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Necessity, not WTO, spurs Indo-Pak trade

The official India-Pakistan (IP) annual trade that since 2003-04 rose from $ 288 million to $ 600 million in 2004-5, is now set to grow further. Such trade through official channels is likely to eat into $ 2 to 3 billion (b) annual smuggling, and costly trade through third countries. India has a substantial surplus against Pakistan in official trade. I-P trade has an annual potential of $ 6.0 billion (b), their chambers of trade & industry estimate. India's Associated Chambers of Commerce & Industry forecasts "two-way trade can reach $ 10 billion (b) annually, within five years, following signing of a free trade agreement." (more)

I & P trade officials and businessmen, in talks this week at New Delhi, have agreed to remove a number of tariff and non-tariff barriers, that had hindered trade growth.

Who broke I&P trade ban? Not mighty Washington, nor EU, but mundane potatoes, tomatoes, onion, garlic, meat and sugar as Pakistan faced a severe shortage and food prices started spiralling early this year. Islamabad allowed open-- and customs duty & tax-free import of 11 items across their overland border points of Wagah on Pakistan and Attari on the Indian side. Their two major cities Lahore in Pakistan and Amritsar in India are less than 50km apart. The landed cost of Indian food items is lower than their current Pakistani prices. Hundreds of other items are also importable, by two countries. Pakistan can now import from India 770 specific items. This is 45 per cent of Pakistan's tariff lines that are importable from across the world, besides other special arrangements for imports from India. Islamabad now wants India to lower its tariffs and provide greater market access to Pakistani products, reciprocating Pakistan's moves to enlarge bilateral trade.

Indian food cargoes started moving into Lahore only weeks ago, after New Delhi's initial reluctance to permit overland exports to Pakistan. New Delhi had wished to use land-based trade as a bargaining chip to force Islamabad allow not only this bilateral trade between I&P, but to be given a corridor for Indian exports to landlocked Afghanistan, and Central Asia. (more)

But, Islamabad brushed the demand aside. Islamabad's demand to India is "Kashmir first, trade later." "Trade first, other settlements will follow," India, always, said.

Trade wheels started moving in July. "The two sides recognised the scope for a further increase in bilateral trade… and enhance mutually beneficial economic and commercial cooperation," a joint statement at the end of talks said this week.

I & P have also scheduled talks in September in Islamabad to expand the scope of air services agreement of 1976 and the Shipping Protocol of 1975 to facilitate larger trade volumes and to remove non-tariff barriers further and increase customs cooperation, and trade facilitation." The statement also said a fiber-optic link, to connect Lahore & Amritsar, will start to handle anticipated larger, business-related telecom traffic. It also will ensure Internet connectivity to remain uninterrupted if the existing under-sea cable develops a fault. South Asian region's growing mutual cooperation, too, is spawning India-Pakistan thaw. South Asia Free Trade Area (SAFTA) agreed upon in January, 2004, at Islamabad's Heads of State and Prime Ministers' summit of South Asian Alliance for Cooperation (SAARC) for a major free flow of business, investments and cooperation, is just four months away. It comes into force January 1, 2006. SAARC-a market of 1.4 billion (b), or 21 per cent of global population, besides I & P includes, Bhutan, Bangladesh, Maldives, Nepal and Sri Lanka. (more)

Safta will push thousands of items freely in the region. It calls for a 20 per cent cut in customs duties by 2006, and between 0-5 per cent by 2013, and 0-to-5 per cent in Saarc's least developed countries, by 2016.

Syed Asif Ali Shah, Pakistani Commerce Secretary and his Indian counterpart S.N. Menon, who led the two teams at the talks are upbeat over the outcome. "India and Pakistan will gain from enhanced bilateral trade and economic cooperation. But, we have to remain mindful that trade growth can be sustainable if it is mutually beneficial to the trading partners. It needs a level playing field," said Shah, of India's existing import restrictions, higher tariffs and non-tariff barriers. Pakistan, in July scrapped duty on import of 13 Indian commodities, including potatoes, tomatoes, garlic, onion, cattle & livestock, meat and sugar, and there will be no import quotas on these items, overland. "We are offering substantial openings to Indian products. We hope New Delhi will now give us some access for our items like bed linen, textiles and home-made products," Shah said. Menon called for " expanded cross border trade and exploring technology exchanges." "An exchange of technology and skills will bring to people quality goods at cheaper prices," he said. I & P have also explored cooperation in aviation, shipping, banking, insurance, financial services, petroleum and gas. Officials and business called for liberalising visa rules, simplification of shipping procedures. Larger overland trade that will create more jobs on both sides of the border by creating ancillary activities along the route, besides tourism and tourist industry. Khokhrapar-Munabao, overland and railway border in Sindh-Rajisthan will be the next business route.

Business compulsions and the political thaw are spawning cooperation in other fields, too. Iran-Pakistan-India (IPI), for instance, are planning to build a $ 4.5 billion (b) transnational gas pipeline, and start an Asian Energy Grid.

New Delhi and Islamabad also are discussing building a second transnational gas pipeline-Qatar-Pakistan-India (QPI) or Turkmenistan-Afghanistan-Pakistan-India (TAPI) as one pipeline is not enough to feed their growing energy demand by 2010. State Bank of India (SBI), and big Pakistani banks and financial service companies have applied to open bank branches and insurance companies, in each other's country, to fund the projected big business boost.

Besides their existing flights, India wishes additional routes including New Delhi-Islamabad, and Pakistan Airlines plans to fly to Chennai.

India also wants to open Mumbai-Karachi shipping route.