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News: India and Pakistan have partially opened their land border recently.
Recent trade relations between India and Pakistan
After the Pulwama terror attack, bilateral trade between the two countries plummeted from around $2 billion in 2017-18 to $280 million in 2020-21 (April to February).
| Also read: “India-Pakistan Relations” – Pakistan to Resume Trade with India |
What steps India and Pakistan should initiate to normalize the relations?
Pakistan should revoke the unilateral suspension of trade: After India’s decision to revoke Article 370, Pakistan suspended the trade with India, which it should revoke now. Also, this trade suspension by Pakistan is inconsistent with the General Agreement on Tariffs and Trade (GATT) and the South Asian Free Trade Area (SAFTA) agreement.
| Read here: Pakistan downgrades diplomatic ties, suspends trade with India |
GATT, as part of WTO, allows countries to adopt trade-restraining measures on certain grounds such as public health, national security purposes (Article XXI). Similarly, Article 14 of SAFTA permits trade-restrictive measures for national security and other purposes. Neither the WTO nor SAFTA permits a country to suspend trade with another member country on grounds that it disapproves of domestic law.
Pakistan to accord Most Favored Nation(MFN) to India: Pakistan is in breach of Article I of GATT towards India since the formation of the WTO in 1995. So, it is time that Pakistan grants the MFN status to India.
| Most Favoured Nation: It is a treatment accorded to a trade partner to ensure non-discriminatory trade between two countries vis-a-vis other trade partners. |
India to restore Pakistan’s MFN status: India has revoked the MFN status to Pakistan in the aftermath of the terror attacks in Pulwama and hiked the tariff rates on all Pakistani imports to an unfeasible rate of 200%.
| Also read: India revokes Pak.’s MFN status day after terrorist strike in J&K |
Trade agreements to be consistent with GATT objectives: Article XXIV allows both countries to enter into any special trading arrangement without fully complying with GATT conditions. The only requirement is that these special trade arrangements should be consistent with GATT’s objectives. Both countries should frame policies according to that.
How normalizing relations with Pakistan can benefit India?
The rise of China poses a greater threat to India. According to the Centre for Policy Research report, a continuing freeze in relations with Pakistan will “enhance India’s external vulnerability to other actors, in particular, China.”
So, normalizing and strengthening trade relations with Pakistan can help India to counter the threat that emerges with the rise of China.
Hence, effective management should be the main objective for fostering economic and trade relations with India and Pakistan.
Source: This post is based on the article ” Get to Business” published in the Indian Express on 29th November 2021.
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