India has withdrawn the most-favoured-nation (MFN) status to Pakistan after a terrorist attack on military convoy in Jammu and Kashmir’s Pulwama region that killed 44 Indian soldiers.

Pakistan-based Jaish-e-Mohammad (JeM) claimed responsibility for the attack and released a video clip of the suicide bomber. The Indian government has blamed Pakistan for abating the terrorist group in executing attacks on the Indian soil. Islamabad, however, denied any involvement in the attack. Finance minister Arun Jaitley said the government will take all diplomatic steps to isolate Pakistan, and withdrew the MFN status.

What is MFN status

Under the guidelines of the World Trade Organisation, the ‘Most-Favoured Nation’ status means each member country has to treat all other members equally as most-favoured trading partners in terms of imposing customs duties on goods. So, all the WTO members are most-favoured nations.

The MFN status was accorded under WTO’s Article 1 of the General Agreement on Tariffs and Trade (GATT) 1994. Both India and Pakistan are signatories to this Agreement and are members of the WTO.

India granted the MFN status to Pakistan way back in 1996, but the neighbouring country has not accorded the same to India. Pakistan had decided in November 2011 to grant India the MFN status, but soon backtracked and failed to implement it. Recently, in November 2018, a senior trade advisor to Pakistan’s Prime Minister Imran Khan told reporters that Khan was keen to hold trade talks with India, but there was no immediate plan to grant the MFN status to India, reported Economic Times.

Instead, Pakistan maintained a positive list of 137 products that it allows to be exported from India, and a negative list of 1,209 items that could not be exported from India.

In terms of trade relations, despite being neighbouring nations, India and Pakistan barely trade. Total trade between India and Pakistan rose marginally to $2.41 billion in the year 2017-18 as against $2.27 billion in 2016-17. India mainly exports cotton, dyes, chemicals, vegetables and iron and steel; while it imports fruits, cement, leather, chemicals and spices.

India removing the MFN status means the government can now revise customs duties to any level on goods coming from Pakistan. T

With inputs from PTI

First Published:Feb 15, 2019 3:01 PM IST