Most Favored Nation (MFN) Treatment for India An Analysis

 Introduction

The issue of granting Most Favored Nation (MFN) treatment to India has generated heated debate with a variety of strong arguments for and against the decision. As the federal cabinet announced in November 2011 that it had decided ‘in principle’ to reciprocate the Indian decision of granting MFN treatment to Pakistan (in 1996), not only a countrywide debate ensued but protests also erupted in parts of the country to oppose the decision.

The proponents argue that there is no harm in granting the MFN treatment, as both Pakistan and India are already members of South Asia Free Trade Agreement (SAFTA), which can be termed as an MFN-plus arrangement. Those opposing the move are of the view that it will increase the influx of Indian goods to Pakistan, and Pakistani industry will be at the receiving end. A very strong opposition to any liberalization of trade with India on the political grounds also remains there, separately.  

Implications, positive or negative, apart; it would not be wrong to say that the issue is rather misunderstood at public and even academic levels. This paper briefly introduces the concept of MFN treatment, sheds some light on the recent developments taking place in Pakistan India context; explores its bearings for Pakistan and suggests an approach for the Pakistani decision makers. Pakistan India trade is a broad subject and inevitably has a political angle attached to it, which cannot be ignored in any discourse. This paper, however, approaches only the recent decision of the incumbent government in Pakistan to liberalize trade with India fully by end 2012, by granting MFN treatment from start of January 2013. The write-up however traces, in brief, the international pressures on Pakistan in this connection – highlighting the decision more as an instrument of international agenda than the indigenous one.