Trading For Peace

By Amin Hashwani & Amir Zia
The News
April 27, 2011

It is now time that the economy, rather than politics, takes the center stage and dictates relations between the two countries.

Cricket diplomacy between the Pakistani and Indian prime ministers has indeed broken some ice. The baby steps of secretary-level talks indicate a thaw in frosty relations, which remain marred by protracted mistrust and animosity at the official level. But in recent years, a paradigm shift has silently occurred in the way the peoples, and even establishments, of the two nuclear-armed nations perceive and articulate their future ties.

Now warmongering is no longer in vogue or acceptable even among hardliners. Despite troubled relations and seething tensions, few challenge the principle desire of good and friendly Pak-India relations, articulated at all official and unofficial platforms. The civil society-led peace lobbies, once shunned and seen with suspicion by the “politically-correct patriots” in both the countries, have become vocal, assertive and acceptable in recent years. The 2008 Mumbai tragedy and its bitter fallout did snap the composite dialogue process and sports ties, but not the cultural interaction at the limited-level of film and music. Yes, Indian movies continue to adorn Pakistani theaters and some top Pakistani artists remain regular fixtures in the glamour world of Mumbai. This was unthinkable and unimaginable barely a decade ago.

The symbolism of the changing times and mood does not have to end here. A more tangible outcome could be on the economic front where due to bureaucratic snags and difficult circumstances, official bilateral trade between the two countries remains pegged just under $2 billion against the enormous potential of around $8 to $10 billion seen in the near-term.

The April 27-28 talks between Pakistani and Indian commerce secretaries in Islamabad, being held after a gap of more than two years, offers an opportunity to set a premise on which the foundations of enhanced economic cooperation can be built.

The usual irritants and bottlenecks stifling the growth potential of Pakistan-India trade are unlikely to go away as a result of the two-day talks, but it will be unfortunate if the two sides fail to grasp the changing mood and at least agree upon a roadmap to their boost economic relations.

The current trade between Pakistan and India is less than 3 percent of their total trading volumes, which has failed to become a meaningful positive influence in improving their troubled bilateral relations.

India has granted Pakistan MFN (most favoured nation) status, but a range of non-tariff barriers block access to most of the products that can find a market in India. Similarly, Pakistan maintains a list of 1,946 positive items that can be imported from India, while the rest are not allowed. In addition, restrictive and time-consuming visa procedures, logistic limitations in the movement of goods, the linkage of trade policies with that of progress on the political front and investment prohibitions hamper meaningful progress.

The current trade, though relatively small, is heavily skewed in India's favour as the positive list maintained by Pakistan still presents about 65 percent of the potential importable goods from India, while the non-tariff barriers imposed on Pakistani products block most of those goods that can find a market in India in which home textile remains on top of this list.

Other non-tariff barriers on Pakistani goods include cumbersome certification requirements, lengthy import procedures, delays in clearance, extra testing requirements at the port of entry, minimum import prices and duties.

As a confidence building measure and to liberalize trade further, Pakistan and India should reach an agreement, which ensures a level-playing field to businesses on both sides.

ºThis should include removal of protective non-tariff barriers on Pakistani goods as well as granting MFN status to India. Simplification of laws and procedures for the smooth movement of goods should also be part of the agreement.

The two sides also need to focus on enhancing road and railways facilities, which presently work as a constraint in increasing the volume of bilateral trade. Pakistan and India also need to work on ensuring visa facilities that include the removal of the restriction of police reporting as well as of ending the practice of issuing city-specific visas.

The two countries must also create a bilateral fast-track mechanism to remove any impediments in trade, and the private sector should get a voice in the policy framework and its implementation. The opening-up of trade should then lead to allowing investments in each other’s countries. Setting up a formal dispute resolution body for Indo- Pak on trade would help in addressing problems of traders in both countries.

The two countries share a long border, have similar cultures and in the not-too-distant past, enjoyed well-integrated transport and market links.

The issue of trade and industry is an area that needs more research in order to fully understand its potential size and implications for each country.

But in an optimistic scenario, we could foresee a future for Pakistan-India trade that replicates pre-1947 trade patterns, but in a new setting. Major cities in both countries could become the hub for trade, with the smaller nearby towns gaining out of the enhanced trade. This could boost the trade volumes of low income areas and play a significant role in poverty alleviation that plagues both countries. With greater interaction and increase in confidence levels, an open transit facility could benefit other SAARC nations including Afghanistan in their economic development, give a boost to the laying of the Turkmenistan-Afghanistan-Pakistan and India (TAPI) pipeline, open up Central Asian energy rich countries to India and China, and most importantly bring people from all sides closer together and create long-term relationships of mutual benefit.

Businesses create sustainable and durable vested interests for peace. This also remains in line with the global trend where more and more countries are focusing on regional trade after the failure of the World Trade Organization talks.

An increase in economic cooperation and trade will go a long way in the resolution of long-standing political and geographical disputes as well. This remains the only sensible and rational way to go forward and to ensure prosperity and progress in the region. It is now time that the economy, rather than politics, takes the center stage and dictates relations between the two countries.

Amin Hashwani is a leading businessman; amin@hashgroup.com

Amir Zia is business editor, The News; amir.zia@thenews.com.pk