How Vajpayee’s Policy On MFN Status In Trade Has Stood The Test Of Time

A stern examination of a policy is how it stands the test of time. One policy that has passed this test is the late Atal Bihari Vajpayee’s decision on trade with Pakistan. It was during Narasimha Rao’s period in 1996 that India decided to extend the most favoured nation (MFN) status to Pakistan in trade. This is one of the requirements after becoming a signatory to the General Agreement on Tariffs and Trade (GATT) that later led to the World Trade Organization (WTO). This is part of the efforts to promote free trade.

Half-way into Vajpayee’s regime during 1998-99, the Press Trust of India interviewed then-commerce minister Ramakrishna Hegde just before he could leave for Geneva for WTO ministerial talks. Since Pakistan is always a sensitive subject, one question veered towards India not being granted MFN by Pakistan despite India’s gesture. Hegde was asked if India would drag Pakistan to the WTO on this issue.

Hegde’s response was cool and calculated: “No, we would wait for Pakistan to give us MFN status. We will not take them to WTO on this.” Twenty years have passed and our neighbouring country is yet to return the favour, but India hasn’t done anything to aggravate trade relations with it. The closest that India reportedly came to reviewing the status was in 2016 when the bodies of Indian soldiers were mutilated by Pakistan army before they were killed. No decision was taken then to review the status.

In July last year, Nirmala Sitharaman, who was then in-charge of commerce and industry, told Parliament that Pakistan is yet to award the MFN status to India and it maintains a negative list of 1,209 items. This means that these 1,209 items are not allowed to be imported from India. She reiterated that the government had not taken any decision to review the MFN status accorded to Pakistan so far.

WTO regulations stipulate that every member of WTO is required to accord this status to other member countries. Under MFN, a WTO member country is obliged to treat the other trading nation in a non-discriminatory manner, especially with regard to customs duty and other levies.

Pakistan’s exports to India totalled $303.58 million in 2015-16 while Indian exports to Pakistan were $1.779 billion. India’s exports to Pakistan trebled between 2004-05 and 2015-16 despite these 1,209 products remaining in the negative list. Pakistan’s contention is that India uses non-tariff barriers to limit access of its products to the Indian market. Be that as it may, India’s trade policy against Pakistan, formulated by Vajpayee, has stood the test of time.

Not only this, it was during his regime that the Commerce Ministry wrote to all states for their inputs on India’s WTO talks. This formed the basis on which negotiations were first held at the Seattle WTO meet and then in Singapore. It was based on these inputs that Murasoli Maran, who became the commerce minister in Vajpayee’s 1999-2004 term, negotiated at WTO to bargain for India.

The point here is that some of the policies formulated during Vajpayee’s rule were done with so much thought that they have withstood even the sternest tests.