Daft reasoning

While enjoying traditional Indian hospitality, Afghan President Ashraf Ghani renewed his threat to block the access of Pakistan’s merchandise to Central Asian Republics (CARs) through his country in retaliation against Islamabad’s persistent refusal to allow Indian exports to Afghanistan to pass through Wagah border.

Such statements, which are made from time to time and often border on rant and rave, strengthen the impression that has already has gained currency: that by not allowing Indian exports to enter Afghanistan through the land route, Pakistan is violating its international obligations. Is this the case? The answer to this question warrants a glance at the Afghanistan-Pakistan Transit Trade Agreement (APTTA) and other relevant multilateral agreements.

There are two major multilateral agreements governing transit trade for landlocked countries. The first is the UN Convention on the Law of the Sea, 1981 (UN Convention). Transit trade provisions are found in Part X of the convention. Article 125 confers on landlocked states the right to access to and from the sea, including the freedom of transit through transit states by all means of transport. However, the same article stipulates that the terms and conditions for exercising the freedom of transit shall be agreed among the landlocked states and transit states through bilateral or regional agreements. Article 127 stipulates that the transit shall not be subject to any customs duties or taxes.

As a result, the fundamental obligation created by the UN Convention on the Law of the Sea on transit states – such as Pakistan – is to give their neighbouring landlocked countries – like Afghanistan – access to the sea for both exportation and importation. A transit state is not bound to give access to a landlocked country to a third country for exports or imports through land. This is logical as a landlocked country, by definition, lacks access to the sea. Of course, a transit state may grant the land route access to a landlocked country. But this is not a multilateral obligation and such an arrangement is to be worked out through a bilateral treaty.

The second relevant multilateral treaty is the WTO Agreement. The WTO essentially sets the rules for trade liberalisation. Transit trade provisions are contained in Article V of the General Agreement on Tariffs and Trade (GATT), which is part of the WTO body of agreements. Paragraph 2 of Article V states that: “there shall be freedom of transit through the territory of each contracting party via the routes [that are] most convenient for international transit for traffic in transit to or from the territory of other contracting parties”.

It is obvious that freedom of transit granted by Article V is not restricted to landlocked countries or transit by sea. However, the freedom of transit is restricted by the phrase “via the routes [that are] most convenient for international transit”. It is for the transit country to decide which route is the most convenient. WTO jurisprudence also supports this interpretation. It was held by a WTO panel in ‘Colombia – Ports of Entry’, a case involving Colombia and Panama, that “a [WTO] member is not required to guarantee transport on necessarily any or all routes in its territory, but only on the ones ‘most convenient’ for transport through its territory”. It is, therefore, for the country granting transit to decide the routes.

APTTA, which was concluded in 2010, provides a comprehensive framework for Pak-Afghan transit trade. It may be a useful exercise to look at the relevant provisions of the agreement. Article 3 of APTTA stipulates that there ought to be freedom through the territory of each party to the agreement. However, the freedom of transit has been made subject to the proviso “via the pre-settled routes”.

The agreed transit routes or corridors are mentioned in Annex-I to an agreement entitled ‘International Transit Transport Corridors and Ports of Entry/Exit’. Two of these corridors are Torkham-Wagah and Chaman-Wagah. This means that Afghan exports entering Pakistan at Chaman or Torkham can be carried to Wagah before they enter India. Annex-I categorically states that Afghan trucks on return will not carry Indian exports.

It follows that Pakistan is not required under any multilateral convention or bilateral arrangement to provide access to Indian exports to Afghanistan or Afghanistan’s imports from India through the land corridor. On the contrary, Afghanistan is bound under Annex-I to provide access to Pakistani exports to CARs through the settled corridors. In case Afghanistan chooses to block Pakistan’s exports to CARs, such an action will amount to a violation of APTTA.

Taking advantage of its dalliance with Kabul, New Delhi has tricked the former into believing that by not allowing Indian exports overland access to Afghanistan, Pakistan is hurting Afghanistan’s economy. At present, the total Indo-Afghan trade is $551 million, which includes $130 million exports from Afghanistan and $421 million exports from India. This is much lower than $1.57 billion worth of Pak-Afghan trade ($1.34 billion exports from Pakistan and $227 million exports from Afghanistan).

Any opening up of trade with India will by no means tilt the balance of trade in Afghanistan’s favours as the Indians have much more to sell to the Afghans than the other way round. Instead, it will drive up Indian exports to Afghanistan and may even exacerbate Afghanistan’s overall balance of payment situation. This, in turn, will shore up the country’s dependence on foreign assistance, including that from New Delhi. As a result, the greater the volume of Indo-Afghan trade, the higher Afghanistan’s indebtedness to the Indians is likely to be.

At present, the $18 billion-strong Afghan economy – one of the smallest and the poorest in the world – runs almost entirely on assistance from international donors. The country also faces a persistently huge balance of payment problem as exports ($521 million) lag far behind imports ($3.3 billion). The Afghans need to narrow the trade deficit and start looking inwards to keep the wheels of the economy moving. An overwhelming dependence on foreign capital inflows will continue to rob the country of whatever sovereignty it is left with. But this is a case of easier said than done. An economy in tatters, resting on only a handful of agro-based industries and working in the shadow of terrorism, is extremely difficult to shape up.

By Indian standards, Afghanistan is a small market. Going by a purely economic logic, it should not hold much of an attraction for the Indians. But the economy has never been the mainspring of New Delhi’s overtures towards Kabul. What it has set upon itself – and has already achieved – is a strong commercial and political presence in the war-torn but strategically important country. Given the zero-sum game that New Delhi and Islamabad are engaged in, any gains made by India anywhere are seen by both countries as a loss for Pakistan and vice versa. The growing warmth in New Delhi-Kabul relations is perceived to be an affront to Pakistan.

Speaking in economic terms, Pakistan possibly losing out from stronger Indo-Afghan ties is not a question of mere perceptions. Afghanistan is the third largest export market for Pakistan. It is also one of the few countries with which Pakistan runs a trade surplus of more than a billion dollars. In case Indian exports get an overland transit to Afghanistan, they may displace a big chunk of exports from Pakistan. This will cause Pakistan to lose an important market. Besides, Afghan trade is a source of substantial commercial activity in Balochistan and Khyber Pakhtunkhwa – where economic opportunities are otherwise meagre.

The writer is a freelance countributor.

Email: hussainhzaidi@gmail.com