Deficit — of trust and trade

Pakistan and India have barely scratched the surface of bilateral trade potential

Trust promotes trade, and trade fosters trust, interdependency and constituencies for peace. It is the deficit of trust between Pakistan and India that the volume of trade between the two countries is just around $2 billion; and it is this little volume of the bilateral trade that speaks of the growing bitter relations between the two neighbours. The World Bank believes that the two nuclear rivals have barely scratched the surface of their bilateral trade potential that stands somewhere around $37 billion, due to the absence of a normal relationship between them almost all through the seventy-plus years of the existence of both.

The Bank has released a report in Islamabad titled ‘Glass Half Full: Promise of Regional Trade in South Asia’, mentioning four barriers to effective regional integration. These barriers are tariff and para-tariff barriers to trade; complicated and non-transparent non-tariff measures; disproportionately high cost of trade; and trust deficit.

The report says that continued political tensions and lack of normal trade relations between Pakistan and India have cast a shadow over cooperation efforts within South Asia, contributing to the lack of progress in the regional cooperation agenda of Saarc [South Asian Association for Regional Cooperation] and Safta [South Asian Free Trade Area]. The author of the report, Sanjay Kathuria, cites the opening of Kartarpur corridor by governments of the two countries as a step towards minimising the trust deficit.

That both Pakistan and India are struggling in the context of balance of trade has no two opinions. Pakistan’s trade deficit rose to $37.7 billion in the fiscal year 2017-18 from $32.5 billion in the previous fiscal year. Similarly, India’s trade deficit widened to $156.8 billion in 2017-18 as compared to $108.5 billion in the previous fiscal. Bridging the trust deficit can certainly help the two countries bridge their trade deficit, to the benefit of the whole region.

Published in The Express Tribune, December 7^th, 2018.

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