybe a red herring now — it distracts us from what is the real issue which is non discriminatory access and as well as a level playing field for both countries.
What are issues that need to be addressed to create a level playing field?
As we see it, the very strict visa regime from India is the biggest non-tariff barrier. This impaired facility of businessmen from both sides who are unable to travel to the other country is the biggest non-tariff barrier. It’s true for all people. If these people can travel they can make economic decisions that need to be made, otherwise it makes it difficult for a normal trading relationship to resume. The fact that we don’t have a banking relationship, again that is troublesome for us and that’s also an impediment to trade. We hope to make some progress on that when I go to India.
In agriculture there is this whole complex of phytosanitary issues which we need to deal with. There were three agreements in 2012 specifically aimed at reducing non-tariff barriers but both countries are yet to implement them. First of all we need to evolve a recognition of standards that we hope would happen which hasn’t yet. The agreements are not moving ahead. The other was customs facilitation and the third was visa — on all three agreements we are hoping [to] start implementation and we hope the Indian government will reciprocate.
Is the ball in your court for MFN? And when do you hope to grant it? Will it be after the new government next year?
No, the ball is in both courts when it comes to abolition of the negative list on Pakistan side, the reduction of non-tariff barriers on India’s side. Both sides have to agree on visas, and banking relationship. Both countries have to agree on phytosanitary issues and agricultural agreements have to be decided by both sides.
The future is in the hands of the people of India. We will deal with whoever [comes to power after the elections]. There is enough momentum on trading relationship and also on peace. We are serious in having a peaceful relationship with all [our] neighbours and a robust economic relationship and peaceful South Asian region. We hope trade itself will be a potent confidence building measure and if it improves the economic plight of our people, brings growth, new jobs that’s a mutual gain.
Giving MFN depends on what kind of expression of goodwill the new [Indian] Prime Minister [after the elections] will make towards Pakistan — if there is great progress on non-tariff barriers, visas etc. I think there are certain steps that we need to take before we reach the final stage of achieving a normal trade relationship.
Ultimately MFN has to be given — in the India-Pakistan relationship, everything is so fraught with meaning and hobbled by history that every step becomes a big issue. Real steps require not only courage, a certain vision and the will to implement government policy down to the level of the individual official at the port -- these are things that are in our way and we hope to get them out of our way.
We want to make progress on [trading at] Wagah and that is the next milestone in our roadmap. Once Wagah moves forward a little bit, other things will follow. We also need to express to the Indian government, more than MFN the issue is substantial market access. There is no formal legal hurdle but there are other things — there is the list of non-tariff barriers which restrict market access — not ensuring free flow of goods or people. Our contention is that Indian goods have more access to Pakistan.
What about trade restrictions at Wagah border and is there some move to make things easier for goods to go across to India?
This is going to be a major agenda in New Delhi. There is a long line of trucks on both sides of the border and how to process them and send things on their way as they are supposed to be done. We just need an agreement, we will talk about this. We need to work through the day, have double or triple shifts — we are also going to talk about containerising the cargo. I believe both countries have the technological capabilities to scan containers — now it is physically examined and takes time. Scanning would move things quicker — Wagah facilitation is an issue and we hope to have closure.
What is the agreement India and Pakistan are planning to sign on trade?
The previous roadmap and timelines have expired and we need to put in some fresh timelines. There was a reciprocal arrangement worked out that Pakistan will take a certain steps and India would reciprocate and so on, that this is the timeline we need to revise. The issue was facilitation on Wagah. If India reduces its South Asian Free Trade Area (SAFTA) sensitive list by 30 per cent, then Pakistan eventually abolishes its negative list, then India in reciprocation is supposed to bring down its SAFTA list to 100 items. Once India has reduced it, then Pakistan has to reduce its SAFTA sensitive list. When that is done we can say we have achieved a normal trading relationship. This is not the case right now — the whole set up of non-tariff barriers that [exist] now and the Indian regulations make it difficult. Customs officials in India have a very wide leeway of indicating the ports from where imports will come [into the country], on phytosanitary issues and how they treat Pakistani goods.
Have phytosanitary issues been discussed in agriculture? And what about subsidies?
Agriculture and subsidies is a can of worms that we are not touching. It is an international WTO issue which is probably best left there but in agriculture the subsidy issue is what the stakeholders are raising in Pakistan and they keep saying after the import of Indian agriculture products the Pakistani produce will become expensive because India subsidises agriculture and we don’t. The subsidy indirectly comes up in our deliberations when we declare agriculture to be a sensitive area but we are not addressing it now.
Agreements have been signed on industrial products — a mutual recognition on standards has been signed on industrial products. But on the phytosanitary measures there is no agreement. Having a reciprocal arrangement on agriculture is something beneficial for mutual trade.
Do you think the environment is right for trade and business between India and Pakistan? Are there any issues the business community would like to take up with the government in India?
The issue is the goodwill of the Indian government which we appreciate and the desire and willingness for peace has to percolate down to that customs official — that hasn’t happened. When we talk of non tariff barriers, most Indian officials simply come back and say this is not something that is Pakistan-specific. This willingness and goodwill of the Indian government has to reach down to the officials and both governments have a hard time dealing with its babudom. Unless that happens things won’t change.
Though we have agreements and we have two governments willing to talk trade and peace but that has to reach the actual borders.
What are the main impediments to Pakistani exports to India?
We are exporting small quantities — the main impediment is that the agreements are not implemented, there are cases when cement shipments have been delayed inordinately at Indian borders which destroys the cement, it’s lying there for weeks and weeks. On paper there is no real restriction on export of cement to India, but there are delays despite the agreements and understanding.
What about Pakistan’s negative list?
The withdrawal of the negative list would signal MFN or NDA to India — that is the key issue. The negative list we hope will be withdrawn I hope in the not too distant future and once we have some comfort level on the sensitive areas, the operationalising of these three agreements, if the visas start to loosen up and the banking sectors are better connected, then Pakistan will be in a position to assume a normal trading relationship.
Is there any progress in the banking sector?
The State Bank of Pakistan (SBP) has just written a letter to the Reserve Bank of India. The original understanding reached in 2011 was to allow two banks each to [open branches in the other country] but when I was accompanying the Punjab chief minister and we met the Indian commerce minister recently, we were told that the Indian government has since reduced the restrictions. It was no longer the issue of how many banks, any bank which applies from Pakistan and fulfils the legal criteria, we were assured will be given a licence to operate in India. It has not happened yet. There is no agreement on banking but this is something the Reserve Banks across the world do. SBP has written to RBI that there are three banks which are interested in opening branches. We have goodwill and understanding but we cannot open bank accounts.
Another thing we need progress on is maybe to allow roaming on cellular networks– it’s a big issue. You see easier visas, banking relationships, allowing roaming on networks, make it easier for to people travel. They are able to assess economic opportunities more accurately and with firsthand experience and that can only benefit trade.
What seems to be the hitch?
The hitch is that trade does not happen in a vacuum and the vacuum keeps on increasing. Outside events like tension on LoC play a role. Again Pakistan and the new government are of the view that no matter what happens we should be able to continue negotiations and talks and making progress on these issues. If the relationship is completely dependent on the news of today and everything is suspended at the drop of a hat or any unfortunate incident, it’s difficult. Yes there have been very unfortunate events in recent past. I understand elected governments have a responsibility to their people to react to events, but I was telling my Indian counterpart peace doesn’t require just goodwill, it requires courage. At certain times it requires the courage to listen to loud anti-other country voices in Parliament — you say yes there is tension, but this is something we are committed to and go ahead. That’s not happening — the kind of contortions that happened before the two Prime Ministers met in New York for instance.
Is there any hope of resolving these issues?
The issue is not hope — the government is committed to normal peaceful relations both diplomatic and economic with all its neighbours — we go to India to express the fact that we are committed to this. Look at the reaction to the LoC tension in both countries — Pakistan for once, a pleasant surprise, not only government but media too acted relatively maturely compared to India. There were loud jingoistic noises which are always there but in Pakistan it was handled maturely.
What about the composite dialogue — is it important for trade talks?
For large scale investments to cross the border there has to be progress on the composite dialogue and some issues like Siachen could be dealt with — that would give some comfort level for investors. It would depend on the progress of the composite dialogue and some resolution of pending issues.