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India withdraws Most Favoured Nation status to Pakistan

Most Favoured Nation status is given to an international trade partner to ensure non-discriminatory trade between all partner countries of the WTO.

Just a day after at least 40 Central Reserve Police Force (CRPF) personnel lost their lives in a dastardly suicide bombing attack in Pulwama, the Indian government has withdrawn "Most Favoured Nation" or MFN status accorded to Pakistan.

Finance Minister Arun Jaitley said the Ministry of External Affairs will initiate all possible steps to ensure complete isolation from the international community of Pakistan, which is expected to have a hand in the attack carried out by terror outfit Jaish-e-Mohammed.

"MEA will initiate all possible diplomatic steps which are to be taken to ensure the complete isolation from the international community of Pakistan of which incontrovertible is available of having a direct hand in this act," said Jaitley.

What is MFN status?

Most Favoured Nation status is given to an international trade partner to ensure non-discriminatory trade between all partner countries of the WTO.

A country which provides 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).

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.

In a nutshell, MFN is a non-discriminatory trade policy as it ensures equal trading among all WTO member nations rather than exclusive trading privileges. Since India and Pakistan are part of the WTO, both are required to grant MFN status to each other and other partner countries.

Does MFN status offer preferential treatment?

Although it sounds as if MFN offers preferential treatment, it only ensures non-discriminatory trade. It makes sure that any country receiving MFN status avoids any disadvantageous situation in comparison to the granter's other trade partners.

An MFN status helps reduce trade barriers and results in a reduction in tariffs. An MFN status helps in the promotion of free trade between two or more countries.

When did India grant MFN status to Pakistan?

India granted MFN status to Pakistan in 1996, just a year after the formation of the WTO. On the other hand, Pakistan is yet to award MFN status to India. The reason behind Pakistan's move to not grant MFN status to India is decades of conflict, mistrust, and war.

Yesterday's attack on the CRPF convoy, which left 40 troopers dead and several others injured, has forced India to revoke MFN status given to Pakistan. The move is expected to further Pakistan's trade advantages which it gets from India.

Considering that there is hardly any strong trade ties between the two neighbouring countries, such a move will only be symbolic. The move could also lead to increased illegal trade between the two countries.

While past requests have been made to revoke MFN status awarded to Pakistan, the Indian government finally decided on the move after yesterday's devious attack.

What happens now?

Sources in the commerce ministry will now write to WTO in order to revoke MFN status given to Pakistan by invoking Article 21 of WTO, also known as the Security Exceptions Article.

The process of communicating to WTO (file moved) has begun, suggested sources.

As of now, the value of trade between India and Pakistan stands at 2.61 billion dollars or Rs 1.86 lakh crore.

Pulwama terror attack

On Thursday at around 3:30 pm, an explosive-laden SUV rammed into one of the buses out of a 70-vehicle CRPF convoy at Awantipora town in Jammu and Kashmir's Pulwama district. The bus, carrying around 35-40 soldiers, was passing through Gundipoora section when it was attacked.

Pakistan-based JeM has identified the suicide bomber responsible for the attack as Adil Ahmed Dar and released a video of him soon after the attack. He was reportedly part of the Pakistan-based terror group since 2018.

Currently, the situation in the Valley remains tense as all police convoys have been halted and an NIA team will be sent to Kashmir soon. Prime Minister Narendra Modi said the forces will be given full freedom to avenge the attack, adding that "Pakistan has made a huge mistake".

Many including the United States have condemned the heinous attack that has claimed the life of over 40 paramilitary troopers and left many injured.