Afghanistan-Pakistan Transit Trade

Issues and Challenges

Pakistan and Afghanistan are interlinked in multidimensional areas, ranging from cultural relations to political ties and from religious bonds to trade links. The trade relations between the two countries are as old as their bilateral diplomatic relationship. As Afghanistan is a landlocked country, Pakistan has been providing transit route to Afghanistan under Article 5 of the General Agreement on Trade and Tariffs and various UN Conventions. Pakistan and Afghanistan have concluded the agreements of transit trade; first the Afghanistan Transit Trade Agreement (ATTA) of 1965, and second, the Afghanistan-Pakistan Transit Trade Agreement (APTTA) of 2010. The ATTA provided Afghanistan with the facility to use Pakistani routes and ports for its transit of goods to the international market. After the independence of Central Asian Republics (CARs) from the USSR in 1991, the Government of Pakistan realized the need for renegotiating the trade agreement with Afghanistan so as to have access to the newly-established CARs. 

According to the APTTA, Pakistan will provide land, air and sea routes to the Afghan goods and Afghanistan will provide land and air routes and facilities to Pakistan for trade with Afghanistan and its bordering Central Asian states and Iran. Both the countries have, time and again, have shown serious concerns on the loopholes in the agreement; businessmen and stakeholders from both sides have consistently been pointing fingers at each other for injustices and burdensome tax regimes. Following are some valuable information regarding APTTA and the issues related to it:

There are three border crossing points on the Durand Line, i.e. Torkham, Chaman-Spin Boldak and Ghulam Khan, as identified in APTTA. Afghanistan is allowed access to three Pakistani ports, i.e. Port Qasim, Gwadar Port and Port of Karachi, while Afghan goods could be transported to India through Wagah Border and to China by Tash Kuram Border Point.

During the past several years, the Afghanistan Chamber of Commerce and Industries (ACCI) has accused Pakistan for not allowing Afghan vehicles and trade convoys to reach to Gwadar port, and alleges that most of the Pakistani vehicles are used for transit trade, which, according to them, is against the APTTA. Annually, about 360,000 Pakistani trucks enter Afghanistan as against an annual entry of 8000 Afghan vehicles. Due to this huge gap, Afghan businessmen say they lose millions to Pakistan. Nevertheless, according to Article 9 of the APTTA, each party is free to select means of transport for the purpose of transit of goods within the territory of the other party to the agreement. The Afghan trucks, reportedly, lacked the third party insurance, which is a necessary condition in APTTA. Afghan authorities and business community should concentrate on removing this flaw in order to bring their trucks and vehicles into an open-market competition.

The agreement also provides for a quota system for the selection of transport with respect to fair share of traffic between the two parties; hence the concerns of ACCI can be addressed through this quota system. This concern was also discussed at the third meeting of Afghanistan-Pakistan Transit Trade Coordination Authority (APTTCA) held on October 11, 2012, which accepted the guarantees of Afghan Ministry of Communications instead of bank guarantees. It has provided Afghan traders and businessmen a viable and feasible option of using their own vehicles.

The next concern shown by the ACCI is that Afghan traders have paid millions of dollars in fines to the Pakistani Authorities in the last five years – for staying longer than the time they are allowed to. It is true because the private sector controls the transactions at Port Qasim and it has its own levies and tariffs, due to which a major chunk of Afghan goods is still waiting for clearance of heavy dues. Pakistani government should regularize the private sector while transiting the goods.

It is also worth mentioning here that Afghanistan charges 110 percent of the value of goods as security while transiting Pakistani goods to Central Asia. This issue must also be addressed at the earliest. It is clearly written in the agreement that no vehicle is allowed to stay longer than the legal time (maximum fifteen days), except in case of accidents or damage to the vehicle. In this case, the concerned authorities should be informed for longer stay. Furthermore, the vehicle should also strictly follow the allotted routes for transit; otherwise, the authorities reserve the right to impose rules and regulations of the host country.

The agreement also provides the facility of Arbitral Tribunal for resolving the issues of bilateral concerns. The APTTCA has to formulate the tribunal comprising two arbitrators within thirty days of the request from either party. The tribunal, chaired by a third neutral arbitrator (neither a national nor a resident of the conflicting countries) would, then, be bound to decide the matter within thirty days. The tribunal will be free to decide its own procedural rules in the light of instructions and procedures given by World Trade Organization (WTO).

The following major decisions were taken in APTTCA to overcome the shortcomings and improve transit trade between the two countries.

• Pakistan will allow system-based partial shipment of Afghan transit goods instead of manual processing.
• Pakistan will also reduce Afghan transit cargo’s scanning to 20 percent from 100 percent.
• Afghan trucks will be allowed to carry goods up to Wagah, on a letter of guarantee by Afghanistan’s Ministry of Transport and Civil Aviation, and on their way back carry Pakistani exports to Afghanistan.
• Almost 90 percent of Afghan cargo being cleared on the first day, with 80 percent cleared without scanning.
• During his visit to Kabul in April 2015, the then Pakistani Commerce Minister Khurram Dastagir Khan, suggested Afghanistan to take steps on its own to further strengthen the trade ties, and put forward following recommendations in this regard:
• Afghanistan should initiate talks on a preferential trade agreement between the two countries that would give more market access to Afghan goods in the Pakistani market and address the issue of smuggling.
• Afghanistan should also waive tonnage fee at the rate of $100 per 25 ton on goods which are in transit to Central Asia.
• Afghanistan should avoid double taxation for facilitation of investment in both countries.
• Afghanistan should also provide multiple entry visas for Pakistani businessmen and skilled workers.
• It should remove ban on the transit of liquefied petroleum gas via Afghanistan to Pakistan.
• Both parties to the agreement need to smooth their trade relations further through bridging up the gap between theory and practice, and should try to eliminate the impediments to and obstacles in the way. They should also concentrate on controlling the smuggling of goods, which is more ($2.5 billion) than the legal trade ($1.5 billion) annually. The illogical and unneeded allegations and blame game should also be avoided, because it erodes trust and confidence in each other.