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Commerce ministry issues SRO for suspension of trade ties with India


August 10, 2019

ISLAMABAD/LAHORE: With the approval of the federal cabinet, the Ministry of Commerce on Friday issued a statutory regulatory order (SRO) for suspending trade ties with India including banning all kinds of imports and exports.

Pakistan has taken this step in order to oppose India’s move for removal of special status to Indian Held Kashmir (IHK). “Yes, the cabinet has granted approval on our summary for suspending trade with India as it was among the first agenda items. After getting approval of the cabinet, the SROs for amending the Import Policy Order 2016 and Export Policy Oder 2016 have been issued to suspend all imports and exports from/to India. However, letters of credit (LCs), which have been opened prior to issuance of this order, shall be honoured. The Afghan Transit Trade (ATT) will go on as previously,” a top official of government told The News Friday.

Official figures of bilateral trade between Pakistan and India showed that Pakistan’s export to India stood at $263 million in last financial year and imports from India $1.499 billion in 2018-19.

In the aftermath of Pulwama incident, exports from March to June 2019 got slowed down as it stood at $14 million in Feb 2019, $7 million in March 2019, $4 million in April 2019, $3 million in May 2019 and $4 million in June 2019. In earlier months of last fiscal year, the monthly exports stood at hovering around $21 million to $44 million on monthly basis. Imports from India remained in the range of around $101 million minimum to $150 million maximum on monthly basis in last fiscal year.

The Ministry of Commerce issued three different orders with signatures of Director General Trade Policy Muhammad Ashraf stating that the federal government has been pleased to suspend bilateral trade with India with immediate effect and until further orders. The statutory regulatory orders amending the Import Policy 2016 and Export Policy Order 2016 are enclosed herewith for implementation.

According to the SRO 927 (1) 2019, in exercise of the power conferred by sub section (1) of section 3 of the Import and Export (Control) Act 1950 (XXXIX) of 1950, the federal government is pleased to direct that following further amendments shall be made in the Import Policy Order 2016 namely:-

In the said order, in paragraph 5; (a) in the sub paragraph (A) in clause (ii) the following shall be substituted, namely:- (ii) goods of Indian or Israeli origin or imported from India or Israel”; (b) in sub paragraph (B) shall be omitted.

In another order, the SRO 928 (1) 2019 states that in exercise of power conferred by sub-section (1) of sub-section 3 of Import and Export (Control) Act 19650 (XXXIX of1950) the federal government is pleased to direct that the following further amendments shall be made in the Export Policy order 2016 namely:

In the said order, in paragraph 4 in sub paragraph (1) after the word “except” the words “to India and” shall be inserted.

Independent economists said that the current account deficit might witness sharp decline for July 2019 as the data would be available by third week of August 2019 after Eidul Azha holidays. It is projected that the current account deficit might stand at $700 to $800 million for July 2019 from $2 billion in July 2018.

Official circles are claiming that Pakistan’s exports in July 2019 increased by 14.23 percent to $1.87 billion, while imports down by 18.39 percent to $3.9 billion. Current account deficit would be almost zero in July 2019 if monthly remittances of identical number of $ 2 billion are included.

After Friday’s announcement to suspend trade from India, approximately net $2 billion, things will change significantly. With oil prices falling by almost 10 percent, even see a positive number in August 2019 might be seen.

Meanwhile, ehe decision to suspend trade with India is favourable for Pakistan since the balance of trade was always in favour of India which was further increased after the Pulwama attack.

India has suspended the Most Favoured Nation (MFN) status to Pakistan and imposed 200 per cent duties on Pakistani products. Pakistani exports to India never touched half a billion dollars while imports once crossed $2 billion mark. Historical data showed that the total bilateral trade between Pakistan and India in 2012-13 was $2.137 billion out of which total exports of Pakistan to India were only $327.496 million and imports were $1.809 billion, causing trade loss of $1.482 billion. In 2013-14, the trade loss was increased to $1.641 billion as the total bilateral trade volume was increased to $2.457 billion. Exports increased to only $408.365 million and imports jumped to $2.049 billion.

However, in 2014-15, after some measures were taken by the then government of Pakistan to protect the domestic agriculture which resulted in decline in bilateral trade volume to $2.057 billion, while exports were declined to $358.082 million and imports $1.699 billion. In 2015-16, imports were increased again to $1.779 billion while exports decreased to $303.58 million that widened the trade gap to $1.476 billion. In 2016-17, exports were increased to $359.179 million while imports reduced to $1.701 billion and the trade gap reduced to $1.342 billion.

In 2017-18, the trade gap reached the highest level of $1.498 billion and imports touched a new high of $1.840 billion. Exports remained $342.44 million as the country was compelled to import cotton from India during these three years.

However, after the Pulwama attack, trade relations were adversely affected as total bilateral trade between the two countries came down to $1.735 billion in which exports were declined to $263 million with imposition of extra 200 per cent duties on Pakistani products by the Indian government through terminating the MFN status to Pakistan and imports to $1.499 billion.

After the Pulwama attack, in June-February 2018, Pakistan’s total exports were $145 million and imports $965 million which were reduced to $32 million exports and $611 million imports during the same period of 2019.

Director General Trade Policy Muhammad Ashraf, talking to The News, said Pakistan evolved the strategy to lessen the effects of the suspension of trade with India. “Pakistan has minimal exports to India. Only our dried dates sector was hit for which we have been working since February when India imposed 200 per cent duties and suspended MFN status. Pakistani dates are one of the major exports to India and we have already evolved a strategy for it. We have developed other international markets and were able to clear our inventories for the last year through market diversification. For the next season, we have explored Turkey and other markets.”

Cement is another major exporting product to India for which the cement industry itself started exploring new markets. After suspension of cement exports to India, Pakistani cement manufacturers have explored new markets like China and others.