Trade roots

It is one of the curiosities of India-Pakistan relations that even when hostilities between the two countries were at their height, the smuggling of goods carried on uninterrupted. This illicit activity testified, ironically enough, to the potential of licit trade between the two neighbours, an issue that figured prominently in the talks between President Pervez Musharraf and Prime Minister Manmohan Singh on Sunday. After all, if buses can ferry people across borders, it follows that lorries can transfer goods. And an increased movement of goods across borders is a good marker of the state of Indo-Pak ties, just as the unleashing of entrepreneurial energy is an effective way to help wind down hostilities.

Indeed Musharraf, by ensuring that his minister of commerce accompanied him on this trip, had clearly prepared himself to talk business — quite apart from the business of talks — with his Indian counterpart. Manmohan Singh was quick to respond. The two sides thus moved towards claiming political ownership of the process of normalising trade ties, instead of leaving it to the chambers of commerce and business professionals of the two countries. The proposed bilateral trade commission and joint business council should ensure greater synergy between policy-making and action on the ground.

There are serious obstacles to achieving better trade relations which need to be recognised. Pakistan’s refusal to grant MFN status to India has been a sticking point in this country, while the threat of Indian goods flooding Pakistan causes great disquiet across the border. Pakistan complains that it has not benefitted from the MFN status granted to it by India because of tariff barriers, India has similar complaints when it comes to items like tea. While the annual demand for tea in Pakistan is estimated at 140 million kilograms, India’s share at present is only around a mere 5 million because of a 30 per cent tariff imposition. It is issues like these that need attention. At the moment, the balance of trade between the two countries is weighted in India’s favour, but this could change substantially as Pakistan’s economy registers greater growth through increased trade opportunities. The big job is to shed mutual fears and suspicions. According to some estimations, trade between India and Pakistan can touch $10 billion by 2010 within the framework of the South Asian Free Trade Agreement. If this is complemented by sustainable bilateral trade ties, that figure could be much larger.