Trade – with – India Argument

        (Edited version published in “Pakistan Today” November 20, 2011) 

Considering Pak-Indian complexity, progress on trade and investment should move in tandem with progress on political and security issues. Yet there is no denying the potential in increased bilateral trade, which is why both governments should move towards enhancing the overall volume.

Interestingly, prior to partition, a good 95 percent of the subcontinent’s trade comprised activity within its borders, and since the fateful divide, the number has dropped to as low as five percent, an indicator of how much both countries can gain from opening up.

In case of fair and sincere advances in trade, Pakistan stands to gain more. There is a good reason the world is making a beeline to tap and exploit India’s rapidly growing, vast market. Therefore, Pakistan’s recent trade diplomacy, culminating in granting India the MFN status, is understandable. It’s just how the exercises undertaken that left a little to be desire?

In effect, Islamabad ended up acceding to India’s MFN demand in return for removal of the latter’s objections in the wro to Pakistan’s special trade concession by the European Union – a one time, time barred window offered to help in the devastation caused by floods.

Of course, MFN or no, we’ve been trading with India for a long trme, primarily around the two thousand odd positive list items Pakistan permits. But despite the fact that India granted Pakistan the MFN status in 1996 and Pakistan didn’t, the overall trade balance is tilted heavilyin NewDelhi’s favour. Of the total trade volume of approximately $1.5 billion,while fine-tuning such arrangements, it is of the utmost importance to safegu’ard interests of local industry, agriculture and the services sector Pakistan’s share is a paltry $275 million. Primarily, we’re unable to export to our potential due to excessive Non-Tariff Barriers (NTBs)erected by India.

I would have approached this issue by seeking a comprehensive bilateral hade deal going beyond WTO and Safta. Falling back on our respective comparative advantages, I would have sought trade preferences for products capable of significant market penetration in India like textiles, value-added textile products, food items, etc. In return, I would ,have directed the government to offer India preferences on raw material machinery, IT products, etc. While fine-tuning such arrangements, it is of the utmost important to safeguard interests of local industry, agriculture and the services sector, hence the stress on gradual opening up. The removal of NTBs has to be central to any such negotiations. India cannot demand trade liberalisation and enforce restrictive barriers at the same time. It is with regard to these issues – protecting indigenous strength and unwinding NTBs – that the recent initiative has been off the mark.

We came close to establishing fresh trade parameters when I was the government’s chief trade negotiator, as Pakistan’s commerce minister for five years, but lack of appropriate movement on political and security issues often checked progress. That we are finally on the road to trade is encouraging, however the need to proceed with caution cannot be stressed enough.

I would also caution against aggressive posturing on opelllng transit routes. It is extremely important to note the incongruity between Saarc access via India and route to Afghanistan and Central Asia through Pakistan. Plus, Afghan transit is one of the biggest, most menacing avenues of struggling into Pakistan. Granting India access will only exacerbate the problem. Specifics of granting transit rights are outside the ambit of the WTO and should be taken up under relevant multilateral transit conventions, not bartered away for deals like the EU concession.

It also bears noting that so long as the other arm of revenue generation – the tax machinery – is compromised, the export sector must be made that much more. proactive to keep the wheels of the economy running. For years.’ Pakistan and India have let political differences interfere with mutual socio-economic uplift, possible through increased trade. We must ensure more trade while protecting our interests, which requires prudence and care, not fanfare.