New Delhi has raised duties on major Pakistani products as a protest against last week’s terrorist attack on its paramilitary soldiers for which it blames Islamabad.
Around 300 trucks carrying cement, one of Pakistan’s major exports to India, were stuck at the Wagah border after duties were suddenly increased 200%. This made importing them very expensive or nearly impossible. Shipments of 170 containers by sea also came to a grinding halt.
The Indian market accounts for a quarter of Pakistan’s total cement exports. In the last financial year, Pakistan sold India $23 million worth of cement. Fruit and vegetable exporters will also bear the brunt of the reaction since they exported $41 million in production.
This economic development has come in response to a terrorist attack on the Central Reserve Police Force. More than 40 personnel were killed in Pulwama district of Indian-Administered Kashmir. New Delhi accused Pakistan-based Jaish-e-Mohammad. Pakistan has asked India to provide any evidence to prove the claim.
The chain reaction started with India revoking Pakistan’s most-favoured nation status, which affects trade. In 1996, India awarded Pakistan MFN under the World Trade Organization General Agreement on Tariffs and Trade. Both countries are signatories to it. Under this arrangement, they are supposed to treat each other as favored trading partners while imposing customs duties.
When India revoked Pakistan’s MFN status last week, it was then free to increase duties. Indian importers would have to pay much more for Pakistani products as a result. This means that Pakistani exporters found that their products had been rendered more expensive and uncompetitive. The two countries exchanged goods worth $2.4 billion the last financial year.
Advisor to the Prime Minister on Commerce Abdul Razak Dawood said, however, that India has not officially communicated its decision to withdraw Pakistan’s MFN status. He added that they are looking into the matter and could talk to New Delhi about it and even raise the issue at the WTO forum.
Oil and minerals, cement, leather products, spices and dry fruit and vegetables are Pakistan’s major exports to India and earn $488 million a year. On the other hand, Pakistan imports Indian cotton, vegetables, tea, iron, steel.