Bilateral trade talks between New Delhi and Islamabad inched yet another step towards Pakistan granting India a ‘most favoured nation’ (MFN) status, even as both neighbours today laid “strong foundation” for a preferential trade agreement.
The two countries also made significant progress towards creating a liberal business visa regime.
“We mutually recognise that the current visa arrangement is one of the most significant barriers to expanding our bilateral trade,” India’s commerce secretary Rahul Khullar said.
This matter has been under “active discussion” between Pakistan’s interior ministry and its Indian counterpart — the ministry of home affairs, he said during his meeting with his Pakistani counterpart Zafar Mahmood here.
Khullar said business communities on both sides were apprehending a “substantial breakthrough” to not only normalise the trading relation between the neighbours but also establish a broad-based preferential trade agreement.
Prime Minister Manmohan Singh had recently highlighted the need to have such a pact with Islamabad. That was expressed during the just-concluded South Asian Association for Regional Cooperation (Saarc) Summit in Maldives, where Singh met his Pakistan counterpart Yousuf Raza Gilani.
On Monday, Khullar said New Delhi welcomed Pakistan’s decision to accord MFN status to India and “to the mandate given for full normalisation of bilateral trade relations as also meeting of all legal obligations”.
In September, during the visit of Pakistan’s commerce minister Makhdoom Amin Fahim, India and Pakistan had set the target of achieving $6 billion worth of bilateral trade from the prevailing $2.7 billion.
On Monday, Mahmood said Pakistan wanted to assure India that have trust and faith in the process of normalisation of bilateral trade. “Times have changed. World is coming closer,” he said in his opening remarks.
India had been urging for the MFN status from Pakistan under the South Asia Free Trade Agreement (Safta) since 1996, when New Delhi had conferred it to its western neighbour. Under World Trade Organisation rules, it is the fundamental right for every member to get an MFN status if there is an agreement amongst themselves.
Pakistan has, under Safta, given MFN trade status to all other members of the bloc, except India. As a result, a chunk of the trade through the indirect route is taking place. In fact, this is double the size of the formal trade.
Khullar said India was open to preparing a roadmap with Pakistan for preferential trading arrangements under the Safta process.
“I hope that through our discussions starting today, we shall achieve a greater clarity on such preferential trading arrangements,” he noted. “Our goal should be to reach peak tariff levels of no more than five per cent for all major traded and tradable commodities.”
Earlier, Mahmood, on his arrival in India on Saturday, had indicated a possible breakthrough in the talks. The official, who is visiting India with a business delegation, also highlighted the need to boost trade ties between the two nuclear powers.