Full normalisation of India-Pakistan trade by 2012

With unequivocal political backing to their endeavour, the Commerce Secretaries of India and Pakistan, Rahul Khullar and Zafar Mehmood, on Tuesday decided to ensure full normalisation of trade in a phased manner by the end of next year.

Following two days of Commerce Secretary-level talks here, the two sides agreed on a sequenced approach.

In the first stage, Pakistan will move from the current Positive List approach to a Negative List. The consultation process is almost complete and the small Negative List should be ready and ratified by February. Thereafter, all items other than those on the Negative List can be freely exportable from India to Pakistan.

In the second stage, the Negative List will be phased out. The timing for this phasing out will also be announced in February. It is expected that complete phasing out will be completed before the end of 2012.

Non-tariff barriers

By then other steps such as addressing non-tariff barriers (a charge usually levelled at India by Pakistan and Bangladesh), harmonisation of customs procedures and wrinkles in the actual mechanics of goods crossing over would have been sorted out. In this respect, Pakistan submitted a draft of the customs cooperation agreement with the expectation that it would be ready for signatures by January next.

Taking note of the “clear mandate given by the political leadership,” both sides agreed to move towards enhancing the preferential trading arrangements under the South Asian Free Trade Area (SAFTA) process. Both sides designated the Joint Secretaries in their respective Ministries of Commerce as Chief Negotiators for working on how to improve preferential trading arrangements under SAFTA.

In a joint statement, Commerce Secretaries of both countries agreed that Pakistan's Commerce Minister's visit to India after 35 years [in September this year] and the political ownership of leaders of both the countries had given tremendous impetus to the trade normalisation process as well as hope and confidence to the business community. Positive developments in the trade track would encourage similar progress in other components of the dialogue process, said a joint statement after talks between the Commerce Secretaries, .

At a joint news conference, Mr. Mehmood gently chided the media for creating an impression about confusion in Pakistan over giving most favoured nation (MFN) status to India.

“MFN is not an award or a degree which we can give to Khullar Sahab. This would not need any notification or a document. Under WTO, members are to grant MFN to each other. That obligation stands and will be completed when there is no list.”

Mr. Mehmood informed Mr. Khullar that the Pakistan Cabinet has given a mandate to the Commerce Ministry for complete normalisation of trade with India. He appreciated India's support in WTO for the EU concession package for Pakistan which would give the Pakistani business community confidence and create an environment of trust and cooperation. Mr. Khullar responded by welcoming the Cabinet decision and reiterated the government's support for the normalisation process and building trust.

Mr. Khullar expected bilateral trade to increase substantially in volume once Pakistan moves from the positive list to the negative list. Pakistan presently has a positive list of 1,900 items.