Pakistan’s MFN tag may stay for now

Pakistan’s MFN tag may stay for now

WHAT IS MFN > suggests special treatment, it actually means non-discrimination. WTO.

PRINCIPLE :

  • The MFN concept is an integral part of the WTO agreements and is among the principles forming the foundation of the multilateral trading system.

  • According to the MFN principle of the WTO’s General Agreement on Tariffs and Trade (GATT) — to which India is a signatory/contracting party — each of the WTO member countries (including India and Pakistan in this case), should “treat all the other members equally as ‘most-favoured’ trading partners.”

  • BRING IT FOR ALL ! As per the WTO, whenever a country brings down a trade barrier or liberalises a sector, “it has to do so for the same goods or services from all its trading partners — whether rich or poor, weak or strong.”

  • EXCEPTION BASED ON SECURITY :However, exceptions allowed to this rule include free trade pacts and special benefits to poor nations

  • India could consider making use of a ‘security exception’ clause in the GATT to deny the MFN status to Pakistan or bring in certain trade restrictions. This is because Article 21(b)(iii) of GATT states that “Nothing in this Agreement shall be construed to prevent any contracting party (including India in this case) from taking any action which it considers necessary for the protection of its essential security interests taken in time of war or other emergency in international relations.”

IND-PAK BILATERAL TRADE : 0.4% OF INDIA'S TOTAL. Minuscule trade . Revoking the MFN status it would only have a “symbolic” impact.

  • It would hit India’s exports to Pakistan if there are retaliatory actions and it could also result in India losing goodwill in the South Asian region (where it enjoys a trade surplus and is a party to a free trade pact called SAFTA, which also includes Pakistan)

  • Pakistan, a founding member of the WTO like India, is yet to grant the MFN tag to India (and Israel).

Consider the following statements regarding the MFN?

  1. MFN principle lays down that imported products are to be treated no worse in the domestic market than the local ones, once these have crossed the customs border.

  2. The essence of MFN principle, as per UN charter, is the 'equality of treatment' which can be summed up as “Favour one, favour all”

  3. Every WTO member will treat all its trading partners equally without any prejudice and discrimination.

  4. NONE.

ANSWER :C

http://www.moci.gov.lr/doc/WTO.faqs.pdf

A = that is National principle.

B= Not under UN Charter ; but WTO Agreement.

C= Correct.

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