The Hindu Business Line : The business of peace

THE INDIA-PAKISTAN DECISION to set up a joint business council is a big step towards injecting some rationality to the trade profile between the two countries. The totally unrealistic character of the trade exchange today is indicated by a comparison of the state of economic ties that existed at the time of Partition. In 1948-49, India was Pakistan's most important trading partner absorbing 56 per cent of latter's exports. Today, the exchange between the two countries does not add up to even one per cent of their global trade. From the strictly economic point of view, this does not make sense and, as everyone acknowledges, the culprit is politics.

With political backing — which, unfortunately, is uncertain — the JBC can play an important role in at least making a beginning to set things right. Happily, there is a strong desire among Indian and Pakistani businessmen to clear the cobwebs and start anew. As the Karachi Chamber of Commerce and Industry president is reported to have, rightly, asked: "Why should we give dollars to others when we can share the profit amongst each other?" referring to the third country trade which, by one estimate, is more than $1.5 billion just in terms of Indian exports (official two-way trade was worth $354 million in 2003-04 and $251 million in 2002-03). The grey market is said to be worth a billion dollars. The closed Line of Control forces Indian and Pakistani businessmen to use the Dubai or Singapore route, the inference being that opening the LoC must be one of the first steps the JBC should take if it wants to make a mark in its job.

The other contentious issue is to get Islamabad to extend the most-favoured nation status to New Delhiwhich would mean the same tariff levels applicable to other trading partners of Pakistan. There is still some reluctance among Pakistani industrialists to this (under the WTO regime, Islamabad really has no choice but to extend the status to India) mainly because of their fear of a flooding of the domestic market with cheaper Indian products. Not unreasonable, but the fact remains that India enjoys a similar status with other, smaller, neighbours, and there is no evidence of these economies, as that of Sri Lanka, turning into Indian trading outposts. India, of course, gave Pakistan the MFN status in the mid-1990s, which makes a reciprocal gesture overdue.

It was a welcome sign that, during the Pakistani President, Gen Pervez Musharraf's visit, the Pakistani side indicated a keenness to get the Iran-India overland gas pipeline going, despite the US' opposition to the project. The most important thing now is to strike while the iron is hot and speed up this project, as also others that can free the flow of India-Pakistan trade. As the Commerce Minister, Mr Kamal Nath, eminently sensibly, said late last year, the two countries should not carry the baggage of their past as they contemplate cooperation in the future. It must be an embarrassment for New Delhi, and Islamabad, that India's trade turnover with some of its much smaller neighbours is much higher than that with Pakistan, and this when the potential is so high, especially in commodity trading (cotton, sugar, tea and wheat, among others).

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