Posted by: bklunk | December 4, 2006

Trading States?

Pak to deny MFN status to India: Report

URL: Pak to deny MFN status to India: Report
This article is a great example of the dynamics of the International Political Economy. International Political Economy refers to the interactions between politics and economics. Basically, there are times when high politics such as security, and low politics, such as the economy can influence each other. This article demonstrates one of those instances. The article describes how Pakistan refuses to grant India Most Favored Nation (MFN) status. What does this mean? The Most Favored Nation principle, which is also known as Normal Trade Relations (NTR), refers to this idea that tariff preferences granted to one state must be granted to all products exporting the same product. Despite Pakistan’s refusal, India has granted Pakistan MFN status. Pakistan’s reluctance shows that there still remains a lot of pent up political rivalry between these two countries. India has made the first step in trying to resolve this conflict by granting Pakistan MFN status. Now, Pakistan should do the same in order to try and achieve peace. India’s actions demonstrate the liberal perspective because they are seeking to cooperate witht their enemy. Pakistan’s actions on the other hand, are a perfect example of the realist perspective. By not giving India tariff preferences, they are trying to protect their own local industries. Therefore, they are looking out for their own interests and how to achieve the most power. Also, in many ways Pakistan is free riding because they have achieved the MFN status from India, but they are not willing to make the same offering. Free riding refers to the states who get the benefits of collecting goods, such as an open international economy or national security, without actually having to pay for them. However, I think that it is in Pakistan’s best interest to grant India the MFN status as well. It would promote more peaceful relations between the two countries and it could help Pakistan’s economy by creating more trading opportunities with India.

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Responses

  1. I would agree that it is in Pakistan’s best interest to grant India MFN status. Not only would this help with the peace process, but it would more than likely help to expand Pakistan’s economy. If Pakistan earns good trading relations with India that is huge because India is on the the fastest growing economies. Thus, India could have the potential to help Pakistan’s economy grow through their own economic growth.
    It is great to see India taking an initiative to mend the tension with Pakistan through trade. I just hope that Pakistan’s continuous refusal to grant MFN status to India does not somehow spark another possible nuclear war.


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