Trade dynamics

LAHORE: A decade back, India wanted to engage Pakistan in trade because it saw CPEC as the cheapest route to China and all Central Asian States. Now, with the Chahbahar route from Iran being available, CPEC has lost its charm in engaging Pakistan.

This is the reason that soon after Foreign Minister Ishaq Dar expressed a desire to open trade with India, an Indian minister promptly ruled it out. CPEC has not yet been operational through the Gwadar seaport even after a decade.

In the meantime, India invested heavily in Chahbahar, which sits at the mouth of the Gulf of Oman, and is Iran's first deep-water port that puts the country on the global oceanic trade route map.

The port lies to the west of Iran's border with Pakistan, about as far as Gwadar, a competing port developed by China in Pakistan, lies to the east of the border.

India this year has taken over the operations of Chahbahar.

When CPEC was launched, it was considered a game-changer because it connected China with Gwadar through a 2700 km corridor. The distance from Shanghai to Karachi is 16000 km. A fully operational CPEC would have drastically reduced the transportation charges through this route for many countries, including Europe, the United States, and India. Because of strained relations with Pakistan, India knew it would not be facilitated, so it funded Iran to develop Chahbahar. The distance from Chahbahar to the Chinese border is 4500 km, which is 1800 km more than the CPEC route.

But since CPEC is not fully operational, the Iranian route currently is the cheapest for trade with Central Asian countries and China. CPEC, if operational, still has a chance as there are not many countries that could trade through Chahbahar because of sanctions against Iran, but India and Turkey are exempted from these sanctions.

Pakistan’s problem is that in the past five years, it has lost a major chunk of the Afghan market where exports exceeded $4 billion a year and have now been reduced to a little over $1 billion. After Chahbahar, Afghans are buying more goods from India that, after release at Chahbahar, cross the Iran-Afghanistan border. This trade may not return to Pakistan. Indians have also gained a foothold in Central Asian markets that were inaccessible to it.

It was demonstrated way back in 2018 that goods trucks from China could reach from the CPEC corridor to Gwadar where a token export was also executed. After that, there was a lull, perhaps because the then government showed little interest in the project.

The interest has been revived recently, but the United States is still opposing it as well as the commissioning of the Pakistan gas pipeline. One can only hope that in view of the importance of these two projects for Pakistan’s economy, our authorities would find a way out.

The imports from China would be much cheaper if the CPEC route becomes fully operational. It would benefit our industries that import raw materials for their products. We will then have no desire to trade with India. The lower transport cost of our exports would make our products attractive in China. We must exploit every opportunity to increase exports and lower imports. The CPEC would save us millions of dollars in freight.