Trading vegetables

The recent decision by government to ban onion exports to India is unwise, may have already provoked retaliation.

The recent decision by the government to ban onion exports to India is unwise and may have already provoked Indian retaliation. In trying to prevent the rise in prices of one agricultural commodity, the government may end up causing an increase in the prices of a far greater number of foods items. Free trade is based upon a simple principle of reciprocity. No country can expect the rest of the world to allow access to its markets and goods if it closes off its own. The government must realise that Pakistan imports a far wider range of food items from India than it exports. If it tries to close off the export of a commodity that India needs in order to keep domestic prices low, India is likely to stop the export of a range of products that Pakistan needs, such as lentils, chickpeas and spices. Imports from India keep prices of these commodities low in Pakistan and many of them form a staple part of the nation’s diet. If imports from India stop, food price inflation — already skyrocketing — will shoot up even further.

This is one of those rare instances where allowing for free trade benefits both producers and consumers in Pakistan. Onion farmers benefit from the higher prices they are likely to command on both the domestic and Indian market, while Pakistani consumers benefit from continued access to cheaper Indian food items. There is no justification for the government to take this step. It is short-sighted policy-making at best and outright incompetence at worse.

The Indian government has not taken any retaliatory steps yet, though a group of Indian exporters have halted shipments to Pakistan. There is still time for the government to reverse the decision. The last thing the country needs right now, as it battles economic and political uncertainty, is to spark a trade war with India. We could not afford it in the best of times. We certainly cannot afford it now.

Published in The Express Tribune, January 11^th, 2011.