3.11.11

Gestures politics with no real meaning can't save the day. India Pakistan need a no holds barred FTA.

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Pakistan grants India Most Favored Nation trade status

Yahoo News and Reuters.

Pakistan's cabinet unanimously decided on Wednesday to grant India Most Favoured Nation (MFN) trade status, a major breakthrough that could bolster efforts to improve relations between the nuclear-armed rivals.

Trade has long been tied to political issues between the hostile neighbors, who have fought three wars since independence from Britain in 1947.

There are hopes that progress in trade ties will help bolster a fragile peace process, which the two resumed in February, with political implications likely to outweigh any practical benefits.

(But there are practical benefits if all sides are sincere. It is wholly uneconomical at present for both sides to conduct trade via the Gulf.......just doesn't make sense)

"This was a decision taken in the national interest and all stakeholders, including our military and defence institutions, were on board," Information Minister Firdos Ashiq Awan told reporters.

(Good job)

Pakistan's military, which has ruled Pakistan for more than half of its history, sets security and foreign policy.

Critics say Pakistan's generals have been so obsessed with a perceived security threat from India for decades that their judgment on vital issues such as the economy has become clouded.

"It's a very powerful step, and a welcome step in the right direction," Indian Trade Secretary Rahul Khullar told Reuters in New Delhi.

"It's good for business. It's good for commerce, and most importantly it increases confidence on the economic front that both Pakistan and India are committed to moving the social and trade agenda forward."

Islamabad has been looking increasingly isolated after India signed a wide-ranging agreement with Afghanistan last month, and the unilateral U.S. raid that killed Osama bin Laden in Pakistan in May which heavily strained ties with ally Washington.

"It's (MFN status) a very major milestone in terms of change in the mindset of Pakistan," said retired Pakistani general and prominent commentator Talat Masood.

"I think they have realized they can't have bad relations with the United States and at the same time continue to have very poor relations with India because this synergy will be very dangerous for Pakistan."

(As has been shout about many times by certain quarters)

While India granted Pakistan MFN status in 1996, Pakistan hesitated.

Pakistani officials want New Delhi to remove non-trade barriers against Pakistan goods. Pakistan has long complained that Indian quality standards and customs procedures have hindered the flow of Pakistani goods into India.

Of the $1.4 billion in trade recorded in 2009/10, Indian exports to Pakistan stood at $1.2 billion while Pakistan exports to India totaled $268 million, according to official data.

India exports $250 billion 2010-2011

Pakistan exports $19 billion 2010-2010

The wider economic disparity is just as stark. Pakistan reported 2.4 percent growth in gross domestic product in the 2010-11 fiscal year while India reported 8.5 percent growth.

Since the 1960s, when Pakistan was an Asian tiger economy (Which other Asian countries including South Korea tried to copy) and India a basket case, India's economy has swelled to $1.5 trillion ($4500 billion PPP), more than eight times the size of Pakistan's $175 billion.($480 billion PPP)

Trade ties were severed after the second war between the two countries in 1965 and have yet to recover fully.

(Now is the time to negotiate for a pre-1965 trading position, and to take things further)

But despite the challenges, the two now appear more keen to remove barriers to trade and the two countries' commerce ministries say trade could easily triple in three years.

(or $4.2 billion.......far too small given Sino-Indian trade volume projected for 2015, and Sino-Pak trade volume projected for 2015)

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(Additional reporting by Qasim Nauman and Rebecca Conway in Islamabad and Matthias Williams in New Delhi; Editing by Nick Macfie; Writing by Michael Georgy)