The Hindu Business Line : Positive signs for Indo-Pak trade

The India-Pakistan trade talks in New Delhi this week mark a small yet significant step forward in economic cooperation. Indeed, it is a welcome surprise that so many positive decisions were taken in a sphere of interaction that has seen little real progress. The hope, of course, is that this is just the beginning of a process, but given past experience, one cannot be too enthusiastic about the future.

On the face of it, the scale of cooperation envisaged is substantial, given the ambition of attaining a two-way trade turnover of around $10 billion in 2010, compared to the present $1.7 billion (that is, a more than five-fold increase in just three years). At the end of 2004, the trade exchange was worth just around $250 million, which throws even more light on the scale of the effort required to hit the target set for the end of the decade. In reality, however, the road ahead may not be all that difficult because the figures quoted above relate to official trade between the two countries and not to the unofficial bilateral exchange through third countries. In March 2004, the then Union Minister for Disinvestment, Mr Arun Shourie’s estimate was that unofficial trade was as high as 10 times the official figure, on which basis the current total India-Pakistan trade may be valued at around $18.7 billion (unofficial plus official trade), meaning that the 2010 trade target has actually been surpassed. Clearly, the thrust of the bilateral effort should be to bring unofficial trade within the official ambit, which can be easily achieved if the restrictions on open trade (mainly imposed by Islamabad) are lifted.

From this perspective, New Delhi’s decision to ease restrictions on Pakistan’s cement exports and the facilitating of mutual banking operations — among other steps (including Islamabad’s intention to encourage Indian tea exports) taken at the recent meeting — though welcome, may not be enough to regularise unofficial trade between the countries. The crux of the issue lies in Islamabad granting India most-favoured nation status (thereby reciprocating New Delhi’s decision taken some years ago) and conducting mutual trade on the basis of a “negative list” (in place of today’s 773-item “positive list”), which, however, is easier said than done because of the non-economic compulsions trumped up by Islamabad. One concrete step Pakistan could take to tackle the problem of unofficial trade is to agree to New Delhi’s suggestion (made at the New Delhi meeting) that the “positive list” be increased by 484 tariff lines. Islamabad’s response will be the litmus test of Pakistan’s desire to improve economic ties with India in the long run.

Related Stories:
‘Pakistan ‘agreeable’ to trade across LoC’
List of more importable items to Pak forwarded

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