Trade for peace

The formation of a joint study group to enhance bilateral trade and economic cooperation between India and Pakistan is welcome. Today, the two-way official trade between the two countries stands at US400 million 8212; a minuscule proportion of their trade with the world. This, incidentally, has grown by about 30 per cent in the last one year along when India8217;s exports to Pakistan increased by 32 per cent and Pakistan8217;s to India by about 22 per cent. While India8217;s main exports are chemicals, plastics, petroleum products, ores, and rubber items, it imports mainly vegetables, fruit, sugar and nuts from Pakistan. In addition, informal trade to the extent of about US2 billion takes place through indirect and sometimes illegal channels. Such trade is also sometimes routed through third markets 8212; like Dubai or Singapore 8212; and involves goods like chemicals, medicines, videotapes, cosmetics and viscose fibre. Given this background, the first thing for the two countries to do is to remove barriers so that such trade can become official. This would reduce prices for consumers, raise revenues for both governments and create an environment for the further expansion of trade.

The biggest benefit of greater cooperation is expected to come from the construction of a gas pipeline from Iran which will benefit both countries. But the two countries should not limit economic cooperation to the energy sector. India will gain from having access to a larger market and by offering IT and business services to companies in Pakistan. Today Pakistan8217;s fears of being inundated by cheap imported products is much lower than a couple of years ago, as trade with China has risen sharply without it having a damaging effect on Pakistan8217;s manufacturing sector or resulting in a loss of local jobs. Opening up to India should not make Pakistan feel as insecure today as it did before the trade expansion with China. Pakistan8217;s traditional exports of small manufacturers such as sporting equipment and surgical instruments will stand to gain immediately from the opening up of the Indian market to them. Its incipient IT industry and its financial sector will gain from cooperation with India which has moved ahead in these fields.

All over the world, greater trade takes place with countries that are geographically close. Yet, in the subcontinent, it is the opposite. There are obvious economic gains from trade and cooperation between the two subcontinental neighbours, but equally importantly there are potentially large dividends in creating constituencies for peace; interests that will counter those who stand to gain from hostility and conflict. The two economist-primeministers would do well to work towards achieving this.