The ‘Mohali spirit’ was hailed but India’s outlook on Pakistan regarding multilateral trade bodies continues to be dogged by a traditional mindset.
Not only is India opposing a trade-concession package offered by the European Union to Pakistan, but is also blocking a move by the neighbouring country to be counted as a Least Developed Country at the World Trade Organisation (WTO), circumventing the stipulation that it must have a population of 50 million or less.
Pakistan says it is an LDC because of the setback to its economy on account of natural calamities and the war on terror in 2010. As an LDC, it would be eligible for EU concessions (subject to WTO rules). India disapproves of the political redefinition of the LDC category.
After the devastating floods in Pakistan in 2010, the EU at its summit meeting in September 2010 offered Pakistan unilateral tariff concessions for the export of some products. The package, covering 75 products, was assessed at ¤200 m (just under $300 m), largely from increased textile exports but also due to a rise in the export of cotton and ethanol among other products. It was in fact a trade concession but the money Pakistan would have saved was considered as aid by the EU.
Floods in Pakistan affected 20 million people causing, an estimated two per cent reduction in Pakistan's 2010-11 GDP, a 10 per cent rise in unemployment and the loss of $2bn in export revenues.
India, however, continues to be in the forefront of a group of nations opposing the move which needs not just approval of the European Parliament but also the WTO. India cites principles of trade for its position on this issue.
To be fair, textile-producing members of the EU including Italy, France and Portugal, are also opposing the trade-concession-as-aid for protectionist reasons. But among Pakistan’s neighbours, India and Bangladesh lead the opposition, while Sri Lanka is ambivalent on it.
Pakistani officials on the negotiating team said as India and Bangladesh had their own preferential trade deals with the EU, the plan could be derailed at the WTO. For the move to go ahead, a WTO waiver was needed. The matter might come up at the India-Pakistan Commerce Secretaries meeting on April 27-28 in Islamabad.
Recently, Pakistani newspapers quoted Commerce Secretary Zafar Mehmood telling a meeting of the Federation of Pakistan Chamber of Commerce and Industries that the country will try and address the misgivings of India and other countries.
India’s argument is straightforward and no secret: If the EU wants to give aid to Pakistan, India would be happy to go along with that. But it should not represent tariff or trade concessions as aid. An Indian negotiator told Business Standard that this could create a dangerous precedent and undermine the principles of free trade. “This is trade diversion, not concession. What about Sri Lanka or Bangladesh’s textile industry? Should they suffer because the Pakistani economy is in trouble?”
However, Sri Lanka is unimpressed at India taking up cudgels on its behalf and scoffs at this. “What we are seeing is something that we’ve been seeing all these years: An India-Pakistan battle by means other than war” a top Sri Lankan trade negotiator based in Brussels said.
India has concerns other than fostering India-Pakistan friendship. The EU-India free trade agreement which is under negotiation could be undermined by such unilateral trade concessions. The political gains from such unilateral trade-as-aid moves are paltry.
And the Mohali spirit ? “That’s another issue,” officials said.
