Presented by:

Sadia Khalid-(BC09-069) Saira Khan-(BC09-067) Sana Javaid-(BC09-070)

Bcom hons. (Morning)

Semester : 5 Section: A Subject: MANAGEMENT

Most favored nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must, nominally, receive equal trade advantages as the "most favored nation" by the country granting such treatment. (Trade advantages include low tariffs or high import quotas.)

Common benefits of MFN

A country that grants MFN on imports will have its imports provided by the most efficient supplier.

MFN allows smaller countries, in particular, to participate in the advantages that larger countries often grant to each other

Granting MFN has domestic benefits

MFN restrains domestic special interests from obtaining protectionist measures.

TRADE BETWEEN PAKISTAN AND INDIA

Exports
Vegetables and fruits

Imports
Capital goods Dyes and chemicals Iron and ore

Textile yarn and fabrics

Leather and leather manufacture Petroleum crude Plants for perfume

Spices and fruits Pharmaceuticals Rice & Sugar

Factors Responsible For Limited Pakistan-India Trade

Indian intransigence on Kashmir High Tariffs Quality Checks

Customs Valuations
Bureaucratic Inertia Clearance of goods Travel Restrictions

Factors Responsible For Limited Pakistan-India Trade

Inadequate Infrastructure Excessive Red Tape: Constraints on Visas

Direct Political Opposition

Customs Clearances

India granted the MFN status to Pakistan way back in 1996. The gesture, however, did not help Pakistan in any way, because it was followed by the imposition of a number of non-tariff barriers by the Indian side, which ironically further crippled the access of the Pakistani products to the Indian market

MFN STATUS GIVEN TO INDIA BY PAKISTAN

On October 2nd ,2011 in the meeting of Federal Cabinet Of Pakistan, it was decided that India Is The Most Favored Nation Of Pakistan For Trade it is a noteworthy step initiated by Pakistan to enhance bilateral ties between the two countries that had fought two major wars and many minor rifts. The move is a good omen demonstrative of reconciliatory relations between two nuclear-powered neighbors. The announcement by the government of Pakistan to grant the most favored nation (MFN) status to India continues to draw mixed reaction from all quarters, industrialists, business community at large, agriculturists and security analysts. On the one hand, there is this lobby, which argues that by doing so not only do we get access to A robust market of more than A billion people. On the other hand, is A large cross section of nervous manufacturers, struggling farmers and skeptical security personnel, who all remain equally fearful of indias regional designs in particular, and its poor track record on bilateral trade in general

CRITISISM ON DECLARING INDIA AS MFN

CRITISISM ON DECLARING INDIA AS MFN

Pharmaceuticals Forum view about MFN to India

The Pakistan Pharmaceutical Manufacturers Association (PPMA) feels that all medicines should be on the negative list, as the industry forms the second line of defense in case of war, natural disasters, or epidemics the PPMA meets around 90 percent of the countrys demand of finished medicine. According to them, the Indians already have very solid non-tariff barriers in place to protect their home industry and the size of the Indian pharmaceutical market is 10 times larger than the Pakistani market Pakistani pharmaceutical industry should get similar State support and protection

Agriculture forum view about MFN to India

Liberal trade regime with India would reduce pressure of escalating inflation

Pakistan was importing merchandise from India of which Rs5.5 billion worth of products were being traded via Dubai and Singapore increasing the cost of doing business in the country India had significant demand for Pakistani horticulture products, including kinnow and mango local cement industry was more competitive attract huge foreign exchange Pakistan should import cheaper fertilizers, diesel and electricity from there Rate of agriculture produce is much higher in India than Pakistan while their cost of production is very low,

Textile sector view regarding MFN Aptma-Punjab chairman Ahsan Bashir :

Our basic textiles have competitive advantage over India while we could develop high value-added textile by importing low cost accessories from India India gave 7.5 %rebate on yarn exports, while there was none in Pakistan. Similarly, yarn imports in Pakistan were duty free while there was 10 % duty on its imports in India.

Official Statements by Commerce Secretary to assure local exporters level playing field

Zafar Mahmood Secretary Commerce said while briefing the Senate Standing Committee on Commerce about the MFN status to India

Zafar Mahmood Secretary Commerce said while briefing the Senate Standing Committee on Commerce about the MFN status to India

Pakistan would not implement the free trade regime without ensuring level playing field for its exporters Islamabad has proposed three agreements be signed with New Delhi. 1. the Customs Cooperation Agreement to address Pakistani exporters complaints of Indians charging high taxes, 2. Mutual Recognition Agreement for standardization of quality standards 3. Redressal Grievances Agreements and Preferential tariff to address consumer protection issues

We have asked Indian side to get signing approval of such agreements from their relevant ministries or departments before the arrival of their commerce ministers arrival in Pakistan by mid February 2012,

The Express Tribune December 23, 2011

The Negative List :

In September this year Pakistan is going to replace tradeable list, known as positive list currently comprising 1,958 items, with non-trade-able list, known as Negative list, by February 2012, under trade liberalization arrangement and so far local industries have proposed less than 1000 items for placement in negative list . However many items proposed by local industries need to be excluded from proposed negative list as few of such items are not even imported from India

Secretary Commerce assured the committee that that before completion of trade liberalization with India as per MFN, an effective level of protection would be ensured to safe guard the local industries, as well as they would be able to use trade defense instruments like antidumping duty, countervailing duty and safeguard duty against any trade threat
But Senator Haroon Akhtar Khan and Senator Abdul Razzaq are of the view that normalization of trade with India would greatly benefit India compared with Pakistan. Pakistans trade deficit would shoot up many folds local industries would be facing tough competition against Indian subsidized products.

The questions arises????????

Will the implementation of negative-list take effect as promised or will it be delayed beyond December 2012; or be forgotten altogether?- it is for the Federal Cabinet to decide

Will there be any regard given to local industries when Ministry of Commerce approaches Federal Cabinet in February 2012 and trade liberalization takes place as per Most Favored Nation status?

Conclusion
There is no denying the fact that bilateral trade on equal terms will surely be very beneficial to both Pakistan and India. It will not only strengthen the economies of both the countries, but also over time can be the key to resolving longstanding sticky issues between the two sides
However, Pakistan needs to be careful and do its homework properly before granting such a status. In doing so, it needs to grapple with the elements of reciprocity and fair play to provide a level playing field to its own people