NTBS: REAL OR PERCEIVED?
TARIQ AHMED SAEEDI
Nov 7 - 20, 2011
Are non-tariff barriers on exports to India from Pakistan real or perceived? Pakistani government is trying to bring the attention of Indian government to unwritten and concealed barriers it faces across the border that wield indirect impact to its exports. On the other side, Indian officials are not willing to equate the issue to most-favoured nation (MFN) that they consider as the gravest and real barrier in up-and-coming bilateral trade relation.
There is no set definition of nontariff barriers with regard to trade relation between India and Pakistan. Therefore, they are not something that can be crossed out by just issuing notifications and import policy orders.
Trade analysts have put the label on situations, procedures, and other indirect restrictions of non-tariff barriers (NTBs) or invisible trade barriers that sour bilateral trade relations between two south Asian economies.
In a paper on 'India Pakistan Trade Possibilities and Non-tariff Barriers', Nisha Taneja of Indian council for research on international economic relations recognized six main categories of NTBs viz. quantitative restrictions, trade facilitation and customs procedures, technical barriers to trade and sanitary and phytosanitary measures, financial measures, and para-tariff measures, and visas that happened to work against Pak exports.
India does not believe on the fallouts of NTBs on bilateral trade, insisting most of them are perceived. At the same time, it is reported to be resolving licensing problems confronted by cement exporters from Pakistan. Quality standard is something that its government has refused to compromise on.
MFN CAN SAVE PAKISTAN $2BN
More over, removal of nontariff barriers need to be reciprocated and thus India is keen to get MFN status from Pakistan. Experts believe that not only India but Pakistan will also benefit from awarding MFN status to its neighbouring country. Pakistan can bag two billion dollar only by granting the status to India, a report by trade development authority of Pakistan says. Importing relatively inexpensive goods from India will bring down prices as well as earn federal board of revenue (FBR) good amount in custom duties, the report titled 'Harnessing India Pakistan Trade Potential' notes.
India accorded MFN status to Pakistan in 1996. Pakistan continued to expand the list of imported items from India: 42 items in 1986 to 1,075 in 2006. However, it has not granted the much sought-after status to India. Analysts say it may be because of the thorny issue of NTBs. Had India removed the barriers and facilitated fair trade transactions with its partner, it would have been awarded with the status, believe observers though some find it illogical to link the two.
Pakistan's commerce ministry is in favour of fulfilling the time-honoured Indian demand, but it has to oblige to the certain procedures to make this a reality.
Commerce minister Makhdoom Amin Fahim is one of those incumbent officials who want to improve the bilateral trade relations with India and see prosperity and interest of both the countries in any such symbiosis.
He got the honour of first commerce minister who visited India after 35 years. His visit was taken as a light at an end of the tunnel in Pak-India good relations.
In his interview to The Economic Times, the minister called the meeting with his counterpart a big breakthrough and expressed his desire to bring bilateral trade up to six billion dollar and beyond. "If I was to decide, may be tomorrow," he answered to a question about the MFN trade status. "We have to go through a procedure. We don't want to hurry. Things should be proper and perfect so that there is no reason to amend them later," said the minister.
Economic benefits of the MFN status awarded to Pakistan are not considerable considering the trade surplus steeply tilting towards India and that Pak goods are still routed through third country to reach India.
India is criticised internationally for its restrictive trade policy. U.S. has also expressed its concern over the trade barriers by India, saying it is inhibiting foreign investments in the economy.
"Even though India has made tremendous strides to open up its economy, there is much more work that is left to be done," said U.S. Commerce Secretary Gary Locke.
"While many tariffs have come down, others remain. Even when there are not outright tariffs there are non-tariff barriers that limit trade and investment," he told the reporters at a press conference in New Delhi.
On the other hand, India is poised to erase all trade barriers that include non-tariffs on exports from its eastern neighbour Bangladesh to give the latter a let-up from its widening trade deficit with the former that has reached to the tune of three billion dollar.
Normally, domestic industries seek help of the government to protect them from foreign forays including imports. Member economies of world trade organization can invoke certain provisions of the international body to protect the local industries. The government of Pakistan has asked textile industry to prepare list of Indian products that are posing threats to them so that it might impose barriers on them.
It should be noted that Indian non-textile goods have great potential to serve Pakistani market while 55 per cent of Pakistan's export potential to India is comprised of textile goods.
Protection is one thing that may be needed by the domestic industry. However, one thing should be clear in mind that commercial greed of corporate sector should not be pampered in the name of protectionism from foreign rivals. Protectionism regime has also disadvantage in its implications for the consumers who are deprived of choices, and forced to endure the afflictions of cartelism, due to the state-patronised monopolies.
Non-tariff barriers are silent killer of trade potential and their removal can save Indian economy handsome money it spends on products imported from countries other than Pakistan.