Indo-Pak trade has potential of highest growth

Pakistan Observer, December 03, 2011
Islamabad—While highlighting the critical issues and comparative advantages, the speakers said that there will be a huge peace dividend if trade relations between India and Pakistan are strengthened. Trade will help to increase people to people contact and peace, when countries are trading with each other, they avoid conflicts. If there are any disputes, as is likely to happen, they use dialogue to resolve them.

They said it during a special lecture on “The cost of economic non-cooperation in South Asia” organized by Sustainable Development Policy Institute (SDPI) here on Friday. Dr Abid Suleri of SDPI moderated the proceedings and said that our traditional trade destinations such as Euro zone and America are in crisis and there is a huge need to explore alternate trade avenues. “We believe first trade has to be initiated which will further lead to normalization of overall relations and we need to turn challenges into opportunities” he added.

Pradeep S. Mehta, Secretary General, Consumer Unity and Trust Society (CUTS), International said that the goods and equipments are informally traded between India and Pakistan through either a circuitous route or clandestine channels which increases the cost from 17 to 35 percent respectively for the importer country. Though official bilateral trade figures are pegged at slightly less than $400mn, illegal trade is $1.5-2bn whereas informal trade is another $1bn adding that some talk of a range of $2-8bn. Official trade figures apart, informal and illegal trade is mere guesstimates but indicate the huge potential for formal trade.

He said that the plight of the consumer and the producer, be it in India or Pakistan is rather unpleasant. India should consider a preferential tariff and reduced non-tariff barriers formula for Pakistan. He said that it is pertinent that bilateral relations should be strengthened to reach the true potential citing a range of data and factual situation from the ongoing study by CUTS in partnership with SDPI and others in Nepal, Sri Lanka and Bangladesh and found that trade between India and Pakistan has the highest growth prospect. “While a large share of gains to Indian consumers will be through Pakistani exports in plastic-based articles, minerals and mineral fuels, Indian exports in pharmaceutical ingredients and electrical equipment will significantly reduce the burden of Pakistani consumers” he added. He said that if strong economies always dominated bilateral trade then China and the US would dominate all economies with which they have a trade surplus.

He said that regional trading blocs may be an instrument for peace and prosperity as proved in other parts of the world. He added that the trade and commerce have been the most effective way of establishing peace between rival nations. “It is expected that the resumption of the composite dialogue process between India and Pakistan will give a fillip to bilateral trade, besides facilitating early execution of various gas pipeline projects such as Iran-Pakistan-India (IPI) and the Turkmenistan-Afghanistan-Pakistan-India (Tapi) projects” he hoped.

Sakib Sherani, former Economic Advisor, Government of Pakistan, said that the trade with India is a plus point but Pakistan has given MFN status to India in rush manner without any sectoral study and consultations with stakeholders. He said that there is huge potential but opportunity cost for Pakistan is very much high despite sitting in the middle of two fast growing economies of the world such as India and China. He also highlighted some of the critical areas which impacted Pak-India trade including limited trade of manufacturing sector, non-tariff barriers, standardization issues and the time factor. He lamented that the souring relations between these two countries have grid-locked the potential of whole South Asian region.

He said that MFN status is no longer a big issue concerning trust-deficit but the deepening water issues including Kashmir dispute that India and Pakistan will have to act to genuinely address the trust-deficit and peace prospects.

Mian Waqas Masud of Fazal Industries said that trade liberalization with India was good but Pakistani business sectors has to be provided a level-playing field by the government to compete with Indian comparative advantage. He said the most-favored nation (MNN) status was given to India without proper consultation with business community or marketing of the term to deal with the ambiguities. We have to differentiate between the SAFTA and MFN lists because both deal with different items. He said that cost of manufacturing is very high due to shortage of electricity and the manufacturing sector is investing more to keep their industry running besides there are varying issues of subsidy which affects competitiveness. He said strict visa regime besides limited visa for business sector is a big hindrance in normalized trade relations between the two countries adding that the visa regime should be softened and visa should be provided on fast-track basis. He also urged the need of an arbitrary authority to resolve the disputes between business communities of each country.

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