The Hindu Business Line : Hardening stance

Reports suggesting that New Delhi may have a change of mind on its trade policy with Islamabad in the wake of Pakistan excluding India from the ambit of the South Asian Free Trade Area (SAFTA) are to be expected in view of Pakistan's intransigence on the issue. The basic point is that, under the SAARC Charter, Pakistan does not have the choice of being selective among the members of the South Asian Association of Regional Cooperation on the implementation of SAFTA, which it has ratified. As such, it is clear that its present policy has been violative of SAARC rules, which cannot be supported.

Seen in this light, the very fact that New Delhi has been tolerant of Islamabad's misdemeanour in this respect till now (since the beginning of July) goes to show that India has been patient enough to give Pakistan a chance to rethink its policy and rectify the error. But patience cannot be open-ended for fear of being construed as weakness, and it is time New Delhi wielded the stick, which is likely to have a strong impact on our neighbour given the sheer size of the Indian economy. In fact, there is enough evidence to buttress the fact that, among other things, freer trade between the two countries would lead to a more efficient allocation of production resources within Pakistan. It would also lead to a decline in the prices of essential commodities such as pharmaceutical products, whose supply today is governed by agreements with Western drug majors which have a built-in price disadvantage for Pakistan.

This apart, visiting delegations of Pakistani businessmen have all drawn attention to the fact that increased direct trade with India would lead to a general reduction in the price of imported Indian products, which are today routed through a third country such as Dubai. It is because of the economic benefits that Islamabad itself has been pitching for trade-facilitating measures such as air-services and general transport agreements, not to speak of opening more bank branches in either country and greater ITeS contact, including setting up more BPO centres.

There is, therefore, little doubt that should New Delhi withdraw temporarily the SAFTA sops already accorded to Islamabad under the treaty obligation (among other things, while India extended in the mid-1990s the Most-Favoured Nation status, which is mandatory under WTO rules and also a SAFTA requirement, Pakistan is yet to do so despite both countries being members of the World Trade Organisation) and initiate dispute settlement proceedings at the WTO, the impact will be felt more by the Pakistani economy than by Indian businessmen, who are constricted in their operations anyway. It stands to reason that the resultant pressure by the Pakistani business community could persuade Islamabad to be more accommodative and realistic in its economic policy towards India than has been the case till now.

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