Pak-India trade talks were moving forward at a brisk pace, as the two commerce ministers – Khurram Dastagir and Anand Sharma- expended personal political capital to provide ‘normal’ trade status to India. The goal was to achieve this milestone before India went into national elections mode in March. As the ministers met a number of times to remove minor irritants in trade, February 14th was fixed as the date for meeting of the commerce ministers in Islamabad, to make the historic announcement of trade normalisation. The naysayers moved quickly to put a spanner in the wheels, and slowed down the talks.
Who is afraid of Pak-India trade normalisation? Speculations abound, blaming the Pakistani defense establishment, the religio-political hardliners, or the local business lobbies protecting their monopoly profits. Most of the trade specialists are all for trade normalization, forecasting benefits for both countries. Very recently, however, we begun to notice some economic cheerleaders for the naysayers, writing op-eds about how Pakistan would suffer if India is given the status of a ‘normal’ trading partner.
Pakistan trades openly with 150 countries of the world, and with the 151st country, India, we start to have sudden moral compunctions, and begin to discover some very strange arguments to stall trade normalization!
Some naysayers assert that since our trade-to-GDP ratio is not growing – even though we have trade openness with other countries of the world- due to our internal structural impediments, we should hold off India from normal trade relations till we fix those impediments!! Well , what we could not fix internally in 60 years, we might just achieve in another 60! Or that we suspend trade relations with all countries of the world, buying some time to put our internal house in order? That- despite internal impediments- Pakistan has normal-plus trade relations with another even larger neighbor, China, occurs as no contradiction to these naysayers! That more than the official Pak-India trade goes on unofficially– through re-routing via Dubai or simple border smuggling – is of no consequence to them either! It seems all of Pakistan trade issues –internal and external – suddenly rise up like zombies to scare the protagonists, as soon as trade normalization with India is put on the table!
One such Naysayer (Sakib Sherani writing in Feb.7 DAWN) found strange reasons for not normalizing trade with India. Quoting from some unheard-off study he predicts a very insignificant Pakistani consumer welfare gain from trade normalization with India! “..trade negotiations between countries typically take years..”, he wrote, and why are we in such a hurry? The naysayer economist needs to understand that these are NOT trade negotiations going on between India and Pakistan, these are efforts only at trade normalization, meaning whatever trade status Pakistan allows to the rest of the world, the same would be allowed to India! It is not a bilateral free trade agreement, wherein a lot of negotiations are involved. Advising Pakistan not to rush into a trade deal (it is not a trade deal!), the naysayer economist wants Pakistan not to make the same mistakes as were made in the Pak-China FTA!! Again the economist does not seem to understand the difference between trade normalization, and a bilateral free trade agreement!
Notwithstanding paranoia of such naysayers, the Pakistan side, led by our Commerce Minister, is in the final stages of negotiations with the Indian counterparts, to finalize giving the Non- Discriminatory Market Access (NDMA) to India after India agrees to allay all apprehensions of Pakistan’s industrial & agricultural sectors. This includes immediate and massive reduction in India’s SAFTA Sensitive List, and products of Pakistan’s export interest not being included in this list, including Textiles. Pakistani sectors, which feel vulnerable to Indian imports (like Synthetic Textiles, Pharma, Agriculture, Auto Sector) shall, however, be maintained in Pakistan’s SAFTA Sensitive List. Pakistan would, in response, eliminate the specific Negative List for India, and open WagahAttari land route for all tradable items. This would potentially result in significant reduction in freight cost for a lot of raw materials imported by Pakistan, and thus make our finished products more competitive. It would lead to substituting India for imports from other global destinations, saving a lot of foreign exchange for Pakistan, while the total imports of these items into the country would not register any significant growth. Any further apprehensions – of cheaper imports from India threatening our domestic producers- shall be overcome through using the Trade Defense Laws, allowed under the WTO. With Textiles out of India’s Sensitive List, Pak exports of textiles to India are expected to spearhead a healthy export growth to India. Another irritant for Pak exporters to India has been the NTBs (non-tariff barriers), like SPS (sanitary & phytosanitary), and TBTs(technical barriers to trade). Through, already signed agreements for bilateral cooperation on Mutual Standards Recognition, Mutual Assistance in Customs, and Trade Grievance Redressal, all such irritants would be effectively addressed.
Availability of cheaper raw materials from India shall help our industry become more competitive, besides providing a significant saving in our import bill. With such newly generated business links, Pakistan’s exports to India are expected to make a quantum jump. By some estimates, our exports to India could triple in the next three years from the current level of around $300 million. This could be the beginning of a virtuous cycle of increased FDI into Pakistan, and better bilateral relations between the two large neighbors in the region.
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