Trade talks set to pave way for normal Pakistan, India relations

Filed on November 19, 2011

In their latest round in New Delhi, commerce secretaries of Pakistan and India have moved a notch further in the ultimate goal of normalising trade ties between the two countries.

While Pakistan agreed to open most of the trade with India by February next, both sides promised to liberalise visa regime, particularly for their businessmen which is imperative for any meaningful progress in expanding their trade.

By February 2012, Pakistan would review what has been regarded as major obstacle to the normalisation of bilateral commerce — the negative list. The large list which restricts Indian imports to Pakistan is to be replaced by a positive list.

On top of negative list of items that India will initially be restricted from trading include the pharmaceutical and engineering industries.

Pakistani pharmaceutical and engineering companies are worried they will be swamped by cheaper Indian imports.

The new list would be drawn up within a couple of months then gradually phased out. An expert panel would decide in January on allowing the trade of oil products.

India on its part has promised to redress Pakistan’s long-standing grievance that its bigger neighbour has erected trade barriers with prohibit duties that discourage its exports to India.

Indian Prime Minister Manmohan Singh has promised to sign preferential trade agreements with Pakistan as a step further to bolster trade ties.

The visa regime for businessmen is also being relaxed. Under the existing practice, both countries require businessmen to register with police on their arrival and regularly report to them.

Visas are issued only for one city. The new agreement eases visa rules. The two countries will also look at the feasibility of electricity trading and will open a second road trading post by February.

The fresh concord is another sign of the accelerated process of thaw in bilateral relations which have resulted from a couple of meetings between prime ministers of the two countries after a substantive progress was achieved in Bhutan last year.

The dialogue process that had derailed after the terrible Mumbai carnage in 2008, has been restored and a lot of mistrust dogging bilateral ties appears to be steadily diminishing.

Analysts hope that with trade relations warming up, India may finally shed the Mumbai hangover.

Pakistan has also begun pursuing more vigorously the prosecution of the seven accused being tried in a Rawalpindi anti-terrorism court on charges of complicity in planning, funding and execution of the Mumbai attack.

Prime Minister Singh has accepted the longstanding invitation to visit Pakistan but is stymied by domestic opposition, particularly from the BJP.

Under Vajpayee a lot of progress had been achieved that was nullified by the ill-fated Kargil adventure.

Hitherto the military on both sides have obstructed rapid progress in bilateral dialogue. But after talks with Gilani, Singh is convinced that Pakistan’s powerful army is on board in the peace initiative.

Contrary to popular belief, Pakistan’s army has been tacitly supportive of a good relationship with India.

Various studies have shown that Pakistan would be net gainer in trade with India with focus on the overall calculus of bilateral commerce.

State Bank’s Abid Qamar while emphasising the potential of post-MFN trade with India had some time back concluded that import substitution will make substantial savings for Pakistan.

There will be other positive outcomes: investment, joint ventures; incentives to increase and improve manufacturing; and relief for consumers. Pakistan has to build a truly competitive capacity.

The India-Pakistan feuds have blocked progress in the SAARC which has failed to achieve much as an effective regional economic bloc.

Peace between India and Pakistan would have great impact in the region.

Lasting India-Pakistan peace is seen as vital to South Asia’s stability and to smoothing a dangerous transition in Afghanistan as NATO-led combat forces plan to withdraw from that country in 2014.

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