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India, Pakistan explore peace through
trade
By Indrajit Basu
KOLKATA -One of the fastest-selling whisky
brands in Pakistan is an Indian brand called Aristocrat.
Another best-selling item is an Indian automotive tire
brand called Apollo. Moreover, Pakistan's most-watched
movies are produced in Bollywood and movie stars who
enjoy iconic Pakistani status are mostly Indian stars
and starlets.
All of these products are on a
list of "banned imports from India" that are smuggled
daily into Pakistan through the porous border of Punjab,
the Pakistani state that borders India. Ordinarily,
given that the two countries are next-door neighbors,
this kind of cross-border trade shouldn't come as a
surprise. But with decades of recurring bilateral
tensions, officially-recorded trade between the two is
abysmally low. In 2001, for instance, which was supposed
to be one of the good years for Indo-Pakistani trade,
Indian exports to Pakistan were only US$183 million out
of total exports of $44 billion, while Pakistan exported
$63 million to India of $8.8 billion in total exports
The fact is that under the radar, cross-border
trade is booming. According to AC Muthiah, an Indian
industry lobbyist, unofficial trade could run as high as
$6 billion to $8 billion - which thus explains the
continued Pakistani popularity not only of Indian
whiskey, pirated movie VCDs and auto spares but of tea,
machinery, pharmaceuticals, steel and even Ghagra-cholis
(an Indian ethnic costume), the Taj Mahal, and boat
rides on Kashmir's famed Dal Lake.
"We have come
to India to see the Taj, shop Ghagra-cholis from Jaipur,
and visit many historical places including Kashmir. It
is our dream,?says Riffat Habib, wife of a
Rawalpindi-based DM Textile Mills managing director, who
is currently visiting India as a part of a 100-member
Pakistani business delegation. The delegation, the
largest ever, is there to conduct trade talks and
possibly initiate business deals on some of the "taboo"
Indian products. The visit of the Pakistani delegation
has started off well, with businessmen on both sides
agreeing on a plan to normalize trade relations, with a
special focus on solving some practical difficulties
facing trade flows between the two countries.
There seems to be a growing realization on both
sides that trade restrictions come at a heavy price.
This seems especially true in Pakistan, where Indian
pharmaceuticals and cycles come at a price 30 percent
and 20 percent higher because these and many other
products like steel, machine parts and branded clothes
are imported through middlemen based in Dubai, Singapore
and Hong Kong.
But the most attractive feature
of the plan pushed by the two business delegations
envisages a gradual opening of Pakistani trade to India.
Although India opened its trade doors for Pakistan by
granting most favored-nation-status (MFN) to Pakistan in
1995-96, Pakistan has delayed extending similar status
to India, an obligation to the World Trade Organization
(WTO) regime. It still maintains a "permissible list" of
only 600 items that can be legally imported from India
whereas India has no list of permitted or forbidden
products.
To some extent, Pakistan has reasons
for being sensitive about extending MFN to India
outright. "Although India has extended MFN status to
Pakistan, throughout the last decade we have suffered an
adverse balance of trade vis-a-vis India," said Aziz
Ahmad Khan, Pakistan's high commissioner-designate
recently. It is natural for us to be concerned with
one-sided export growth strategies. We therefore need to
look into all aspects of trade-related issues.
Pakistan may have to reciprocate with some sort
of a favorable trade policy towards India sooner rather
than later because the United States wants it that way.
Pakistani press reports suggest that the US has stepped
up pressure to give India MFN status as mandated by the
WTO. Analysts also say that Pakistan's current economic
performance, which has outstripped India's recently, has
created a historic opportunity for trade to flourish.
Pakistan in 2002-03 has emerged as South Asia's fastest
growing economy," according to the country's finance
minister, Shaukat Aziz, which comes after a gap of
almost a decade. According to Aziz, Pakistan registered
growth of 5.1 percent last year against Indian gross
domestic product (GDP) which is now estimated to have
grown an anemic 4.3 percent in fiscal 2002-03, revised
downward from 4.5 percent. Certainly, free trade between
the two should create burgeoning economic opportunity.
According to Tata Economy Consultancy Services, a free
market between the two countries would give both access
to a middle-income population with per capita earnings
of US$1,000.
Some analysts believe that if India
and Pakistan were to join hands in trade, it could also
entice China into an economic relationship with South
Asia, creating an economic force to be reckoned with.
That may appear wishful thinking, but the future of
bilateral trade is looking more hopeful after decades of
disappointment. The delegation visiting India say they
have managed to extract assurances from India's external
affairs ministry regarding easing of visa rules to
enable businessmen to travel to each other's countries.
They added that they would seek to extract a similar
commitment from Pakistan. The two countries have also
agreed to work jointly on opening movement of goods by
road through Wagah - a "no-man's land" border area
between the two - by setting up storage facilities, one
each by India and Pakistan, for cargo. The two sides
would also work on simplifying and standardizing
documentation required for shipment of cargo between
Mumbai and Karachi ports. Customs procedures relating to
Indo-Pakistani trade consignments have become onerous
over the years, not only causing delays but also adding
to the cost of doing business for both sides.
"We could be beaters if we could put our heads
together," said Jamal Mehboob Maghoom of India-Pakistan
Chamber of Commerce and Industry, while FICCI president
AC Muthiah added that India-Pakistan relations could be
resuscitated if business were to take the lead. And both
would like to see the political leadership of the two
countries agree.
(Copyright 2003 Asia Times
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