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Go-slow on trade talks with Pakistan

New Delhi, May 2: India will go slow on trade talks with Pakistan following the death of Osama bin Laden.

Top officials said New Delhi would wait and watch to see how the situation evolved after the death of Laden, who was killed by US special forces in Abbottabad near the Pakistan capital.

India had sent its commerce secretary to Islamabad to build on a thaw in bilateral relations.

The talks were seen as positive, and Pakistan had said it would take “immediate necessary steps to ensure that non-discriminatory trade regime is operationalised at the earliest”.

However, the officials said, “We doubt that the Pakistan government will be able to carry forward talks in the atmosphere which is building up there. Pakistani legislators, for instance, are not in favour of giving India MFN (most favoured nation) status which is a normal tax treatment given by all members of the WTO to each other.”

A section of Pakistan’s legislators has laid the condition that the MFN status will be given to India only if the Kashmir dispute is resolved.

According to WTO rules, all members should grant MFN status to each other. This ensures that a WTO member sets uniform import duties on goods from all the member nations.

India can, if it chooses to, go to the WTO arbitration council to force Pakistan to give it the MFN status.

Pakistan has also consistently refused to implement the South Asian Free Trade Agreement (Safta), which came into effect on July 1, 2006.

Under the Safta deal, all the seven nations, which make up the group, have to open up their markets to each other, barring a small list of negative items that they want to protect from competition.

While all the other South Asian nations have implemented the agreement, Pakistan says it fears the deal will flood its market with cheap Indian imports.

India’s annual trade with Pakistan is just about $2 billion.

Official trade between the two nations is small compared with other South Asian countries such as Bangladesh and Sri Lanka.

Goods worth $2 billion are sold to Pakistan through third countries such as Dubai, and another $1-billion worth of goods are smuggled out from Gujarat and Rajasthan.

Analysts estimate that the two-way trade can jump to over $14 billion a year if normal relations are restored.

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