MFN Status Current Affairs - 2019
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After the withdrawal of the Most Favored Nation tag to Pakistan, India has now increased the customs duties for imports from Pakistan to 200%. The increase in the customs duty would drastically increase the prices of Pakistani goods in India and make exports unfeasible.
Pakistan Exports to India
Pakistan’s exports to India include fresh fruits, cement, petroleum products, bulk minerals and ores, finished leather, processed minerals, inorganic chemicals, cotton raw, spices, wool, rubber product, alcoholic beverage, medical instruments, marine goods, plastic, dyes and sports goods.
The increase in the customs duty would adversely impact Pakistan’s exports to India, which stood at USD 488.5 million (around Rs 3,482.3 crore) in 2017-18 as it would drastically increase the price of goods in India.
The increase in the customs duty is in accordance with its domestic Foreign Trade (Development And Regulation) Act which allows the government to prohibit, restrict or regulate the import or export of goods and also conform to the global trade norms which do not require any country to furnish any information disclosure for which it considers contrary to its essential security interests and allow countries any action which they consider necessary for the protection of their essential security interests.
One day after the Pulwama terror attack on 14th February, 2019, India has taken a stern step of withdrawing the Most Favoured Nation or MFN Status of Pakistan. This move would enable India to increase customs duty on goods coming from Pakistan. The decision was taken in the meeting of the Cabinet Committee on Security (CCS) that took place on 15th February 2019.
What is the MFN Status?
- The MFN status is given under WTO’s General Agreement on Tariffs and Trade (GATT). It is given to an international trade partner to ensure non-discriminatory trade amongst all the members of WTO.
- As per the first clause in the General Agreement on Tariffs and Trade (GATT), a country providing MFN status to another country has to provide concessions, privileges, and immunity in trade agreements.
- WTO states that if a special status is granted to one trade partner, the country is required to extend it to all members of the WTO without discrimination or any special treatment.
- An MFN status helps reduce trade barriers and results in a reduction in tariffs especially in customs duty. This in turn strengthens trade-ties between the two countries.
- As India and Pakistan both are members of the WTO, both are required to grant MFN status to each other and other partner countries.
What is the State of MFN Status Between India and Pakistan?
India had granted MFN status to Pakistan in 1996, a year after the formation of WTO. But Pakistan hasn’t accorded MFN status to India till now. The reason for this is decades of conflict, mistrust and war. Now the total India-Pakistan trade has increased marginally to $2.41 billion in 2017-18 as compared to $ 2.27 billion in 2016-17. India had imported goods worth $488.5 million in 2017-18 and exported goods worth $ 1.92 billion in that fiscal. India’s exports mostly include cotton, dyes, chemicals, vegetables and iron and steel; while its imports include fruits, cement, leather, chemicals and spices. Given that Indo-Pakistan trade-ties is not very strong, this step of revoking the MFN status is only symbolic.
What is the Cabinet Committee on Security?
There are 6 Cabinet Committees in India i.e. Appointments Committee of the Cabinet, Cabinet Committee on Accommodation, Cabinet Committee on Economic Affairs, Cabinet Committee on Parliamentary Affairs, Cabinet Committee on Political Affairs and Cabinet Committee on Security. The Cabinet Committee on Security (CCS) of the Central Government of India looks into the matters of defence expenditures and National Security. It consists of the Prime Minister, Minister of Home Affairs, Minister of External Affairs and, Minister of Finance and Minister of Defence. It is chaired by the Prime Minister.
About the Pulwama Terror Attack
37 CRPF personnel were martyred in Jammu and Kashmir’s Pulwama district on 14th February 2019 when a terrorist attacked with an explosive-laden vehicle into one of the buses of the convoy of the security forces. Jaish-e-Mohammed has taken responsibility for the attack. There were more than 78 vehicles in the convoy in which 2500 personnels were present. This is the worst terror attack since the Uri attack in 2016.