The Hindu Business Line : Shackled trade

The latest figures on India-Pakistan bilateral trade merely underscore the fact that, freed from government intervention on both sides, a more liberalised trade will improve the living standards of the people on both sides. However, so far Islamabad has not been keen to let this happen mainly because of non-economic reasons, its basic argument being that unless the Kashmir problem is settled there can be no progress on any other aspect of Indo-Pakistani relations.

Very recently, Islamabad increased the number of items in the `positive' trade list with India to 1,075 from 773, strengthening the argument that Pakistan is serious about opening up its economy to Indian exports in keeping with the spirit of South Asian Association of Regional Cooperation and SAFTA (South Asian Free Trade Area). Admittedly, the new items are on the periphery of the bilateral trade profile, and may not contribute significantly to boosting trade volumes, but they will help strengthen the positive trend: The latest official figures show that during April-November the bilateral exchange increased to around $869 million, which compares most favourably with the overall 2005-2006 trade level of $689 million. Pakistan must, however, realise that there is only one way in which it can fully honour the underlying spirit of regional cooperation under SAARC — by unconditionally extending to India the Most-Favoured Nation treatment, what it is mandatorily expected to do both under the SAFTA guidelines as well as the WTO (World Trade Organisation) rules. As of now, there is little sign that Pakistan is inclined to doing so; this, it is hoped, will inform New Delhi's response to the Islamabad `initiative' on the expansion of the positive list.

In fact, recently, the External Affairs Minister, Mr Pranab Mukherjee, said that, vis-à-vis the Pakistani move, New Delhi would be considering whether it can do something `unilaterally' by way of a response. While the intention is laudable, New Delhi should not be seen to taking any step that will be difficult to justify on economic and contractual grounds. In fact, a recent report by the State Bank of Pakistan pointed out unequivocally that, under WTO rules, Islamabad "is required to open its markets for India without any discrimination" and, second, that the process of bilateral trade liberalisation "can foster economic growth and broaden the process of regional integration as well" which, presumably, includes the political aspect as well. Clearly, this goes against the official Islamabad stand on the sequencing of initiatives, suggesting, among other things, that a debate is on in Pakistan about how it should deal with its neighbour in the interest of healthy bilateral relations.

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