ISLAMABAD, 2 March 2007 — Pakistan yesterday announced that it would not grant Most Favored Nation (MFN) status to New Delhi until nontariff barriers and para-tariffs were removed for the smooth flow of Pakistani goods.

“No proposal is under consideration at this stage but when such a case comes up for review, the removal of nontariff barriers and para-tariffs would be unavoidable,” said Commerce Minister Humayun Akhtar Khan at a press conference here.

He also asked India not to go for a review of tariff concessions, as it would be a serious blow to South Asia Free Trade Agreement (SAFTA), a step Pakistan would deeply regret because of its negative effects.

He was of the view that Pakistan was complying with the SAFTA agreement while India thinks it is not.

Replying to a question he said there were three forums to resolve disputes among the member states, which include the committee of experts, SAFTA Ministerial Council and through bilateral negotiations.

We are ready to go to these forums to remove the misunderstandings, he maintained.

The commerce minister said Pakistan believes that trade is primarily an issue of market access whereas large number of para-tariffs and nontariff barriers exist in India’s trade regime, which is highly protective of its domestic industry, denying market access to other countries including Pakistan, despite tariff cuts under SAFTA.

He refuted Indian allegations that Pakistan was not complying with the SAFTA agreement, adding that “we adhere to the regime but India is creating hurdles.”

To a question, the minister said that SMC, the highest decision-making body of SAFTA discussed para-tariffs and nontariff measures among other issues confronted by the member countries. Just after the issuance of the notification on July 1, 2006, for tariff concessions under the SAFTA agreement, he said, India argued that tariff concessions offered by Pakistan were subject to the import policy order of Pakistan and therefore against the spirit of the agreement.

Humayun Akhtar said Pakistan contested the Indian objections during the SMC and “we rebutted the Indian point of view on the grounds that the import policy regulations are provided in the import regimes of all SAARC countries.”

Pakistan had only highlighted this requirement in its notification to make it transparent, he said adding that such conditions were not mentioned by other SAARC countries in their respective notifications, which did not imply that they had waived off such conditions for trade within the region.

Replying to a question regarding MFN status to India, the minister said, the process of composite dialogue is under way and all the issues will be resolved in due course of time.

To another question, he said that Indian exports to Pakistan are likely to cross $1 billion while our exports to India will stand at $350m during the current year.

The South Asia Free Trade Agreement is an accord reached at the 12th South Asian Association for Regional Cooperation (SAARC) summit at Islamabad, on Jan. 6, 2004.

It creates a framework for the creation of a free trade zone covering 1.4 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.

The seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of practically all products in the region by end 2012.

The SAARC Preferential Trading Arrangement (SAPTA), with concessional duty on subcontinent trade, went into force on Jan. 1, 1996.

The new agreement i.e. SAFTA, came into being on Jan. 1, 2006, and will be operational following the ratification of the agreement by the seven governments.

SAFTA requires the developing countries in South Asia, that is, India, Pakistan and Sri Lanka, to bring their duties down to 20 percent in the first phase of the two-year period ending in 2007.

In the final five-year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts.

The least developing country group in South Asia consisting of Nepal, Bhutan, Bangladesh and Maldives, gets an additional three years to reach zero duty.