Pakistan relaxes land route trade rules
Pakistan has moved nearer to conceding the promised most-favored nation status to India by the year-end by increasing the list of goods that can be traded via the Attari-Wagah border, a move that will enhance shipments across Punjab. Pakistan has decided to increase the list of goods beyond the 200 items that are at present permitted to be traded via the land route, albeit the full list was not immediately available with the Indian government. The 30% reduction in the list by December is to follow "removal of all restrictions on trade by Wagah-Attari land route"
Why this move by Pakistan? How will this move be beneficial for India? What is a Sensitive List? What is SAFTA?
Now, Why this move by Pakistan?
- The move is part of the agreement b/w the India and Pakistan in September 2012 after India declared a cut in import duty to a maximum 5% over the next 3 years on 264 items, which are part of the SAFTA sensitive list.
- By December 2012, Pakistan will also grant the MFN status to India.
- India will then keep only 100 items on the SAFTA sensitive list, constituting mostly of sin goods such as tobacco products and wines and spirits.
How this move will be beneficial for India?
- India has been demanding for long that more trade should take place b/w India and Pakistan via the land route as costs would come down.
- In the absence of trade via the land borders, goods have to transported via the sea route, which enhances the cost, in particular if it has to be moved by road from Punjab to Mumbai or one of the ports in Gujarat.
- Sensitive list is a list with every country which does not include tariff concession.
- South Asian Free Trade Area (SAFTA)
- Agreement inked on January 6, 2004 at the 12th SAARC summit in Islamabad, Pakistan.
- Created a Free Trade Area of 1.6 billion people in Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
- The seven foreign ministers of the region inked a framework agreement on SAFTA to reduce customs duties of all traded goods to zero by the year 2016.
- Came into force on January 1, 2006 and is operational following the ratification of the agreement by the seven governments.
- Under SAFTA agreement developing countries in South Asia (India, Pakistan and Sri Lanka) have to bring their duties down to 20% in the phase-1 of the two year period ending in 2007 and in the final 5 year phase ending 2012, the 20% duty will be reduced to zero in a series of annual cuts.
- The least developed nations in South Asia (Nepal, Bhutan, Bangladesh, Afghanistan and Maldives) have an additional 3 years to reduce tariffs to zero.
- India and Pakistan ratified the treaty in 2009.
- Afghanistan as the 8th member state of the SAARC ratified the SAFTA protocol on May 4, 2011.