Learning from China

Economic gains must be separated from political differences for Pakistan to enhance its economic ties in the region.

Chinese Premier Li Keqiang’s decision to visit India and Pakistan on his first official trip abroad after taking office reflects some important aspects: the level of importance China allocates to the region and the kind of weight it attaches to its relationship with both countries. The Chinese premier voiced his keen interest in developing better economic and technical cooperation and the creation of greater investment opportunities with both countries. This should give positive signals to the incoming government in Pakistan. Another aspect to glean here is the force of regionalism at play, a phenomenon getting stronger globally.

Economic regionalism, though not a new concept, has fast gained traction in the last two decades with more and more countries entering into bilateral and regional trading arrangements, including customs unions, free trade areas and common markets. This outcome can be partly explained by the endless procrastination of the Doha Round of the WTO having pushed multilateralism to the background. But political exigencies between countries and genuine economic pressures exerted by businesses and industry within countries to strengthen international supply chains and acquire deeper market access for their products have substantially spurred this global trend to forge trade and economic ties within and across regions. Economic interests have even roped in countries otherwise eternally divided on crucial diplomatic and strategic issues. The search for better economic prospects has led countries to make unholy alliances, putting apparently intractable disputes aside. Hence, logic and economic wisdom dictate that countries should be able to prevent economic gains from being dampened by political irritants, especially in interlinked economic environments with spillover effects.

To mention just a few examples, India and China have a long-standing border dispute but China is India’s largest trading partner with bilateral trade between the two targeted to reach $100 billion by 2015. The Chinese premier’s gesture to visit India as the first country after assuming office and the warm welcome accorded by his Indian counterpart, though under pressure to call off the visit due to border tensions between the countries having escalated, points to overriding gains not to be lost to such sporadic incidents. Also, India’s continued support of the Tibetan freedom struggle and provision of safe sanctuary to the Dalai Lama and the self-proclaimed Tibetan government in exile has incurred China’s strong opposition all along. But these contentions have not affected trade relations between the region’s largest economies. The Spartly Islands dispute in the South China Sea involves China and countries, which are predominantly members of the Association of Southeast Asian Nations (ASEAN) and the trading bloc created by the ASEAN Free Trade Area (AFTA). The China-ASEAN FTA is the largest free trade area in the developing world in terms of trade volume and the largest in the world in terms of population and GDP. The Qualifying Industrial Zones (QIZs) in Jordan and Egypt set up in collaboration with Israel, countries riddled with historic border and territorial disputes in the Middle East, is another case in point. History is replete with examples where economic concerns have been pivotal in averting political flashpoints between countries due to mutual economic interdependence.

In this context, are Pakistan and India ready to enhance their trade relations despite outstanding disputes? Do they feel a serious need for better trade and investment ties with each other, no matter how turbulent things get on other fronts between the two? Can we in Pakistan afford to remain aloof from the economic prospects on offer in the huge market of a billion-plus people in India? Will Pakistan’s improved economic relations with India help speed up the envisaged plan of making the country a transit hub in the region? Will the MFN status granted in principle to India be allowed in reality? Will it carefully counterpoise the gains and economic realities of both countries and not just symbolise the fulfilment of a binding commitment?

These are some of the questions to mull over by the new government while arriving at long-term policy decisions to enhance our economic ties and deeper integration in the region. This can only happen if economic gains are separated from political differences, a wise lesson to learn from the Chinese premier’s visit to India.

Published in The Express Tribune, May 30^th, 2013.