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India Slashes Textile Tariffs On Pakistan

In what many are calling a watershed historical moment, India has announced plans to dramatically reduce onerous tariffs on the importation of textiles from Pakistan. This is an extension of efforts that begun in 1996 between the two countries, long gripped by tumultuous conflict, to gradually normalize trade relations.

Currently, the bi-lateral trade relationship between India and Pakistan is relatively modest, topping $2.4 billion annually. However, some experts think a mutual liberalization of their markets could expand that volume ten-fold over a short period of time.

As it stands, India imposes a hefty 30 to 45 percent duty on all textile products that originate in Pakistan. The government plans to reduce that burden to a comparably modest 5 percent and is considering, sometime in the proximate future, offering Pakistan duty-free access as well. India extended duty-free access to Bangladesh in 2011.

The thorny issue of duty-free access has stymied trade progress between the two nations before. India granted Pakistan that status in 1996 in exchange for a promise to be granted “most favored nation” status in return. The intent of the agreement was to drastically reduce the number of products both nations have banned importing from each other across their borders. However, Pakistan reneged on its commitment and never revised India’s trade status.Also, many Pakistani businesses complained that cumbersome regulatory obstacles and unnecessarily strict visa requirements undercut the benefits of India’s extension of the coveted status to Pakistan.

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Still, India plans to reduce the list of banned items from Pakistan shortly. According to a senior official from the Commerce Department: “Once the reduced sensitive list under SAFTA [South Asian Free Trade Agreement] is notified, most of the textiles lines would be out, for the benefit of Pakistan. We might bring it almost to the level of Bangladesh.”

Pakistan is increasingly focused on fortifying its textile and clothing sector, which continues to constitute the bulk of its export volume. As a demonstration of this commitment, the Pakistani government has renamed its Ministry of Commerce, now calling it the Ministry of Commerce and Textile Industry. Opening up textile trade with India would be a major step towards the revitalization of the industry as a whole.

India expressed confidence in the two nations’ march towards greater economic cooperation. Nisha Taneja, a representative of the Indian Council for Research on International Economic Relations said, “Pakistan’s textile export basket is small. It depends on what products under this category would be opened up by India, which is crucial. They are heavily banking on textiles. And, I do not see a problem in granting them easy access because if we can take on Bangladesh, then there would be no problem with Pakistan.”

Nawaz Sharif, Pakistan’s Prime Minister, has been widely credited with the improvement of commercial relations with India. Before he was ousted from power in 1999, he was a prime mover behind peace talks between the two nuclear-armed nations, traditionally adversaries. Even slow progress is reassuring between two nations that have fought three wars with each other since 1947.

In another sign of rapprochement, Sharif recently called for a relaxation of media regulations in both Pakistan and India that would allow for more shared programming. Currently, most Pakistani television is banned from being broadcast in India.