New Delhi: The free trade pact among the eight member nations of the South Asian Association for Regional Cooperation (Saarc) will be operational by the year-end once Pakistan grants India most-favoured nation (MFN) status, says a top chamber chief.

“The South Asian Free Trade Area (Safta) will lead to complete integration of trade and commerce among the eight Saarc countries. Most favoured nation status to India is a hindrance,” said Vikramjit Singh Sahney, president of Saarc Chamber.

“But we are pushing for it. We have been assured it will come soon. Once Pakistan grants such status to India, it will pave the way for full implementation of Safta protocol,” Sahney told IANS in an interview.

The MFN status is a technical designation under the norms governing the World Trade Organisation (WTO), which basically means a member’s country must treat all the other members equally when it comes to market access.

India gave such a status to Pakistan in 1996, but Islamabad refused, in part because it says New Delhi imposes non-tariff barriers that prevent its companies from accessing the Indian market.

Instead, Pakistan had been limiting its imports from India to less than 2,000 items under a “positive list” — which, too, is set to change to a “negative list” of 1,200 items. “This list will also be phased out largely by the year-end,” Sahney said.

According to him, the recent warmth in business relations between India and Pakistan — which was evident in a large measure when India’s Commerce Minister visited Islamabad, Karachi and Lahore last month — was a good sign for regional integration.

“The success of Safta depends on India and Pakistan. The recent developments show that the things are moving in a right direction,” he said, adding bilateral trade can double in just one year if Pakistan grants India MFN status is granted.

Formal trade between India and Pakistan was recorded at $2.7 billion in 2010-11. Through third countries like the UAE, this trade is estimated at $10 billion. The balance is heavily in favour of India with its exports at $2.3 billion and imports around $400 million.

Among the Saarc countries, intra-regional trade accounts for a mere six percent of the total overseas engagement even as the eight countries constitute 22 percent of the global population.

Pakistan earlier maintained a “positive list” of 1,946 items, which were allowed to be imported from India. Now it will soon notify a “negative list” of 1,209 items and they alone will be banned for import from India.

Sahney said even though the negative list of 1,209 items is larger than the industry’s expectations, the promise to phase out the list altogether over a short period of time was the move in the right direction.

At a meeting Feb 29 in Islamabad, the Pakistani cabinet decided in principle to phase out the negative list by Dec 20, 2012.

The Safta was signed in January 2004 during the 12th Saarc Summit and calls for gradual elimination of trade and investment barriers among India, Pakistan, Bangladesh, Nepal, the Maldives, Sri Lanka and Bhutan towards a common customs union.

Afghanistan joined the pact in 2007.

Independent studies have shown that regional integration in South Asia could generate billions of dollars in new income and employment, push trade and investment and also help member nations fight poverty with inclusive growth.

By Gyanendra Kumar Keshri (Source: IANS)