India is hopeful that Pakistan will grant it most favoured nation status (MFN) and restore normal trade relations by July this year after its general elections.

“Hopefully by June-July, a new Government will assume office in Pakistan and its first priority would be perhaps giving the (MFN) status,” Commerce Secretary S.R. Rao said on Thursday at a Indo-Pak trade seminar organised by research body Icrier.

The next round of talks for further liberalising trade ties between the two countries, which has taken big strides over the last two years, is likely to take place after the elections are over and the new Government is in place.

Pakistan was supposed to extend MFN status to India by the end of December 2012 by removing all bans on Indian products, but could not do so because of opposition from the farm, pharmaceuticals and auto lobbies.

Although Pakistan now allows over 6,800 items from India, up from about 2,000 items it allowed earlier, the country continues to ban 1,200 items.

India had extended MFN status to Pakistan way back in 1995 as this is mandated under the World Trade Organisation and means nothing more than treating one country same as the other. India and Pakistan are both signatories to the WTO.

The Commerce Secretary assured that the business visa regime would be normalised soon as the agreement for liberalising visa norms has already been signed.

“Only notifications are awaited from both the sides,” Rao said, adding that work visas, too, would “come soon” as both sides have now permitted foreign direct investment.

Trade experts from both sides are of the view that India-Pakistan bilateral trade, currently around $2 billion, has the potential of increasing several folds, but it will happen only if the countries seriously address the problem of logistics and are ready to bring down “psychological’’ barriers.

Industry often ends up being more protective than reason permits. For instance, Pakistan’s negative list indicates that the automobile and component industry is the largest sector that enjoys protection from Indian imports.

However, India is competitive in only 37 automobile items out of 167 automobile items on the negative list, pointed out Nisha Taneja from Icrier.

The Commerce Secretary said enough safeguards are available in the regional agreement of SAARC countries to protect the domestic industry in Pakistan against import surges from India.

“In the SAARC agreement, we have a safeguard clause which is over and above the safeguards present under the WTO regime. An authority can do due diligence if any injury is caused to its domestic players and it can protect the industry by raising the tariffs,” he said.

amiti.sen@thehindu.co.in

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