The Telegraph
Since 1st March, 1999
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Focus on trade in truce drive

New Delhi, May 7: Taking advantage of Pakistan’s peace initiative, Delhi plans to take a tough line by asking Islamabad to grant the much favoured nation (MFN) status to Indian business.

Although Pakistan had committed to give India the MFN status at the World Trade Organisation, it has till now refused to do so, restricting imports from India to a list of 685 products on which heavy duties have been imposed.

Top finance ministry officials said high level inter-ministerial consultations on talks with Pakistan have decided to focus on two core issues — terrorism and trade. “We are going to tell them forcefully that till they give us the MFN, which really means letting our goods in at rates at which they allow goods from most countries to come in, normalisation means little to us,” senior officials of the department of economic affairs in the ministry said.

Along with this, India will ask Pakistan to ease the visa regime for Indian businessmen and work on a long-term plan to improve rail and road links.

Pakistani intransigence on trade has resulted in a situation where Indian goods worth $2billion are routed through third countries or are smuggled across the border but official trade stands at a tenth of that value.

India now wants Pakistan to bet on peace with its money.

“If they put their money here, war will be a costlier business for both. We estimate trade between the two could be worth about $4billion or 6 per cent of the total value of exports of the two countries in a short while. With that kind of money involved, war becomes a costlier affair,” the officials said.

India will concentrate on extracting concessions for the export of tea, coffee, automobiles, drugs, tyres, steel and chemicals.

The price differential in drugs is about 30 per cent while the difference in the cost of cars in India and Pakistan is over 40 per cent. The government feels Indian auto majors could make a killing in the neighbouring market. Even in bicycles, India wants the duty reduced from a high of 40 per cent to 20 per cent to make Ludhiana’s offerings competitive in Lahore.

“Its not just a case of India getting concessions. We have already given them the MFN status. Now, we are willing to give them a huge list of goods which we are willing to buy. This list could give a whole new fillip to the Pakistani textile industry which has been going through a crisis,” the officials said, refusing to reveal all the cards being worked on for the coming talks.

The government also wants Pakistan to agree on allowing joint ventures between corporates of the two countries. Pharmaceuticals, software, education, auto parts, light engineering are some of the areas where India will demand that Pakistan open up to joint ventures.

“This will be a tougher nut to crack as they are unlikely to agree to this immediately. But in the long run, they will have to. Cross-border investments make it even tougher to get involved in war than just trade,” the officials admitted.

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