Ripe moment to let Indo-Pak trade escalate for the greater good of South Asia: CUTS

February 16, 2012, Jaipur
“The moment is ripe for India-Pakistan trade ties to escalate. A number of forward-looking steps have taken during the recent visit of the Indian trade minister to Pakistan. They should form the basis for a built-in agenda for enhancing trade relations between the two neighbours,” said Bipul Chatterjee, Deputy Executive Director of CUTS International.

He added that the decision of the Pakistani Cabinet to defer the modalities of doing trade with India from its existing positive list approach to a negative list approach should not be looked at pessimistically as that will happen over time given the overall agenda of normalising trade relations between the two countries.

He stressed on the importance of five important decisions taken during this visit which will address concerns about customary and procedural non-tariff measures affecting trade between India and Pakistan. Formal trade between the two countries is about US$ 3 billion per year, while its potential is huge. Some estimates say that trade can be enhanced to US$ 10 billion per year including formalisation of informal trade via third countries if some significant non-tariff measures are addressed.

The importance of easing visa rules, simplification of customs procedures, mutual recognition of each other’s standards, institution of a body to deal with trade-related grievances, and opening of bank branches in each other country is to be looked as part of a built-in agenda for incremental improvement in trade relations, Chatterjee added.

Normalisation of Indo-Pak trade relations will also have a significant positive boost to regional trade integration in South Asia. In the past, troughs in Indo-Pak trade relations is known to have affected the progress of regional initiative for trade liberalisation, both countries being the largest member states of the South Asian Free Trade Agreement.

This positive development is expected to help in taking forward the agenda of regional integration during the forthcoming SAFTA Ministerial Council meeting to be held on February 16, 2012 which will be attended by trade ministers of all eight SAFTA members.

During the 17th Summit of South Asian Association for Regional Cooperation held in Maldives in November 2011, the participating Heads of State of SAARC members had renewed their commitments to cut down their respective sensitive lists containing products which are kept out of bounds from tariff reduction programme under SAFTA.

On this subject, with support from The Asia Foundation and in partnership with a group of like-minded organisation from among South Asian countries, CUTS International has recently done a study on Cost of Economic Non-Cooperation to Consumers in South Asia. The study estimates that consumers will benefit from access to cheaper products if SAFTA facilitates more open trade between the regional economies. Minimum gain in terms of annual savings on account of overpriced imports from outside the region would be US$ 2 billion.

In about 355 excluded products listed by SAFTA members, there exist very strong prospects for higher regional trade if preferential tariff rates under the Agreement are applied to them. The study found that trade between India and Pakistan has highest growth prospect.

India and Pakistan together stand to save a minimum of 55 per cent of their import bills on about 200 product categories, reducing the consumption expenditure in both countries by more than US$ 800 million per year. 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 import burden of Pakistan.

CUTS International is a non-profit, non-governmental think-tank working among others on trade and regulatory issues. Enhancing regional integration in South Asia through trade and its implications for consumer welfare is a major agenda of the organisation. Based on the results of its work, the organisation is developing a long-term programme on regional trade integration, with particular focus on India-Pakistan trade relations. This Track-2 agenda will complement the Track-1 agenda of enhancing regional trade which is gathering a momentum.

For more information, please contact:
Bipul Chatterjee, +91(0)9928207628,
Joseph George, +91(0)8003766304,