The Pakistan Cabinet’s unanimous decision on Wednesday to extend the “most favoured nation” (or MFN) trading status to India ranks as a historic move, regardless of its motivation. The logic of this means the severalfold enhancement of official bilateral trade between the two countries, which is too negligible to be mentioned in polite conversation.
The MFN status is pretty much the norm in trade between nations and was mandated by the old GATT rules that now apply through the World Trade Organisation. Not extending it is the exception. Essentially, MFN status boils down to a country not singling out another for discriminatory or negative treatment in allowing market access. Those exalted words do not have any other exalted meaning. India and Pakistan reciprocally gave each other MFN billing in 1948 even after the turmoil of Partition, and the arrangement continued until the 1965 war. India subsequently returned to the arrangement in 1996 in its relations with Pakistan, but the military in that country insisted on not reciprocating the gesture on MFN, taking the view that business as usual in trade ties would not be permitted until the Kashmir question was resolved to Islamabad’s satisfaction.
This deeply disappointed the business community on both sides, but the facts of life couldn’t be sidestepped. In effect, Pakistan’s military establishment, who are the real movers and shakers in that country, worried that flourishing trade ties might set in motion a dynamic whose logical meaning would be the establishment of a climate of wider investment and closer economic ties, eventually paving the way for easy movement of ordinary people on both sides. If all that came to pass, the military would lose its control as it would be hard any longer to portray India as “dushman humsaya” or “enemy neighbour”, an unfortunate stereotype reinforced through textbooks in Pakistan.
Pakistan military’s reading of India hasn’t undergone a change. Therefore, the proximate explanation for the all-powerful Army accepting the Cabinet’s decision on MFN for India is Pakistan’s current troubles with the United States and Afghanistan on its western flank. It’s then foreseeable that this MFN status to India can be withdrawn whenever the military deems fit. But it’s heartening that Pakistan’s two major parties have long been supporters of the idea. If the MFN status leads on to a more open visa regime, and to two-way religious tourism, then bilateral trade could rise to $40-50 billion a year, far above the measly single-digit figures being bandied about. But wise leadership in Pakistan is needed to live up to the potential. A friendly trade regime between India and Pakistan will also boost the business climate within Saarc, whose 17th annual summit is just days away.