Trade with India

During his campaign aimed at responding to the increasingly harsh challenge of the PML-N in Punjab, President Asif Ali Zardari has been touring the stronghold of the ruling party, shoring up the PPP’s position. When he reached Okara he spoke near the old Sulemanki border post with India, declaring that “Pakistan is willing to have dialogue with India on all issues, and is also open to trade with the neighbouring country”.

He was speaking against the background of the recent visit to New Delhi and Attari by the commerce minister, confirming an initial agreement between the two countries to enhance bilateral trade and soften the visa regime. The two sides are preparing negative lists of commodities so that free trade can take place and they can begin the transformational process to dwarf long-standing bilateral disputes. Beyond the bilateral focus, there is the prospect of South Asian trade across Pakistan to Central Asia and across India to East Asia.

Are we standing at the gateway of a big change? A look at history tells us that wars and trade have always brought about big changes. In our day, wars are difficult to wage as the global order is firmly bound to the status quo. Trade remains the only medium of radical change. It removes the national frontier as a locus of tension and conflict, and reintroduces it as the medium of developmental synergy between sovereign states. Pakistan anticipates big traffic on the roads that traditionally connected the two states and is already expanding the road leading to the Wagah border.

Initially, the attraction of this new project is for those industries and traders who export: Pakistan expects to export 1,650 items — woven fabrics, garments, bed linen, footwear, dates and chickpeas. India expects to export 3,286 items — automobiles, diesel trucks, black tea, pneumatic tyres, antibiotics and reactive dyes. Pakistani exporters will gain from the negative differential between the currencies of the two countries: the Pakistani rupee is half the value of the Indian rupee. India expects Pakistani investments to land in East Punjab pending the bad law and order situation in Pakistan.

President Zardari cannot have missed the rapid progress Bangladesh has made with respect to the opening of multiple routes connecting India with other neighbours across its territory. It has crossed the psychological barrier that bedevilled Dhaka because of the primacy of bilateral disputes in its relations with India. Bangladesh intends to provide transit facilities to India, along with Nepal and Bhutan by March 2013. It has already allowed a wide transit road joining India with its states in the northeast.

Opponents of trade opening often say that there is no big potential in the free-trade regime that is being inaugurated. After all, the export potential from India to Pakistan is $9.5billion, while that from Pakistan to India is $2.2billion. It is apparently nothing compared with India’s trade with China at $75billion. They say trade with Central Asia through Pakistan will be of small value because Central Asia does not have the population that could be counted as a big market for Pakistani and Indian goods. This position is belied by the rising energy needs of South Asia and the potential of energy export from Central Asia based on regional surplus now going from Central Asia through Russia to Europe. If Pakistan looks closely at the smuggling of its agricultural commodities through Afghanistan, it will realise that a regional network of roads to Central Asia will transform Pakistan’s economy, which is now admittedly strong in agriculture. A landlocked Central Asia is bound to grow economically with higher standards of living, which means it will need trade outlets to the sea through Pakistan.

Pakistan is shifting from its ‘military’ view of geopolitics — prevent transit trade to gain advantage — to a civilian view, which allows transit to gain economic advantage and prosperity of the people. The new paradigm is late in coming and this delay is being felt by Pakistan, as other South Asian states are currently posting high growth rates.

Published in The Express Tribune, April 23^rd, 2012.