Pakistan to Boost Trade Ties with India

ISLAMABAD -- Pakistan's government announced Wednesday it would normalize trade with its giant rival and neighbor India, a sign of better ties between two nuclear-armed nations whose tense relations have long poisoned South Asia.

The decision to grant India "Most Favored Nation" status would enable Pakistanis to export more goods to booming India at a time when Pakistan's own economy is in the doldrums.
Most Pakistani business quarters welcomed the decision, but some expressed concerns about cheaper Indian goods flooding the market.

The World Bank estimates that annual trade between India and Pakistan is around $1 billion and could grow to as much as $9 billion if barriers are lifted. Much of the current trade is illicit -- products go through Dubai, where they are repackaged and are smuggled into both countries, meaning higher prices for consumers and less tax revenue.

Pakistani Information Minister Firdous Ashiq Awan did not say when the new rules would take affect, but said that the country's powerful military -- which dictates policy on India -- agreed with the decision.

There was no immediate comment from India.

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Granting a country MFN status means that countries trade on equal and improved terms, typically giving each other low tariffs and high import quotas.

India gave Pakistan MFN in the 1990s, but Pakistan did not reciprocate.

Islamist groups and nationalists reared on hatred of mostly Hindu India complained that "trading with the enemy" was a concession to New Delhi.

Awan rejected that, saying Pakistan has similar agreements with 100 other countries and that

"Pakistan would continue to extend moral and diplomatic support to the Kashmiri people. The new trade agreement would not affect the cause of Kashmir."
India has also been hit by terror attacks by militants trained in Pakistan, allegedly with the support of the Pakistani military.

Hostility to India is deeply ingrained in Pakistan's military, which for years has used the threat from the east as an excuse to gobble up most of the desperately poor country's budget. The decision to normalize trade appears to reflect a relaxing of its attitude toward New Delhi.

Analysts have speculated that the army's position has softened because of the country's economy difficulties and threats from Taliban militants in the northwest.