India and Pakistan have shown some maturity
in
talking trade; do they actually mean it?
Unfortunately,
a mention of Pakistan and India; and one gets ready to hear some unpleasant
news. However, after a long time the meeting between Pakistani and Indian
Commerce Ministers resulted in an excuse to rejoice. Not only that, after three
and a half decades Pakistani Commerce Minister visited India. Both the
ministers were also able to take some tangible and positive steps towards trade
normalisation between their countries.
For
the last many years, few of us have been advocating that small steps towards
promotion of friendly relations between Pakistan and India should not be
underestimated. There are no quick fixes for the chronic mistrust and
misunderstandings between the two neighbours but to trust each other more.
It
is said that trade follows the trust; but my theory is that trust follows
trade. Despite its flaws, I am a believer in multilateral trading system. Trade
between India and Pakistan would not only provide an opportunity for enhanced
people-to-people contact but also turn the business community into a catalyst
force for peace as they would have to safeguard their business interests. We
have already observed this happening in case of “China and USA” and “China and
India”. Normalisation of trade between India and Pakistan would also provide
increased choices to consumers both in terms of quality as well as in terms of
prices.
The
cost of economic non-cooperation between the two countries is extremely high
not only for both of them but also for the whole region. Pakistan and India had
been the main stumbling block in success of South Asia Free Trade Agreement
(SAFTA) which was signed in Islamabad in 2004. As per SAFTA, SAARC members have
to bring their tariffs down to zero for each other by 2016. If implemented with
political will and get accompanied by an agreement on trade in services as well
as an agreement on investment; SAFTA has the potential to turn around the
economy of whole region.
Although
their bilateral trade grew over the last decades, their estimated mutual trade
potential is around US$11 billion. Various studies have been suggesting that
both Pakistan and India can save billion of dollars by importing from each
other, the essential items that they have been importing from third countries.
As
I mentioned earlier, there is no quick solution to the chronic bones of
contention between India and Pakistan. However, the issues hampering trade
could have been resolved following a fast track approach. Some of these issues
include visa for business community; non-tariff trade barriers (NTBs) that
Pakistan complains are being imposed by India on its products; “most favoured
nation” (MFN) status that India requires from Pakistan; trade on negative trade
lists versus positive trade lists; infra structure development for enhanced
trade; treaty on free flow of investment; and mutual recognition of standards.
Both
the countries showed the resolve to tackle these issues by jointly agreeing to
work to more than double bilateral trade within three years, from current
levels of US$ 2.7billion per annum to about US$ 6billion.
Pakistan
complains India about its NTBs, especially on cement and textiles. However,
India claims that its NTBs are not Pakistan specific. In fact, India is ranked
115th of 125 countries to impose trade tariff on “Trade Tariff Restrictiveness
Index” (TTRI) by the World Bank. One of the positive developments of current
talks between trade ministers is the identification of issues impeding trade in
sectors such as cement, textiles, and surgical instruments. From Pakistan’s
point of view this is quite substantial achievement as India has recognised
that there are factors impeding Pakistani exports.
Another
positive development is on the issue of visas. Both the ministers have showed
consensus to issue multiple entry one year visas to the business community.
Pakistani visitors would be able to travel anywhere in India unlike the current
city specific visas. This initiative on its own, if implemented in letter and
spirit, has the potential to double the bilateral trade over next three years.
Pakistan
indicated to give India the MFN status. Here it is pertinent to mention that
India gave Pakistan the MFN status in 1995 (since inception of WTO). We do need
to raise awareness in Pakistan about the term MFN. Its Urdu translation has
created so much media hype as Pakistan would declare India its best friend.
Although both the countries should declare each other their best friends and
live in peace and harmony so that billions of dollars which are being spent on
military expenditures to counter each other’s defense power may be diverted to
social sector development. Yet, MFN has nothing to do with friendship. Together
with the principle of national treatment (i.e., there cannot be discrimination
among WTO member states on the basis of nationality), MFN is one of the
cornerstones of WTO trade law. In effect, if India gets an MFN status from
Pakistan then Pakistan would have to treat it at par with all other WTO member
countries. Here it is pertinent to mention that all WTO member countries are
bound to give each other MFN.
There
is also a welcome development on trade on the basis of negative lists during
the recent ministerial discussion. Current “positive list approach” allows only
those items to be traded which are on positive list. Everything else gets
restricted by default. Whereas negative list approach, which is practised
internationally will contain only those items which should not be traded hence
creating new venues for bilateral trade.
Ministers
have also agreed to improve the infrastructure facilities to promote trade at
Wahga and Atari. India is also contemplating removing its blanket ban on
capital inflows from Pakistan (Islamabad has no such ban on Indian investment).
Another significant development that tool place during Pakistani Commerce
Minister’s tour is that India has announced to withdraw its objections on the
European Union trade concessions to Pakistan.
To
me all of the above-mentioned developments are extremely important milestones
in the trade history of both the countries. Those of us who are always vocal in
criticizing our policy makers and political leaders when they are in wrong
should come forward to appreciate these positive developments that may lead to
a sustainable peace in this region.
The writer is the executive director
of Sustainable Development Policy Institute and is contactable at
suleri@sdpi.org
|
