Trade and investments are expected to be among the key issues to be discussed between the India and Pakistan foreign secretaries when they meet in mid-January.
According to officials, the two countries are keen to direct their peace efforts towards “trade diplomacy” in a bid to build enough trust to tackle issues including terrorism and Kashmir. There is a huge potential to increase trade between the countries, they feel. Exports from India to Pakistan reached almost $2.3 billion while exports from Pakistan to India were only $430 million in 2013-14, according to the commerce ministry data.
Many experts contend that trade between the two countries is actually almost double the official figure, with imports from India coming to Pakistan via third countries such as the UAE. Most-favoured nation (MFN) status would enable direct imports into Pakistan from India instead of indirect routes that translate into higher transport cost.
Ram Upendra Das, professor and senior fellow at the Research and Information System for Developing Countries, New Delhi, said, “ The meeting between Prime Minister Narendra Modi and his Pakistan counterpart Nawaz Sharif is a collective aspiration of people and leaders of both sides. Pakistan has moved from ‘positive list’ regime to a ‘negative list’ regime comprising of 1,209 tariff lines of import of goods not allowed from India.”
The commerce ministers of India and Pakistan last January had met on the sidelines of the Saarc Business Leaders Conclave held in New Delhi and had reaffirmed the commitment of their governments to expeditiously establish normal trading relations and provide Non-Discriminatory Market Access on a reciprocal basis. Both sides decided to intensify and accelerate the process of trade normalisation, liberalisation and facilitation and to implement the agreed measures.
The two neighbours have a Preferential Trading Arrangement under the South Asia Free Trade Area (SAFTA) process. Benefits under the SAFTA process are partially blocked by Pakistan through the ‘negative list’.
At the end of the meeting between the two leaders in May 2014, it was stated that the two countries could move immediately towards full trade normalisation on the basis of the September 2012 road map worked out between the commerce secretaries of both countries.
However, relations between the two countries were put on hold in August 2014 when the Modi-led NDA government cancelled high-level talks with Pakistan due to Pakistani high commissioner in India meeting separatist leaders from Kashmir.
External affairs minister Sushma Swaraj had recently expressed the hope that the renewed dialogue between India and Pakistan will open a new chapter of peace and development in the region. Making a statement on her visit to Pakistan in both houses of Parliament, the minister had said it was decided that a “comprehensive bilateral dialogue” will start and foreign secretaries of the two countries will work out the modalities under the “new dialogue”.
The major beneficiary of trade between India and Pakistan will be the consumer, as it will give them low cost goods and services due to reduced cost of production and large economies of scale.
In a research paper, Huma Sattar, a visiting analyst from Pakistan at the Heritage Foundation in Washington DC, has said, “For years, the two countries have insisted on negotiating trade with non-trade issues. As a consequence, talks have remained intermittent, largely governed by the unresolved political animosity between the two countries. Where trade might once have paved the way to better ties with India, it has now become a negotiating chip for other, larger issues between the two countries.”
Pakistan had pledged to grant India MFN status by the end of 2012, meaning Indian exports would be treated the same as those from other nations, but has so far not done so. India granted Pakistan MFN status in 1999.
Officials from Pakistan claim that there were number of issues on both sides for normalising bilateral trade which included “making sure that vulnerable sectors are protected and the issue of the non-tariff barriers in India and the issue of imbalance of trade and certain other infrastructure-related issues”.
MFN status will mean
India can export 6,800 items to Pakistan, up from
around 2,000 at present, and the countries aim to lift bilateral trade to $6 billion within three years, officials have said.
Bilateral trade dialogue with Pakistan was re-initiated with the 5th round of
India-Pakistan commerce secretary-level talks on commercial and economic co-operation in April 2011.
This was followed by
further rounds of talks held in November 2011 at Delhi and September, 2012 at Islamabad.
Three ministerial level dialogues were also held in September 2011, February 2012 and April 2012.