Liberalisation pitfalls


Granted, the local press is right in appreciating the pace of progress of Pak-India trade liberalisation set in motion by the Fahim-Sharma summit some months back. Nor can there be any denying that the present regime of redressing trade barriers is unprecedented, and ultimately complete liberalisation is in the best interests of both countries, as well as greater South Asia. Yet it is prudent to be mindful of pitfalls such processes invariably entail. So far, the government has been rightly cautious, revising its negative list after giving another ear to some industries that stand to lose comparative advantage in case of opening up too soon.
Pros and cons cannot only be weighed technically, with market forces dictating eventual readjustment. Shifting posture too soon in a stagnant economy is rife with complications – imports from the neighbour increasing just when traditional production advantage is compromised, for example. Rather than mark year-end for phasing out the negative list, both Islamabad and New Delhi must reconsider gains against the original project scope.
Much has been accomplished. Both governments have been able to restrain rightist tendencies and convince trade lobbies of the urgency of forward march. Interestingly, this movement has rubbished the previous mutual position of settling political disputes before engaging more purposefully in commerce. Now, the technical more-trade transition needs very fine management. Both sides must ensure their trump cards are not caught off guard, and some will require more time than the remainder of the year to prepare for stiffer competition. Should haste prevail, no matter how well intentioned, neither economy can currently withstand production and earning shocks, and both will suffer.