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India withdraws Most Favoured Nation status for Pakistan

India withdraws Most Favoured Nation status for Pakistan

Indian government on February 15, 2019 announced to withdraw the Most Favoured Nation (MFN) status accorded to Pakistan.

The decision of Prime Minister Narendra Modi headed Cabinet Committee on Security (CCS) came a day after the dastardly terrorist attack on CRPF convoy in Pulwama killing more than 40 jawans.

Besides, India will initiate all possible steps to ensure complete isolation from the international community of Pakistan.

What is MFN status?

Under rules of the World Trade Organisation (WTO), a member country is not allowed to discriminate between trade partners and if a special status is granted to one trade partner, the country is required to extend it to all members of the WTO.

Thus, MFN is a non-discriminatory trade policy as it ensures equal trading among all WTO member nations rather than exclusive trading privileges.

A country providing MFN status to another country has to provide concessions, privileges, and immunity in trade agreements. It is the first clause in the General Agreement on Tariffs and Trade (GATT).

When did India accorded MFN status to Pakistan?

India and Pakistan are part of the WTO, both are required to grant MFN status to each other and other partner countries. India granted Pakistan the MFN status in the year 1996, however, Pakistan has so far not given the MFN status to India.

What would be the effect of withdrawing MFN status?

Withdrawing of MFN status for Pakistan would mean rise in custom duties on the goods imported from Pakistan effectively impacting the already crippled Pakistan’s economy. However, considering that the bilateral trade between the two countries stand at meagre US$ 2 billion, such a move will only be symbolic. The move could also lead to increased illegal trade between the two countries.

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