2012-13, Alto, automobile, cheaper, diplomacyMazhar M Chinoy, emission standards, Euro-compliant engines, Euro-II, free trade, imported, India, joint ventures, liberalisation, MFN, Most Favoured Nation, non-tariff, Pakistan, spare parts, stability, Suzuki, Toyota Corolla, trade, Wagah-Lahore
The present government seems quite keen on liberalisation of trade with India and is even considering awarding the country Most Favoured Nation (MFN) status, a status which has its share of critics and supporters.
Pakistan’s anti-liberalisation lobby is led by the local automobile manufacturers who fear that free trade will lead to cheaper Indian cars being imported into Pakistan, eventually driving local manufacturers out of business. However, all the lobbying against India’s potential MFN status has not amounted to much and local car makers are reconciling themselves to the idea of Indian imports, even if they are only spare parts.
In reality, open trade is not a bad proposition for the automotive industry, as it presents opportunities for both countries. For example, certain Toyota Corolla parts are cheaper in Pakistan while other parts are cheaper in India; this can be made into a win-win situation for the parent company, benefiting both affiliates.
Local producers like Suzuki can also benefit by importing cheaper parts from India, reducing prices locally. Similarly, cheaper Euro-compliant engines for the Alto can be imported, enabling Suzuki to reinstate this popular model, which was discontinued in 2012 for want of mandatory Euro-II emission standards.
From the other side of the border, there have been reassurances that non-tariff barriers – which currently inhibit imports from Pakistan – will be removed. This bodes well for the relatively swift set up of Pakistani joint ventures with Indian parts makers; furthermore, action on improving channel systems through the Wagah-Lahore route is already underway.
In 2012-13 Pakistan imported Indian goods worth $1.7 billion while its exports to India amounted to only $510 million. The MFN status will catapult this figure manifold, but the real concern is the long term stability of India-Pakistan free trade, which is directly dependant on successful diplomacy.
– Mazhar M Chinoy
First published in the Adbuzzzz Section of The DAWN National Weekend Advertiser on November 10, 2013.