What will happen to Pakistan after India withdraws Most Favoured Nations status?

India has withdrawn the MFN or Most Favoured Nations Status to Pakistan on 15 February 2019. Basic custom duty on all goods exported from Pakistan to India has been raised to 200 percent with immediate effect.  Slapping an import duty of 200% effectively means  almost banning the imports from Pakistan. 

Items which are exported 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 beverages, medical instruments, marine goods, plastic, dyes and sport goods.

When did India grant Pakistan the Most Favoured Nations Status?

India granted Pakistan the Most Favoured Nations Status in 1996.

                                                                                               picture credit - change.org

What is the Most Favoured Nations 


Status?

                                                                                                 

Most favoured Nation is a status, given to all international trade partners to ensure non- discriminatory trade between all partner countries of WTO.

A country which provides MFN status to another country has to provide concessions, privileges, and immunity in trade agreements.

Basically, countries can not discriminate between their trading partner.  The concept is to end the discrimination among nations. If one country is given some concession, the same concession must be extended to all members of WTO.

Pakistan never granted MFN status to India.  

Why did India withdraw the MFN Status?

India faced a brutal terror attack on CRPF personnel in Pulwama in Jammu and Kashmir. It caused India to raise custom duty by 200% on goods originating from Pakistan effected from February 16.

Two main products are imported from Pakistan – Fruits and Cement. The slapping an import duty of 200% effectively almost banning the import from Pakistan.

Trade between India and Pakistan

The Total trade between India and Pakistan increased to $2.41 billion in 2017- 18. India imported goods worth $448.5 million in 2017- 18 and exported goods for $1.92 billion.

India exports raw cotton, cotton yarn, chemicals, plastics, man- made yarn and dyes to Pakistan.

How will it impact on Pakistan?

Hiking the tariffs will impact on the country. This will be more symbolic move, and will signal the world that India has changed the stance about Pakistan.

The economic damage will hurt the Pakistan’s economy.

The remedies available for Pakistan

As per rules, Pakistan can raise issue at different forums including the WTO (World Trade Organization) but the certainty and effectiveness of the raising issue at international platform may remain under suspicious, as Pakistan till now has now impacted the MFN status to India.