THE new trade policy has been announced amidst a number of serious challenges faced by the economy. The target of 15 percent growth in exports, achieved last year, has again been set in the new trade policy which is quite challenging at a time when the economy is in a spin. Similarly limiting the import bill to $30 billion compared to last year's $39.97 billion is rather ambitious in view of the doubling of oil prices from $ 68 per barrel to $145 per barrel and because of extraordinary hike in the international prices of food items which Pakistan might be required to import. To give boost to production the policy envisages establishment of 11 new industrial clusters, reactivation of the Federal Export Promotion Board and review of the TDAP Ordinance. Incentives have been provided for value added and traditional products and for products manufactured by the SMEs. The new trade policy widens the scope of imports from India by allowing the import of 136 new items. With the inclusion of these items, the total list of tradable products with India has been increased to 1,938 tariff lines from earlier 1,837. This makes the grant of MFN status to India redundant. The rationale given is that cheaper raw material and machinery from India will make local exports more competitive in the international market. The import of mining machinery and paddy harvesters for instance would supposedly bring down the cost of production. Similarly the import of cheaper diesel and fuel oil will help address the growing trade deficit. The import of used buses not more than ten years old has been allowed for overseas Pakistanis. Custom duty on the import of CNG buses which could now be imported from India has been brought down to zero and Indian manufacturers have been offered incentives to produce them in Pakistan. While both Mr Zardari and Mian Nawaz Sharif are committed to increased trade with India, many Pakistanis think this should remain restricted till the resolution of the Kashmir issue. To achieve the export target set at $22.1 billion the government will have to provide uninterrupted supply of power and gas at affordable price to the industrial sector. The recent shutdown by powerloom owners in Faisalabad indicates the seriousness of the problem. What is more the coalition government will have to improve the law and order situation and ensure that strikes and social unrest do not reduce the production activity in major industrial towns. Strikes by truck owners and calls for shutter downs by political parties have in the past led to the cancellation of orders by foreign buyers. What is required to keep the country peaceful is complete harmony between the coalition partners particularly the PPP and PML-N which is presently lacking.