Neighbors, Yet Bitter Enemies Inch Closer To Better Relations

By:  The Associated Press

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. Some Pakistani business quarters welcomed the decision, but others 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 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.

India granted MFN status to Pakistan in the 90's, but Pakistan did not reciprocate until now.

Pakistan and India have fought three wars since they were carved off from each other in 1947, with the disputed status of Kashmir the main flashpoint. Both countries claim all of Kashmir.