Indo-Pak trade track

Islamabad fritters away the benefits of entering a billion-people market

Written by Sajjad Ashraf | Published: February 23, 2012 12:29:45 am

Islamabad fritters away the benefits of entering a billion-people market

Given the history of mutual suspicion,the recent visit of Indian Commerce Minister Anand Sharma to Pakistan,the first in 30 years and at the head of an 80-strong business delegation,can arguably be termed as a success.

While it was no doubt disappointing that Pakistan could not keep its declared timeline of announcing the “negative list”,the signing of three agreements meant to allay Pakistan’s concerns about a “level playing field” is a step in the right direction. Equally encouraging is the understanding reached between the two sides to hold further discussions,likely in March,on several measures of economic engagement.

Experts agree that direct trade,currently at a measly US $2.7 billion,is expected to reach $10 bn within three years,once Pakistan reciprocates to India’s MFN status granted to Pakistan in 1996.

Notwithstanding the MFN status,Pakistani exports to India remain abysmally low due to non-tariff barriers in India,argue Pakistani businessmen. While all barriers may not be Pakistan-specific,the absence of adequate handling facilities on the Indian side at the Wagah-Attari border and India’s strict visa conditions for Pakistanis are just two examples of these barriers and are not conducive to business.

Addressing a business meeting in Karachi,Sharma assured the sceptical Pakistani businesspeople that “India wants to engage Pakistan and write a new essay of trust and friendship to change the future of this region.”

Many in Pakistan dismiss Sharma’s words as hyperbole. For right-wingers,there can be no “trust and friendship” between India and Pakistan unless Kashmir is wrenched out of India’s control. Extremists on either side need to understand this mutual belligerence holds back economic growth of the whole SAARC region. There is a lesson here from the India-China engagement where,despite territorial claims,bilateral trade touched $74 billion in 2011,which the two aim to raise to $100 billion by 2015.

Pakistani manufacturers,used to making money based on protectionism and chronic energy shortages,lead the campaign against liberalising trade with India without realising that competition will improve quality standards in Pakistan.

Detractors of the India-Pakistan economic engagement must realise that north-west India — out of which Pakistan was carved — with all the rivers flowing downstream into the Arabian Sea,historically forms one economic unit. That is why,despite the heat generated by Partition,the two countries allowed duty-free exchange of goods at the time of Independence. This arrangement lasted only three months. Since then,economics has remained subject to politics.

Pakistan opened its markets for consumer items during the 1950s. Restricting Indian imports within the “positive list” (allowing trade in the listed items only),when Pakistani markets are swamped with Japanese,Korean and Chinese products,was bound to be questioned,as it is now by the common people in Pakistan.

The signing of the FTA with China in 2006,following which many Pakistani products faced stiff competition from Chinese products,brought forth the economic absurdity of keeping India out merely on the basis of “politics”,argue many businesspeople.

There is considerable logic in the argument that if Pakistani products can withstand competition from China,why not India? By following India-specific restrictive trade policies,Pakistan foregoes its advantages of improving in competition and enter a billion-people market in a booming economy with a growing middle class. At the same time,it is incumbent on the Indian leadership to allay Pakistan’s concerns,remove Pakistan-specific barriers and help build confidence in their Pakistani partners.

Of critical importance in developing the regional economic structure is the Iran-Pakistan-India (IPI) gas pipeline,delayed in the face of US opposition. India chose to pull back from the project in 2009 citing security and pricing reasons. Sceptics link India’s decision to the Indo-US civilian nuclear deal. Iran has completed its part of the pipeline and Pakistan has reaffirmed completion of the project during 2014 at the latest. While India ostensibly maintains the option to return to it,this may be the time to rejoin this important project when India’s demand for energy is on the rise. In addition to meeting its energy needs,India could then contribute to the “peace pipeline” for the larger good of the region in which India is the major power.

In the spirit of natural partnership growing out of shared history,the leadership and people at every level must ensure that the forward movement is sustained this time. Once confidence takes hold,the demands of globalisation and mutual advantages will necessarily lead to overland exchange of goods between India,Central Asia and Europe,and it will all be through Pakistan.

With trade and ideas traversing either side,the people of the two countries should be able to look forward to a shared and a prosperous future too.

The writer,formerly in the Pakistan Foreign Service,is adjunct professor at the Lee Kuan Yew School of Public Policy and visiting senior research fellow at the Institute of Southeast Asian Studies,Singapore

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