India withdrew most favored nation (MFN) trading status with Pakistan immediately following a suicide bombing that killed at least 40 national police and injured hundreds more. India then imposed a 200% duty on any goods imported from Pakistan.
MFN agreements lower barriers to trade. The special trading status was first granted by India in 1996. Pakistan has not fully reciprocated during the intervening years but was softening its stance prior to the Feb. 14 incident. The two countries have thrice gone to war since the 1960s.
The attack, followed by reprisals in the air and on the ground, left both nations bloodied and fearful of escalation. India and Pakistan each possess enough nuclear weapons to assure mutual self-destruction.
India’s tea exporters are publicly supporting government retaliation against Pakistan, a choice that has disrupted tea trade norms.
Anshuman Kanoria, who chairs the Indian Tea Exporters’ Association (ITEA), said members of the association are willing to sacrifice a market over principle.
“The nation and the security of our forces and fellow countrymen come first and commerce is secondary,” Kanoria explained. “We are not even thinking of trade with Pakistan now. We stand firmly behind the government and are waiting for direction from the government,” he said. “Exporters are not refusing shipment to Pakistan, but the mood among Indians is one of extreme anger. Exporters are adopting a wait and watch attitude and looking for direction from the Indian Government.”
The India Tea Association (ITA) supports restrictions. ITA chair Vivek Goenka told the Economic Times, the industry will look for other destinations like Egypt, the Middle East, and Russia to export Indian tea.
“What is more important is to protect our country from this sort of ghastly terror attack,” he said. “Whenever there are tensions between the two countries, exports get impacted. We have seen that in the past also,” said Goenka.
Imposing retaliatory tariffs quickly led to a cut off in supply. Pakistan is the world’s third largest tea importer and has turned to suppliers in Kenya and Sri Lanka but continues to receive tea from India via re-exporters in Dubai.