The trade ministers of India and Pakistan meet in New Delhi on Wednesday to discuss measures to overhaul ragged commercial ties which should help bolster a fragile peace process between the nuclear armed neighbours.
Wednesday’s meeting is part of this year’s resumption of formal peace talks, known locally as the “composite dialogue”, which were broken off after the Mumbai militant attacks in 2008 that killed 166 people and for which India partly blamed Pakistani spies.
“There is no direct linkage between a successful trade meeting and success on the political front, or the Kashmir front, but eventually these things will feed into that wider process,” said Siddharth Varadarajan, editor of the Hindu newspaper and a well-known foreign policy expert. “I think both sides, for better or worse, have decided to press ahead with the low-hanging fruit,” he said.
Irritants abound: Trade across what is one of the world’s most heavily militarised borders is severely restricted both in the number of items that are permitted to be bought and sold, and the hours during which the customs are open for business. Exporters are forced to route the bulk of trade via a third party such as Dubai, raising business costs, slowing deliveries and inflating prices. Islamabad wants India to lower what it says are unfair barriers to trade, such as cumbersome approval procedures for exporters selling anything from cement to fruit and vegetables. Another sore point is India’s continued opposition to a scheme proposed by the European Union to boost textile exports from areas of Pakistan ravaged by floods with duty waivers. Europe’s top trade official on Tuesday boosted expectations that India is ready to approve the scheme.
“We have also information whereby India would now be prepared to lift its veto,” EU Trade Commissioner Karel De Gucht told EU lawmakers at the European Parliament, which must also approve the duty breaks. Formal approval by India could follow at the World Trade Organization in early November and subsequently by the European Parliament, opening the way for European duties to be lifted on a list of Pakistani textiles and other products including ethanol as early as next January. The trade between the two countries might have grown fourfold to $2.7 billion during 2010-11 in seven years, but it is still one fourth of the informal trade of over $10 billion between the two countries. Pakistan has already expressed its desire to “positively” consider granting Most Favoured nation (MFN) status to India. Pakistan has also announced its intention to move over from the positive list to negative list on trade with India. Currently, Pakistan has given access to 1,940 product lines on its positive list and has 12,000 on the negative list.
