A game of trade and balance

AVIJIT GOEL | Updated on January 25, 2018

Given the prevailing political climate, India can strongly influence the transit agreement between Kabul and Islamabad

In the ever-changing political and diplomatic landscape of Afghanistan and Pakistan relations, a strong point of contention is the fate of the Afghanistan-Pakistan Transit Trade Agreement (APTTA). It is a bilateral trade agreement signed in 2010, allowing for movement of goods between the two countries.

This agreement superseded the 1965 Afghanistan Transit Trade Agreement, which granted Afghanistan the right to import duty-free goods through Pakistani seaports. It did not offer Pakistan reciprocal rights to export goods to the Soviet Union, nor to the Central Asian Republics after the fall of the USSR. In 2010, encouraged largely by the US which professed that greater regional connectivity between South Asia, Central Asia and the Middle East would help jumpstart Afghanistan’s economy, APTTA became a reality.

Equally unequal

No bilateral agreement is ever equal, especially in geopolitical or commercial terms. However, APTTA belongs to a select club of agreements that have seen inequality shift from one member to the other in less than a decade. Pakistan, over the last few years, has closed its borders multiple times with Afghanistan, especially in times of diplomatic or security turbulence, where it used the blockade as an arm-twisting tool to rein in political Afghanistan. This affected the market in Afghanistan substantially as costlier imports from other countries or smuggled imports from Pakistan would needlessly push up prices and inflation.

Afghanistan, often accused as a cesspool of political short-sightedness, surprisingly worked towards a long-lasting solution to this issue. Firstly, it diversified trade partnerships over a decade and became a member of the WTO in 2016. At the post-accession forum of the WTO, Humayoon Rasaw, Afghanistan’s minister of commerce, said: “Afghanistan is committed to maximizing the benefits of WTO membership by...secure, stable and non-discriminatory access for Afghan exports and integration into the rules-based global economy”. Clearly, the significance of ‘non-discriminatory’ and ‘rules-based’ trade weren’t lost on the larger audience.

Circa 2017, Pakistan’s exports to Afghanistan dropped by a significant 27 per cent over the past one year. India is the largest importer of Afghan goods now and trade with Iran has grown by 25 per cent. From a high of close to $3 billion bilateral trade between Afganistan and Pakistan in 2011, the figure may drop to about $1 billion this fiscal.

The primary grievance that Afghanistan has with the current APTTA is that it does not allow for bilateral trade with India. Afghan goods can unload at Wagah for Indian destinations, but cannot take Indian goods back to Afghanistan. (Pakistan’s contention is that this would fuel a black market of Indian goods in Pakistan as the goods may find their way through black channels back into Pakistan.)

Strong posturing

Since 2015, President Ghani had been issuing warnings, soft at first and direct later, about closing Pakistan’s transit route to Central Asia if his country’s entrepreneurs were not allowed to trade with India through the Wagah border crossing. His insistence on including bilateral trade with India into APTTA at the least, or revising the agreement as a trilateral one, fell on deaf ears until now.

This past October, Ghani issued a decree banning Pakistani trucks from entering Afghanistan. The trucks will now have to offload their goods at the Afghanistan-Pakistan border and from there, Afghan trucks would carry the goods to the Hairatan and Shir Khan ports.

This strong posturing by Afghanistan on APTTA regarding the inclusion of India has surely taken Pakistan by surprise. It may not be a big export blow to Pakistan yet, but it surely is a loss of face as Afghanistan has also set about signing transit agreements with Tajikistan, Uzbekistan and Turkmenistan so as to allow Afghan transport into them. Last October saw Pakistan reaching out to India through unofficial channels on talks regarding the APTTA (which India refused).

The APTTA surely is seeing a shift in power balance, though the likelihood of India replacing Pakistan as the closest trading partner seems unlikely immediately. The irony might also lie in Afghanistan soon pulling the strings unilaterally in transit allowances. For example, in importing power from Central Asia in the future, Pakistan will be dependent on Afghanistan. The shortest and most commercially feasible way is through Afghanistan, and it could be a level playing field of geographical transit allowances on more mutually agreeable terms.

The writer is a geo-political analyst

Published on January 25, 2018

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