Trade-with-India argument


While fine-tuning such arrangements, it is of the utmost importance to safeguard interests of local industry, agriculture and the services sector – 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 per cent of the subcontinent’s trade comprised activity within its borders, and since the fateful divide, the number has dropped to as low as five per cent, 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 exercise was undertaken that left a little to be desired. In effect, Islamabad ended up acceding to India’s MFN demand in return for removal of the latter’s objections in the WTO 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 time, 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 heavily in New Delhi’s favour. Of the total trade volume of approximately $1.5 billion, 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 trade 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 importance 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 opening 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 smuggling 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.

The writer is a former Federal Minister


  1. This is true as a general rule that a specific / sectoral industrial policy is needed to kick start and maintain growth momentums in productive capacity of the economy. It has been argued by many sane economist like Ha-Joon Chang of Cambridge university that all now developed countries have had protection/support systems for priority sectors. Pakistan is a unique case. The powers that be have been claiming that if you lower your tariffs below ASEAN levels than Pakistan can hope for some development. Following this, Pakistan became liberalized in a WTO-plus fashion. So much so that FTAs were like hotcake till very recently. Pakistan even signed FTA with China which is world major export-oriented industrial economy. The question is after whole sale liberalization and FTA with China what India can do a a damage to Pakistan’s economy. What Pakistan needs is a well-articulated industrial policy with some structures of industrial forecasting even at the provincial and city levels. But who cares? We are trying to bring in the economics of 80s (much of neoliberal thought in new bottles) under the so-called new growth strategy for Pakistan.

  2. The Trade between Pakistan and India must be re-started as early as possible,bcoz the resumption of trades between these two countries is very essnetial.the indian products are very fine standard and are very durable.Moreover the trade will be more cheaper and quickly be available,The cost of transpotation will be very reasonable.there are lots of products in India can be exported to Pakistan at low prices.In my opinion ,the trade must be started immediately without any delay,as it is very much interested in both countries.

  3. Due to long term reliance on USA now Pakistan has to open up itself to other countries and specially neighboring counties. Pakistan already enjoys FTA with China but India shall not be ignored. USA is the biggest importer of Pakistani goods but due to current situation Pakistan cannot rely fully on US market. India is a big market for Pakistani products no doubt. The main argument against MFN status to India is that Pakistani local industry will suffer so I would tell the people that we should import raw material from India which is cheap so our cost of production falls and our goods can compete with Indian goods which we import. This way our 64 years enmity will turn into friendship. Trade is the solution to many problems between countries so this should be considered and trade will bring prosperity among the two nations. They cannot afford long term enmity, it is loss for both of them as both r spending so much on defence budget. Due to MFN, Pakistan competitiveness in agricultuural goods will increase and will be able to compete with Indian goods.

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