Most Favoured Nation Current Affairs - 2019
Category Wise PDF Compilations available at This Link
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.
Pakistan Government has no immediate plans to grant Most Favoured Nation (MFN) status to India. However, it is working out free trade agreements (FTAs) with different countries, especially China and hopes to complete second FTA with China by June 2019. Pakistan has not reciprocated MFN status to India, reportedly citing “non-tariff barriers” erected by India as well as huge trade imbalance.
Pakistan maintains negative list of 1,209 items which are not permitted to be imported from India. But, it allows only 137 products to be exported from India through Wagah border land route. Bilateral trade between India and Pakistan stood at US $2.28 billion in 2016-17. India mainly exports cotton, dyes, chemicals, vegetables and iron and steel to Pakistan while it imports fruits, cement, leather, chemicals and spices.
Most Favoured Nation (MFN)
- As per World Trade Organisation (WTO) rule, each of the WTO member countries should treat all tother members equally as ‘most-favoured’ trading partners.
- Though MFN sounds like special treatment, in effect it means non-discrimination and tend to promote objective of free trade in general.
- Under MFN status, WTO member country is obliged to treat other trading nations in non-discriminatory manner, especially with regard to customs duty and other levies.
- India has already granted this status to all WTO members, including Pakistan (accorded in 1996), but Pakistan is yet to transition fully to MFN status for India.