Afghan transit trade agreement

After prolonged negotiations, the governments of Pakistan and Afghanistan finally signed the Afghan Pakistan Transit Trade Agreement on October 28. This a welcome step in our relationship with Afghanistan beyond the national security paradigm. Both governments want a long-term partnership that rests on a solid economic foundation as a recipe for sustainable mutual cooperation. The accord, which allows Afghanistan access to Pakistani seaports and Pakistani businesses access to Central Asian markets, is likely to boost overall trade volumes of each country. Government officials in Islamabad estimate that Pakistani exports could increase by as much as $2 billion a year. Afghanistan, likewise, will be able to expand its legitimate international trade which should help to curb smuggling activity in the long-run.

However, the treaty comes equipped with one handicap: Afghan importers will not be able to use the Wagah border to transport goods from India via the land route, which may be cheaper for them in some instances. This is largely due to Islamabad’s fears of such goods being dispersed into the Pakistani market rather than going on to their legitimate destination in Afghanistan. While such fears have some validity to them, we would like to remind the government that free trade is a two-way street: one cannot expect to restrict one’s own market to outsiders and have the rest of the world keep their markets open to one’s goods and services. It was precisely this fatal mistake that caused the US to implement the restrictive Smoot-Hawley Act which accelerated the global economic depression in the 1930s.

India’s economic interests in Afghanistan are legitimate, even if Delhi’s political activities there make Islamabad nervous. And seeking free trade with India is also in Pakistan’s long-term interests. We would recommend that the government try to expand economic ties with India. Doing so will then allow Afghanistan to not be economically penalised for political tensions between the two South Asian giants.

Published in The Express Tribune, October 30^th, 2010.