Money Matters

To trade or not?

By Majyd Aziz
Mon, 07, 24

Regional economic integration occurs when countries come together to form free trade areas or customs unions, offering members preferential trade access to each other’s markets.

To trade or not?

Regional economic integration occurs when countries come together to form free trade areas or customs unions, offering members preferential trade access to each other’s markets.

Among the top ten trading blocs are the European Union, Asean, MERCOSUR, Nafta, and even Saarc. While global trade blocs are flourishing and becoming economic juggernauts, the Saarc economic train got derailed primarily because of the extremely complex political terrain that exacerbated the already tense Indo-Pak bilateral relations. The debate continues on the prospects of resumption of bilateral trade, and emotions do run high, at times more negatively than pragmatic.

Before August 2019, optimism was in the air, and reports, initiatives and actions manifested a positive outlook even though Pakistani goods, although appreciated by many Indian consumers, were not able to make a big splash. According to the preamble of one of the executive summaries of the World Bank regional trade report, ‘A glass half full: the promise of regional trade in South Asia’, "What if the trade between India and Pakistan were valued at $37 billion instead of $2 billion?”.

A devil's advocate was more cynical. He wondered: “Why trade with India? Pakistan's exports to India were, in the immortal words of Gen Ziaul Haq, ‘peanuts’. Why should Pakistan go through the hassle of buying and selling to an enemy? More so, when at least $3 billion to $4 billion worth of Indian goods used to enter in undocumented mode or through third countries, then wasn't this negatively impacting Pakistani industries? Wasn't India relying on non-tariff trade barriers or non-tariff trade measures -- thus making it very difficult for Pakistani goods to enter across the border?"

The fact is that circumstances have pushed progress on bilateral trade way, way back. Notwithstanding the current uncertainty, is it possible to at least pragmatically contemplate with an eye towards the future? I have always advocated making trade and investment the pivotal point in bringing about sanity in the region that could enable progress in any dialogue between India and Pakistan. The trade regime should not be made challenging for the business community. I give less importance to the rhetorical outbursts regurgitated by hawkish elements or regressive persons on both sides of the Line of Control. They have vitiated most of the bilateral trade development achieved over the years.

Secretary General of Consumer Unity & Trust Society (CUTS) Pradeep Mehta has very correctly stated that: “In terms of expanding the increasing trade relations between India and Pakistan, let me rely on Victor Hugo’s famous quote: ‘All the forces in the world are not so powerful as an idea whose time has come.’ The time to normalize trade relations is in the interest of the peoples of Pakistan and India (but) the recalcitrant forces are all the naysayers and protectionists on both sides of the border, who believe that their own interest is more important than the larger public interest. The wise in the governments have to call their bluff.”

The business community of India and Pakistan must not remain prisoners of history nor should they ignore the fact that over seven decades have gone by and the peace dividend has yet to be encashed. There are powerful forces on both sides of the border who continue to demonize the trade liberalization process. At the same time, emotions and sensationalism reach a high crescendo whenever negative episodes occur.

It seems the bilateral relationship swings between nostalgia, scepticism, and deadlock. The weeds of neglect and contempt are still on the railroad tracks and the cobwebs of distrust and conflict are visible on the ceilings.

The business community must become an energetic game changer in a more prominent way to get the myriad roadblocks on the motorway of trade liberalization removed. Conferences and conclaves (I have been a speaker at many such events in India and Pakistan) are great public relations extravaganzas but there is no vigorous determination to achieve (only propose) real solutions. Are the denizens of the Sub-continent waiting for divine intervention or are they ready for a regional paradigm shift on a fast track? A lot needs to be done; more goodwill needs to be created.

An initiative (now on the backburner) was undertaken by the Transnational Strategy Group (TSG) based in Washington of which I am senior adviser for Pakistan. In early 2014, in my speech at one of the conferences in New Delhi, I proposed the establishment of a Pakistan-India Cross-Border Special Economic Zone on the Pakistan side of the Wagah-Attari border where Indian companies could set up plants, employ Pakistani workers, and export to India and also to Afghanistan and the Central Asian Republics, etc. The TSG appreciated the proposal and convinced the United States Institute of Peace, Washington, to fund the study that was then presented to respective governments and others who matter.

For developing and emerging countries, SEZs generally have positive economic policy and infrastructure implications, regardless of whether the host nations are operating under a politically unstable or post-conflict atmosphere. For conflict-prone nations in particular, SEZs can act as a pioneering vehicle to foster peacebuilding.

The SEZs would have offered a breakthrough that other measures are unable to provide in the current state of bilateral ties. Meetings of participants from the private sector, government and law-enforcement were planned to be held in New Delhi, Islamabad, Lahore and Amritsar but then, as feared, an ominous event happened, and the study was consigned to gathering dust in the archives of the TSG.

So, what is the way forward? Is the status quo desirable or worthwhile? Should the private sector of both countries endeavour to assist one another in effective lobbying and advocacy with governments and organizations in each other’s country to bring about positive policy changes as well as to remove bottlenecks, barriers, and impediments that hinder bilateral trade and investment?

It is sad to point out, but it seems there is widespread apathy even in the ranks of the business leadership and hence there is neither a bilateral conversation nor practical efforts made to move forward. However, brainstorming by the private sector has its own importance but such initiatives can boomerang if not accompanied by political steps to remove the underlying causes of tension between the two countries. They must impress upon both governments to go for genuine normalization by deliberating the thorny issues in a substantive mode.

The government in New Delhi can take a few forward steps to melt the ice. The two positive steps should be: one, restoring the Most Favored Nation status (or as the Pakistan government, mindful of negative connotations if translated into Urdu, changed it to Non-Discriminatory Market Access); and, two, revert the imposition of 200 per cent across-the-board import duty on Pakistani products to the pre-August 2019 level.

Moreover, both countries should nominate their high commissioners and gradually liberalize the visa regime, especially for businesspersons and for medical purposes. It is time to resuscitate the Saarc dead horse and hold the long-postponed Saarc Summit.

Religion-based decisions should not be imposed on trade and even on sports. Trade and investment should not be hostage to contentious issues. The welfare of the people should be paramount. Butter should be the priority, not bullets. Anger and jingoism should be curbed and discouraged. The Greek shipping tycoon, Aristotle Onassis, aptly said -- and this should be a guiding point for the prime ministers of India and Pakistan -- that ”it is during our darkest moments that we must focus to see the light.”

The writer is a former president of the Employers Federation of Pakistan.