India increased customs duty on all goods originating from or imported from Pakistan to 200 per cent with immediate effect. It is not very clear whether this will affect the third-country trade which is going on between the two countries through places such as Dubai in the UAE and Singapore.
The move comes after India withdrew the ‘Most-Favoured Nation’ status accorded to Pakistan on February 15 following the Pulwama terror attack in Jammu and Kashmir that led to the killing of at least 40 CRPF personnel and injuring of many others.
• The most favoured nation (MFN) status was accorded in 1996 under WTO’s General Agreement on Tariffs and Trade (GATT).
• The special status is accorded by one state to another in international trade. The term means that the country which is the recipient of this treatment must nominally receive equal trade advantages as the “most favoured nation” by the country granting such treatment.
• As per the obligation under the WTO, the member countries of WTO were required to extend MFN status to each other automatically, unless otherwise specified in the agreement or schedule notified to the WTO by the member country.
• India granted the MFN status to Pakistan in the year 1996. Though the two nations have no formal bilateral trade agreement, a composite dialogue began between them in 1998.
• As per the WTO rules, India could roll back the MFN status from Pakistan at any point. The decision to review the MFN status accorded to Pakistan was first thought off in the wake of Uri attack.
• Pakistan exported just 500 USD million of goods in 2017-18 to India, representing 1.5 per cent of its exports. However, it is believed to have exported goods worth about 3-4 times as much through third countries.
• While the official trade between the two neighbours in 2017-18 stood at 2.4 USD billion, the third-country trade between the two is estimated to have been 5-10 USD billion.