A baffling array of legal and practical barriers to exports between the neighbours has spurned unofficial trade worth up to $10 billion, dwarfing official exchanges of $2.7 billion.
But a recent rapprochement that looks to normalise trading relations between India and Pakistan could end a decades-old system that stifles business and saps profits through networks of middlemen, money changers and smugglers.
A booklet of 1,945 items lists trade allowed to run from India to Pakistan – but only 108 can be trafficked directly by road through the border post at Wagah, near the eastern border city of Lahore.
At old markets in Lahore, traders peddle whitening creams and hair dyes that have journeyed from India to Karachi by sea bound for Afghanistan, before being reloaded and smuggled along the Hindu Kush to re-enter Pakistan.
Along the way a simple anti-wrinkle cream rises from Rs75 to Rs160s while black hair dye doubles from five to Rs10.
Tons of industrial chemicals and drugs travel into Dubai, where their port of origin is relabelled to hide their Indian provenance before being sent on to Pakistan. The process entails a mark-up of 15-20 per cent, say importers.
But 15 years after India granted Pakistan “Most Favoured Nation” status in line with World Trade Organisation rules, Pakistan this month finally agreed to return suit, paving the way for a radical reorganisation of bilateral trade.
Pakistan has pledged to open its market to over 7,000 products from India over the next three months and says India should have full MFN status by the end of 2012, a step to removing discriminatory higher pricing and duty tariffs.
The list of nearly 2,000 items allowed for trade is to be replaced by a list of disallowed items, and a second trading post has been opened at Wagah.
Observers say the rapprochement signals a seismic shift from Pakistan’s traditional and strategic antipathy to India, and a deeper economic engagement between the countries that is crucial for lasting peace in the region.
“People who are pro-trade have prevailed. For the first time our strategists are viewing economic security as a significant element of national security,” said Abid Hussein, who teaches trade policy at Lahore University of Management Science.
The Pakistan Business Council estimates that enhanced bilateral trade could bump the country’s growth rate by 1-2 per cent. Experts predict $1.5-2 billion could be saved by routing imports directly into India and its 1.2 billion consumers.
Barriers remain, however. Businessmen want to see more land access open up along the 1,800-mile (2,880-kilometre) border, along with more options for air.
On the Indian side of Wagah, only two trucks can be loaded and unloaded at a time, hampering a burgeoning export trade in gypsum and dried dates.
Official figures show that while 4,000 tons of goods can come into Pakistan on up to 200 trucks per day, only 500 tons can leave in 70 trucks.
Overall land trade last year totalled 21 billion rupees in exports compared to 1.33 billion rupees in imports.
But powerful lobbies remain unconvinced that the hostilities that have led to three wars since independence can melt away.
Hundreds of activists in Pakistani-administered Kashmir on Friday demonstrated against improving trade, and leaders in industries likely to lose out to open competition with India are loudly demanding an opt-out.
They point to India’s protectionist policies in sectors such as agriculture, where exporters pay a 37 per cent tariff instead of the standard 13 per cent.
They fear that Pakistan will be flooded with cheaper Indian goods, strangling domestic business, although Vohna, who sits on the Pakistan-India standing committee for the Lahore Chamber of Commerce points out that free trade with India’s big rival and Pakistan’s close ally China has failed to do so.
“The main difference between India and China is confidence,” said Vohna.
“Every person argues with me that Indian goods will close our factories. I tell them if Chinese cheap goods cannot close our factories, India’s will not.”
Published in The Express Tribune, November 28th, 2011.
COMMENTS (9)
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The area which is now Pakistan flourished in pre-partition era when it traded openly with rest of India, why should it suffer from open trade now?
There is no emotion attached to pak-china or china-india trade . but here it is reserve.
At old markets in Lahore, traders peddle whitening creams and hair dyes that have journeyed from India to Karachi by sea bound for Afghanistan, before being reloaded and smuggled along the Hindu Kush to re-enter Pakistan. Along the way a simple anti-wrinkle cream rises from Rs75 to Rs160s while black hair dye doubles from five to Rs10. Tons of industrial chemicals and drugs travel into Dubai, where their port of origin is relabelled to hide their Indian provenance before being sent on to Pakistan. The process entails a mark-up of 15-20 per cent, say importers.
As an Indian the above lines were the ones that i found most pleasurable..
“Every person argues with me that Indian goods will close our factories. I tell them if Chinese cheap goods cannot close our factories, India’s will not.”
million dollar quote, the way chinese goods flooded into pak markets was much aggressive, i am sure indo-pak trade will be a win win game, and most important is that, we should not inherit hate to our childrens, lets work on similarities, differences will be automatically settled
Trade b2in india nd pakistan is a win win situation for both d country..thanks to ET to publish good news.
The result for Pakistan will be positive only if its Exports are bigger than its Imports otherwise it will be in a deficit and its domestic industries will suffer. So, it is too soon for Pakistan to say that it is benefitting. There should be rules and regulations to protect Pakistan's domestic industries and its Exports.
Indians are excellent at business. Fortunately or Unfortunately, Pakistanis have the Gujratis and Marvadis as their neighbors. These guys can outshine China's flooding of Pakistani markets any day!
Let there be more news of trade and other business exchanges than news of hatred.
Im so happy to see and hear this. Finally they have put aside their petty differences. This could mean that pakistan may not need to rely on us aid in the not so distant future. Good news all round. The US will save couple of billion dollars and pakistan will start to become relient on business rather than aid. yay!!