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Differential treatment : SAFTA meet to discuss Indian complaint against Pakistan |
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The South Asian Association for Regional Cooperation (SAARC) will hold a regular meeting of the South Asia Free Trade Area (SAFTA) Ministerial Council comprising Commerce Ministers to take up New Delhi’s complaint that Pakistan was not offering India the trading rights under a sensitive or negative list as mandated under SAFTA. The decision was taken at the SAARC Council of Ministers’ meeting in Dhaka on August 2, when India raised the issue. Bangladesh Foreign Minister Morshid Khan said after the meeting that it has been agreed to hold a regular meeting of the SAFTA Ministerial Council which would take up the issue. India raised the issue of differential treatment accorded by Islamabad under the SAFTA agreement at the Foreign Secretaries meeting on July 31 and August 1 and the Foreign Ministers meeting on August 1-2.
Under the SAFTA agreement signed by the seven South Asian countries in January 2004, Pakistan negotiated a “sensitive” list that would apply to India, but, inexplicably, has now ordered that trade would be governed by the existing bilateral arrangements. Indian officials find the Pakistani position strange because both New Delhi and Islamabad were on the same side of the fence when it came to compensating the least developed countries for the losses they might suffer under the new arrangement. Earlier this month, India pointed to a Pakistani notification, SRO No. 695(1) 2006 dated July 1, regarding tariff concessions for SAARC member countries. It stated that goods could be imported into Pakistan under the agreed SAFTA tariff concessions “subject to import policy order notified by the Ministry of Commerce.” “This last qualification refers to the import policy order of July 21, 2005, which limits SAFTA tariff concessions for India only to items on the existing bilateral positive list. We regard this action as against the very essence of SAFTA. SAFTA operates on the basis of agreed sensitive lists. SAFTA has little operational meaning if member countries do not honour their commitments in letter and in spirit,” the External Affairs Ministry said. “The credibility of the participating member country and SAFTA itself will be seriously questioned if attempts are made to introduce additional conditionalities that were neither discussed nor agreed to when SAFTA was being negotiated. Any efforts to subject SAFTA to such conditionalities would be a derogation of the agreement,” the Ministry added. Since India believes that the Pakistani position goes against the letter and spirit of the agreement, New Delhi has asked for a meeting of the Ministerial Council, the highest decision making body of SAFTA.
At a Press conference in Dhaka, Pakistan Foreign Secretary Riyaz Mohammad Khan claimed that the domestic notification issued by Islamabad restricting trade with India to positive list as opposed to a negative or sensitive list was not against the agreement. It does not contravene the letter and spirit of the agreement. In a rejoinder to the points made by India, Khan said New Delhi was indulging in propaganda and not following the procedure for dispute resolution laid down in the agreement. “Bringing the matter to the Standing Committee (of Foreign Secretaries) and looking to the Council of (Foreign) Ministers is tantamount to jumping the procedure and disregard for the provisions of the SAFTA Agreement,” he said. Though he admitted that Pakistan had taken the bilateral route with India by the notification, when SAFTA was a multilateral agreement, he denied that Islamabad had denied tariff concessions to 90 per cent of the goods importable from India.
Accusing India of maintaining a highly restrictive trade regime replete with para-tariffs, composite tariffs and non-tariff barriers, he said: “The substantial increase in bilateral trade in the past several years has been entirely in favour of India. Our goods have found little access to the Indian market because of the multi-layered restrictive regime”.
Pakistan Foreign Minister Kasuri also denied India’s charge of discrimination and said while India’s exports to Pakistan have increased by 400 per cent in recent years, Pakistan has not been able to manage entry into India’s market even where it has a competitive edge.
India’s Minister of State for External Affairs E. Ahamed who raised the matter at the Dhaka meeting said, no matter how many provisions of the SAFTA Agreement Pakistan quoted, the fact remains that SAFTA has been negated. It has not been implemented by Pakistan in the spirit that it was negotiated. It contradicts the directives of the SAARC leaders at the 13th summit and it contradicts the public pronouncement made by Pakistan’s own leadership. Separately, Foreign Secretary Shyam Saran wondered why complaints of para-tariffs and non-tariff barriers were being raised now when no country had been compelled to enter the SAFTA agreement. He stressed that India’s sensitive list was the shortest as it was the biggest economy in SAARC.
Observers believe that denying Indian goods free access under SAFTA is a political compulsion of Pakistan rather than economic wisdom. This becomes clear from a report by the State Bank of Pakistan, the country’s central bank, released this January. It says, Pakistan stands to save between $400 million and $ 900 million on its import bill if it would expand the positive list and allow imports from India of goods that it presently imports from other countries at higher cost.
There are 2,646 items that are common in Pakistan’s imports and Indian exports. The report, based on 2003-2004 data, says that after excluding the items that are on the positive list for India, 45 per cent of the items could be imported by Pakistan at lesser cost from India than the current cost of import from the rest of the world. It identifies 47 products that are cheaper to import from India. It also points to chemicals and pharmaceutical products. In these sectors Pakistan’s imports from India were 4.3 per cent and 6.8 per cent respectively, of its total imports in these sectors. As many as 166 of these items cost less to import from India than from other countries. In 2005-06, bilateral trade was over $800 million, more than double what it was in 2003-2004. Informal trade could be as high as $2 billion.
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