F E A T U R E S

India-Pakistan Trade Stuck in Barricades
Gobind Thukral

IMAGINE if India and Pakistan had not fought two deadly wars and if Pakistan had not openly abetted insurgency in Kashmir, the two rivals besides cutting down on defence spending  would have reaped huge gains. Their deep cultural and social ties would have been the envy of the world and economic co-operation and competition would have brought prosperity, reduced poverty; illiteracy and detestation for each other replaced with empathy and consideration. Alas! The very reverse and painful has been the relationship since the dawn of freedom.

Fortunately, there is a strong peace process moving at several levels and the constituency of peace offers rich dividends for the political class and the people. Yet its speed sometimes belies hope and a skeptical and an apprehensive public feels disheartened. Look at the trade barriers the two countries have erected and they just do not go despite host of meetings, pious declarations and agreements. Trade talks move at snail’s pace despite the demand from the industry, trade and the public. How does one explain the denial of land route Wagha – Atari for India to reach Afghanistan? India is allowed as Pakistan permits other countries from Europe and America to move goods via sea to Karachi port. The two countries have active links via road- Amritsar-Lahore and rail links via Atari-Lahore linking the two Punjabs and Munabao-Khhrapar linking Rajasthan and Sindh. For trade, these remain underutilised despite the regional free trade agreement, South Asia Free Trade Area [SAFTA] among the seven Saarc countries calling for the barriers to go.

A good section of the media and the Pakistani elite now understand that they could hardly reap any advantage from war mongering which had been the compulsion of some politicians and army dictators. It is not that the Indian leadership is not blameworthy, but Pakistan as President Gen. Pervez Musharraf recently acknowledged has been a pawn at the chessboard of western hegemony. Addressing the senior State Bank of Pakistan officers recently, Musharraf spoke unequivocally about the situation emerging since the Soviet invasion of Afghanistan in the late 1970s, with a reference to “the arrival of four million Afghan refugees in Pakistan, the training of the Mujahideen in Pakistan, civil war in Afghanistan and Pakistan’s support to the Taliban government, and the beginning of an armed freedom struggle by the Kashmiris in the late 1980s.”  He said that his government was undoing what, “Pakistan and the West had jointly done in 27 years”.  Candid indeed. The people in the sub-continent, hostage to politics of hegemony and communal lineup for long could expect some peace, open borders and good trade. Yet the bilateral trade between India and Pakistan is extraordinarily peewee - less than one percent of their global trade. Reason: their volatile political relationship has besieged attempts to encourage trade between the two countries. In turn it has impacted economic integration in the South Asian region as a whole. Pakistan allows Indian goods either to be smuggled or imported from Singapore and Dubai.

In 2000-2001, India exported goods worth a mere $186 million to Pakistan, out of $44 billion of its total exports.  Pakistan's total export was $8.8 billion, but only $65 million to India.  Despite the large increase in the number of positive items to 1059, the bilateral trade continues to be small, less than one billion dollars.

Experts estimate that the full scope of bilateral trade between Pakistan and India; once estimated at three billion dollars and recently at five billion is now anticipated at ten billion dollars. Instead of trading through third countries like Dubai and Singapore and suffering outright smuggling and criminalisation of society, the two neighbours could directly exchange goods with each other. Even the sealed borders remain attractive to smugglers for goods and drugs, giving rise to mafia in areas like Amritsar, Ferozepur, Sri Ganganagar and Jodhpur on the Indian side and Lahore and Kasur on the Pakistani side. The two sides have been heavily burdened with expenditure to check this smuggling. Instead the legal way could get the two governments large tax revenue, trade and industry could flourish and competition would help industry to upgrade and improve standards. The consumers would get variety and that too at competitive rates.

Moreover products like sugar, wheat and meat when in short supply could quickly move from one country to another and offer consumers respite by checking spiraling prices. Right now India needs wheat and Pakistan is surplus by 1.5 million tonnes. Why go to Australia and Canada for that?  Similarly Pakistan needs sugar and India is surplus. In fact, India has recently helped Pakistan through the export of sugar and meat. Insurance and transport costs are much lower, particularly through rail and road.

Energy cooperation is the key area where the two nations could benefit. India as the rapidly growing energy markets can absorb new sources of supply and Pakistan could fulfill that need as a potential transit route from Iran and Central Asia. India has shown keenness for the   construction of one or more new pipelines, a major capital investment. This is possible only if there is political stability and economic feasibility and not the saber rattling. According to an Iranian proposal, Pakistan could gain up to $800 million per year as transit fee. It could also fulfill its own energy needs. India would benefit from diversified sources of pipeline gas and lower its dependence on more expensive liquid natural gas (LNG).

Major hurdles continue to be political and psychological.  The burden of the song has been Kashmir first and Pakistan little realises that it’s most backward poverty struck Balochistan, Wazirabad and NWFP and even Kashmir it has, are a political bombshell threatening the disintegration of the nation. Normal political and trade relations could be helpful in a big way. For good reason now traders and industrialists in Pakistan do not think India could just swallow them. There is greater confidence and they feel they could do business. Pakistani media reflects this abundantly.

Nevertheless, bright spots are emerging. Pakistan has officially agreed to abide by the SAFTA and it should be moving towards granting ‘Most Favoured Nation’ status too. India had granted that status long back in 1995-96.   At the recent Dhaka meeting of commerce ministers, both have agreed not to levy import duties of more than five percent on products traded within the South Asia Free Trade Area. The agreement is to lower import duties by 2008. Five other countries of the SAARC have agreed to keep the duties between zero and five percent.  This silver lining was clear when Indian commerce secretary, SN.Menon held three-day long meeting with his counterpart in Pakistan in mid April. Discussions remained positive all along and disagreements were kept at bay.

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