Cross border Trading on opportunities

The News, Pakistan, February 03, 2013
By Pradeep S Mehta, Abid Suleri

Instead of waiting, non-state actors should reinforce governmental efforts with their own and take advantage of opportunities of improved Pak-India commercial relations

One feels sorry about the recent tension between India and Pakistan across the line of control not only due to the losses of precious lives on both side but also due to the fact that such unfortunate incidents may ruin the nascent peace process.

However, it is heartening to note that tension is easing off and both the governments still seem to continue working towards implementation of SAFTA through bilateral trade normalisation. Last two years had witnessed a number of promising developments on commercial relations between India and Pakistan. And they have to be nurtured as against just crying over Pakistan’s decision to delay the grant of Most-Favoured-Nation status to trade with India. Recent developments show that Pakistan has provided de facto MFN to India. The Indian establishment should look at a glass which is half full rather than looking at half empty glass.

From a narrow base of Positive List, Pakistan has decided to apply a broader Negative List approach. As against earlier approach of allowing trade in just about 1,800 tariff lines, this base has increased to all product lines except about 1,200. In other words, earlier just over 20 per cent tariff lines (products) were allowed for trade between India and Pakistan. Now, about 15 per cent are barred from being traded — a new opportunity of trade potentiality in almost 65 per cent tariff lines. This was followed by a decision taken on the side of the trade ministers’ meeting on South Asian Free Trade Agreement held in Islamabad in early 2012.

Delegations led by respective commerce ministers paid mutual visits and declared a series of revitalizing steps, liberal business visa regime being the most notable one. Traders benefitted from the commencement of an Integrated check post at the Wagah-Attari border.

However, there is fear that the momentum generated in the preceding years is running out of steam, as implementation of some of the decisions is taking longer than expected. It is misplaced as efforts at the governmental level are indeed accounting and covering short-term shocks that may arise out of easing of trade restrictions. At this juncture, what is to be pondered over is how stakeholder groups other than governments can contribute to the latter’s initiatives at normalising our trade relations.

While tariffs are coming down, numerous non-tariff trade barriers (NTBs), particularly procedural ones, are hindering our trade. Removal of such barriers is now the key to foster Indo-Pak trade but what is lacking is a formal institutional mechanism to do so. This gap can be plugged by active involvement of the civil society.

An initiative, supported by The Asia Foundation in which Sustainable Development Policy Institute of Pakistan and CUTS International of India jointly participate, has recently made inquiries into the extent of NTBs affecting intra-regional trade in South Asia. It was observed that as much as 34.81 per cent of the value of total intra-regional trade can be saved if South Asian countries undertake some minimalistic reforms to harmonise, regulate and remove NTBs by matching intra-regional trade conditions with that of ideal global standards which are achievable. Our work has estimated that in case of Indo-Pak trade NTBs are much above the South Asian average and accounts for about 43 per cent of the value of total aggregate bilateral trade.

This calls for a new approach as the current one on trade reforms suffers from a number of inherent problems such as lack of clarity in the definition of NTBs, fragmented policy responses towards NTBs, difficulties in quantifying costs and benefits of reforms and subsequent problems related to incentives and enforcements. Hence, disciplining NTBs remains sub-optimal. Non-inclusiveness of relevant stakeholders in the process of reforming NTBs is a major limitation. Many important NTBs even fail to get discussed as the directly affected trading community has limited access to the official channels.

Greater involvement of the private sector in the formal system of reforming NTBs and related factors would strengthen the official initiatives by bridging data deficiency and by building synergies between governmental establishments and business organisations. Businesses possess first-hand information on trade costs and potential alternatives to costly and ineffective trade regulations. Direct inputs from them will make the reform process more informed and focused.

Besides fostering transparency and efficiency, an inclusive and participatory approach toward NTB reforms will also facilitate responsibility sharing, reducing some burden on the governments. As the private sector gets involved in the process, starting from identification of non-tariff barriers to implementation of reforms, possibilities may be thrown up for public-private partnership in financing reforms, a pressing concern with respect to trade facilitation measures and improvement of trade infrastructure.

The most important building block of such a participatory approach is mutual consultation and consensus among various stakeholder groups such as government officials, business associations, political groups including trade unions, and consumer groups and other civil society and community-based organisations. Academia and media are required to complement such efforts for collective action.

Civil society organizations should act as catalyst for dialogues among these stakeholder groups. They are in a position to understand and analyse socio-economic implications of enhanced bilateral economic integration, particularly at local level and, thus, can potentially bridge macro-micro gaps in policy-making process and its implementation. They can take lead in awareness generation and anchor the dialogue process by providing appropriate platforms. More importantly, as neutral enablers, they can find the sources and reasons of resistance to the cause that may arise and help to defuse conflict of interests among other stakeholder groups.

Creation of any new or restructuring of old institutional and legal systems is not required for empowering private stakeholders to deliver their respective roles in this participatory approach. Article 3 (Objectives and Principles) and Article 10 (Institutional Arrangements) of South Asia Free Trade Agreement have adequate provisions for creating such a participatory system. As per these provisions, businesses from South Asian countries can access the NTB resolution authority under SAFTA through their membership in national level business and trade associations, some of them are also members of the regional apex body — Saarc Chamber of Commerce and Industry.

This proposed approach should have an awareness generation component on the harmful effects of NTBs on intra-regional trade — consumer and producer welfare and revenue generation on the part of governments — and the urgency of addressing them as well as the potential role businesses and other stakeholder groups can and should play. Some recent initiatives to promote the involvement of private sector and other stakeholders in trade liberalisation process in other regions should be reviewed for designing appropriate modalities. The determination of the civil society to grab opportunities offered by improved commercial relations between the two neighbours will prevail if they stop waiting and take proactive steps.

The authors are respectively Secretary General, CUTS International, Jaipur and Executive Director of SDPI, Islamabad

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