Pakistan to suffer by MFN status withdrawal ; India is free to enhance custom duties on imports to any level
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New Delhi, February 15: Just a day after at least 42 Central Reserve Police Force (CRPF) personnel lost their lives in a disaster suicide bombing attack in Pulwama, the Indian government has withdrawn the Most Favoured Nation or MFN status granted to Pakistan.
"MEA will initiate all possible diplomatic steps which are to be taken to ensure the complete isolation from the international community of Pakistan of which incontrovertible is available of having a direct hand in this act," said Jaitley while announcing the government decision.
Removal of this status simply means that now India is free to enhance customs duties to any level on goods coming from Pakistan. The move could also lead to increased illegal trade between the two countries, said the trade experts.
Multani Mitti that women use for fairness or washing their hair, Sendha Namak are the items imported by India from the neighboiuring nation. Pakistan is the only producer of this salt in Asia and India is the biggest consumer. Footballs, Hockey sticks & other sports items are also imported from Pakistan forming about world’s 80% manufacture along with footballs, Carpets and Rugs.
Most Favoured Nation status is given to an international trade partner to ensure non-discriminatory trade between all partner countries of the WTO. A country which provides MFN status to another country has to provide concessions, privileges, and immunity in trade agreements, it being the first clause in the General Agreement on Tariffs and Trade (GATT).
In a very brief sense, MFN is a non-discriminatory trade policy as it ensures equal trading among all WTO member nations rather than exclusive trading privileges. Since India and Pakistan are part of the WTO, both are required to grant MFN status to each other and other partner countries.
The India-Pakistan bilateral trade relations has, over the last more than five decades, witnessed a chequered history, reflecting the changing dimensions of geopolitical tensions and diplomatic relations between the two countries.
India granted MFN status to Pakistan in 1996, just a year after the formation of the WTO. On the other hand, Pakistan is yet to award MFN status to India. The reason behind Pakistan's move to not grant MFN status to India is decades of conflict, mistrust and war.
The World Trade Organization has given information about the status of the Most Favored Nation in Section 21B, which can be revoked if there are security concerns between the two countries. However, it is necessary to meet certain conditions.