Trade to the forefront

Written by Pradeep S Mehta | Abid Suleri | Updated: Apr 21 2008, 03:31am hrs
India and Pakistan, as discussed in our last article (Trade against terror and tragedy, March 23), have new opportunities to intensify the engagement, even as the contextual incentive framework undergoes changes. In a world so keen on the gains of trade liberalisation, it is now well recognised that it is a pity that the potential for trade between India and Pakistan is not being addressed fully, despite the fact that entrepreneurship has flourished on both sides of the border.

Unfortunately, governments on both sides are not doing enough to pave the way for an increase in the volume of trade and a concomitant restoration of amicable relations. With globalisation upon us, trade negotiators of both countries should use the skills of commercial diplomacy as a complement rather than replacement for neighbourhood diplomacy, and vice versa.

There are several examples of such diplomatic endeavours. China imposed a ban on imports of Japanese rice in 2003 following the risk of insect infection. But later, an agreement (rice diplomacy) signed between Japan, the worlds most expensive rice producer, and China, the worlds largest rice consumer, restoring rice imports by China and salvaged the neighbourhood relationship.

In the subcontinent, it is important to point out that the two countries have indeed come to each others aid in times of crises. Pakistan approached India in 1990 to help it tide over a potato and onion crisis, and imported Indian sugar during a shortage in 1997. Similarly, India imported foodgrains from Pakistan in 2003 on account of an emergency. Who else could have helped on an emergency basis in the case of essential commodities but a neighbour

The February 18 elections have brought back parliamentary democracy in Pakistan. Here, it must be kept in mind that Pakistani voters gave a heavy mandate to the Pakistan Peoples Party (PPP) and Pakistan Muslim League Nawaz (PML-N) with the hope that this alliance would help to end the Constitutional as well as economic crisis facing the people of Pakistan. This mandate comes with a huge responsibility that is, of restoring supremacy of the Constitution, and providing immediate relief to people on the socio-economic front. While the first one (especially restoration of the judiciary) would understandably take some time, people would demand an immediate relief to their economic miseries. This, in turn, requires fiscal space that can easily be created, first by reducing military spending (one quarter of current expenditures are on defence), and second, by promoting intra-Saarc trade to reduce the trade deficit.

The political leadership in India seems ready to avail the opportunity provided by a democratic change in Pakistan. India has expressed hope that economic relations between the two will improve after the formation of a democratically elected government in Pakistan. The co-chairman of the PPP, which is the leader of the alliance with PML-N, Asif Ali Zardari said in an interview with Karan Thapar on the The Devils Advocate on March 1, 2008, that India and Pakistan could set aside the Kashmir issue to be resolved by a future generation, while they focus on trade and economic ties to improve bilateral relations. This was widely reported, but it was not all that he said. Zardari also added that people-to-people contacts should be improved, then inter-dependence of trade if Indian industry depends on Pakistani energy, and we depend on the Indian market for our products to be sold, we are both inter-dependent, financially integrated industry-wise. If the new democratic government of Pakistan acts on this premise and comes out with a decision to confer the much-awaited most favoured nation (MFN) status on India, and India in turn reduces its much criticised non-tariff trade barriers (NTBs) against Pakistan, the way for more trade and cooperation between the two most dominant countries in South Asia would be paved. These gestures would also give a fillip to Safta, which has remained dormant for far too long.

Pakistani voters have rejected military and mullahism (seen in North Western Frontier Province where Awami National Party and PPP have formed the government). An eco-politically stable Pakistan is as important for India and the US as it is for the people of Pakistan. Now it is the collective responsibility of the forces that would like to see peace in this region to combat terrorism and tragedies through trade.


Mehta is secretary general of Cuts International, Jaipur, and Suleri is executive director of Sustainable Development Policy Institute, Islamabad. N C Pahariya of CUTS contributed to this article