Shafeeq Rahman on how normalisation of Indo-Pak trade would bring mutual benefits
DESPITE POLITICAL disturbances and border disputes, India and Pakistan have the untapped potential in trade of numerous commodities and services which would ultimately enhance economic and commercial cooperation and contribute to economic growth and development in both the countries. Trade could also be the best confidence-building measure. To increase the volume of trade in both sides, bilateral discussions at ministerial level among the different departments were held in the last two years on several occasions. Pakistan’s intention to give the Most Favoured Nation (MFN) status for India at the end of this year is considered as the key step towards the enhancement of trade.
Pakistan will move from a ‘Positive List’ to a small ‘Negative List’ for trade in sensitive items. The Negative List of 1,209 items was formally notified by the government of Pakistan on 20 March. It is expected that the complete phasing out of the Negative List before the end of 2012 would complete the transition to Most Favoured Nation (MFN) status for India, by Pakistan. Referring to importance of MFN, Pakistan President Asif Ali Zardari has said that granting Most Favoured Nation trading status to India was a paradigmatic shift in policy driven by business sectors on both sides of the border. He said that the decision would reconstruct the region’s economies and increase its stability. After granting the MFN status, Pakistan’s import duties for Indian products would be around five times less than general duties. India is also implementing friendly trade policies with Pakistan through South Asian Free Trade Area (SAFTA) agreement, lowered its peak tariff to Pakistan by 8 percent and promised to downgrade up to 5 percent by 1 January 2013.
To normalise trade, both the countries need to dismantle the unnecessary tariff barriers and to open the rail and road linkages at different border points so that the time and money spent on transit, now on the higher side, could be minimised. At present, transport infrastructure with Pakistan is adequate for trade compared to India’s infrastructure with Nepal, Bangladesh and other neighbouring South Asian countries. Inadequate transport infrastructure may be due to the confidence deficit in the government about expansion of extremist activities but business groups and the common man on both sides are willing to enhance the cooperation in trade and investment.
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It is for this reason that an integrated checkpost and dedicated gate for the movement of trucks with commodities at Attari-Wagah border started in April 2012. Similar integrated checkposts are under consideration at different border points for smooth transportation. Sectors with high trade potential among the two countries are agri-products like fresh vegetables, fruits, cereals, dates and spices which require speedy delivery. India also offered to export refined petroleum and petro-products by road, rail and by sea and is willing to look at the feasibility of constructing product pipelines to Pakistan. Multi-entry visa for businessmen would make travel easier.
INDIA HAS a favourable balance of trade with Pakistan due to its surplus in export. Further, India being the emerging export destination, globally known for low-priced products, can meet the demands of Pakistan’s consumers. In the last five years, from 2005-06 to 2010-11, India’s export to Pakistan increased nearly three times from $689 million to $2,333 million. The mainly commodities exported are sugar, vegetables, cereals, textile and chemicals. Similarly, India’s import is also increasing. The goal is to double bilateral trade within three years.
After independence in late 1940s, India and Pakistan were major trade allies. But the subsequent wars and political tensions between the governments derailed commerce, the worst period being 1965-74. Now, with political stability on both sides and people’s willingness to engage in trade, mutual benefit is assured. Pakistan’s huge population and the similarity in clientele are pluses for India. Pakistan would get the benefit of low-priced products from India, increasing competitiveness in the domestic market. Both sides need to build confidence with less protectionist policies. Bilateral trade, of course, not is the catalyst for peaceful coexistence but it would definitely count as a keystone for a prosperous South Asian region.
Posted on 7 May 2012 in Tehelka
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