Jahangir's World Times First Comprehensive Magazine for students/teachers of competitive exams and general readers as well.
The democratic governments in two countries provide a window of opportunity for stronger trade ties. As indicated by empirical studies, the potential for trade between the two countries is huge, but there are certain factors hampering the growth of trade.
Pakistan and India have attracted considerable international attention due to their unique political, economic and security relations in South Asia. Both countries are having geostrategic importance and roles in the region and beyond. The business community of both countries desires to have greater trade ties but territorial disputes restrict every tangible effort. Both countries can learn from United States and China who have divergent views on Taiwan but that does not hamper their trade relations and both are largest trading partners. As a neighbouring countries with more than 1000 KM of common borders, the trade volume between India and Pakistan should be very high but it is unnaturally small. Although a gradual increase is taking place in the trade relations since 2000 and total trade volume (exports plus imports) crossed $2 billion mark in 2010 from a paltry amount of $500 million in 2000 but it is a fraction of the potential which both countries have in trade. Currently Pakistan’s trade accounts for only 0.5 per cent of India’s trade while India’s trade account for a little over one per cent of Pakistan’s trade. The current share is incomparable with the share of trade at the time of independence. In 1948-49, 70 per cent of Pakistan’s exports went to India and 63 per cent of Indian exports destined to Pakistan. About $2-3 billion trade per year is taking place between two countries via third countries such as Dubai. This trade can be undertaken bilaterally at much lower cost. The economic integration has potentially a big role in bringing real change in the living standard of people of these countries.
Pakistan maintains a positive list of about 1400 items that India may export to Pakistan. Inadequate road and rail links and limited port facilities along with bureaucratic regulations and restrictions are making trade costly.
Trade relations cannot be built overnight and both countries have to go a long way to achieve this objective. The first important step in this direction is to build the public support for trade relations between these two countries. At the same time, both countries have to introduce wide-ranging fundamental trade reforms to expand trade. The focus should be on bilateral measures which can easily be accomplished and potentially increase trade along with gaining support for more difficult and bolder reforms. In the short-run, main reforms should have more focus on trade facilitations. Easing restrictions on visas; removing the conditions on rail wagons carrying goods across the border to return empty; eliminating the requirement of touching third country port on ships between India and Pakistan before bringing in imports; increasing air links between the two countries (particularly establishing flights between Islamabad and New Delhi); opening up of additional border crossings and bus routes; increasing the number of customs posts; and allowing branches of Indian and Pakistani banks to operate in the other country.
The medium-term measures to enhance trade ties between India and Pakistan include Pakistan granting MFN status to India, and India reciprocating it with significantly lower tariff rates on goods particular interest to Pakistan such as textiles and agricultural products. The other steps include granting permission to transit trade from India which is required by WTO rules. Both countries can help each other by facilitating energy trade through gas pipelines and joint energy grids; harmonising customs procedures; allowing trade in information technology; and eliminating obstacles to foreign direct investments by the other country.
The democratic governments in two countries provide a window of opportunity for stronger trade ties. As indicated by empirical studies, the potential for trade between the two countries is huge, but there are certain factors hampering the growth of trade. The successive Indian and Pakistani governments have often repeated the desire for peaceful relations, reaching a comprehensive agreement that settles outstanding disputes, such as Kashmir and the Indus waters agreement, still does not seem to be in the cards as yet. However, developing stronger economic relations between the two countries could be a base on which to build overall ties and trust. More specifically, despite the political issues that divide them, steps could be taken toward better economic relations through expanding trade between the two countries. The trade relations can improve with the support of businessmen on both sides of the border. Certainly trade will not solve the problems between the two countries, but it could lower tensions and bring normalcy in the region and better life for the citizens of both countries.
