The Hindu Business Line : Tangled trade

In recent days, attention has been on wheat and cement imports from Pakistan, bringing to the fore yet again the totally unsatisfactory state of affairs on trade between the two countries. There has been no progress, though the subject has been discussed at the highest levels over the past few years, both bilaterally and under SAARC auspices, perhaps because of the stakes involved in other spheres of bilateral relations. Thus, the inefficient structure of bilateral trade relations remains in place affecting the long-term, strategic interests of both the economies.

Take wheat and cement, which India needs to import and which Pakistan can supply to the immense benefit of its producers and exporters. True, Pakistan's Economic Coordination Committee on Wednesday (May 23) banned export of wheat on the ground of an internal price increase that it described as the result of `hoarding of stocks' and `manipulation of the market'. But the fact remains that, at the macro level, this was as good a time as any for Pakistan to sell its cheap wheat to India, which is facing a shortage of the fine cereal. According to Indian flour mill sources, Pakistan had around 500,000 tonnes of surplus wheat and, as per one trade estimate, India needs to import 3-5 million tonnes of the cereal this year.

As for cement, there is a 20-million-tonne gap between demand and supply in India, which has led the Commerce Minister, Mr Kamal Nath, to ask Islamabad to focus on cement exports, the future potential of bilateral trade in this sector being nothing short of rosy in view of the fact that, while no sizable capacity is likely to come on stream the next three years, demand is rising by around 11 per cent annually. On the other hand, there are reports that the Pakistani cement industry is upbeat on the news that India is likely to increase imports from across the border, and has already drawn up plans to raise production capacity substantially, not merely to meet increased demand from India but from other markets as well (Pakistani cement exports doubled to 2.45 million tones during July-April 2006-07).

Seen against this background, it is to be hoped that the quality-certification problem holding up additional cement exports from Pakistan will be sorted out quickly (no doubt after taking care of Indian interests). This is because the cement export-import issue is not merely a matter of two markets working together to sort out a temporal trade requirement as efficiently as possible. It is also nothing less than an important building block to strengthening economic cooperation between two neighbours that have kept away from each other because of other non-economic irritants.

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