India has taken a stern step of withdrawing the Most Favoured Nation or MFN Status of Pakistan. This move would enable India to increase customs duty on goods coming from Pakistan. The decision was taken in the meeting of the Cabinet Committee on Security (CCS).

What is the MFN Status?

• The MFN status is given under WTO’s General Agreement on Tariffs and Trade (GATT). It is given to an international trade partner to ensure non-discriminatory trade amongst all the members of WTO.
• As per the first clause in the General Agreement on Tariffs and Trade (GATT), a country providing MFN status to another country has to provide concessions, privileges, and immunity in trade agreements.
• WTO states that if a special status is granted to one trade partner, the country is required to extend it to all members of the WTO without discrimination or any special treatment.
• An MFN status helps reduce trade barriers and results in a reduction in tariffs especially in customs duty. This in turn strengthens trade-ties between the two countries.
• As India and Pakistan both are members of the WTO, both are required to grant MFN status to each other and other partner countries.

 India’s exports mostly include cotton, dyes, chemicals, vegetables and iron and steel; while its imports include fruits, cement, leather, chemicals and spices. Given that Indo-Pakistan trade-ties is not very strong, this step of revoking the MFN status is only symbolic.