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March 19, 2021

Regional trade dynamics

March 19, 2021

Trade can, at best, be defined as an essential activity of buying and selling of goods and services at national or international level. There are multiple ways and means to promote trade in and amongst the nations.

The multiple arrangements made by various nations for trade promotion are normally in the form of free trade agreements, preferential trade agreements and regional trade agreements. The most popular these days are regional trade agreements and trading blocs.

If we look at the history of regional trade agreements, we find only fifty such arrangements in 1990. These expanded to around 280 by the end of 2017 – meaning it has become a popular tool for trade promotion in the world. The most significant trading blocs currently are EU, Asean, APEC, SCO, BRICS, Nafta, RCEP, ECO, Saarc etc. Pakistan, being a member country of Saarc and the ECO, needs to effectively promote its trade on the pattern of the gravity model by utilising these regional arrangements. But the million-dollar question is: how to revive regional trade through Saarc in the absence of visionary leadership in India? The ECO forum can be effectively utilised for trade and economic cooperation by Pakistan.

The Saarc countries have a big consumer market of about two billion people with comparatively cheap labour and a huge potential for industrial growth. The need right now is to promote trade in the region to change the poor condition of its people through industrial growth, trade infrastructure and trade promotion attracting more investment in the region. Right now, the intra-regional trade volume is dismal owing to various reasons, which need to be addressed by the major partners by removing all sorts of hurdles and barriers. The intra-regional trade is not picking up more than five percent of the total trade volume of the region and the main reason behind such low trade is mainly attributed to regional disputes, which need to be resolved at the earliest.

Trade promotion in the region is subservient to and dependent upon better bilateral relations among Saarc countries, especially India and Pakistan. Regional trade promotion is a necessity for South Asia and can be promoted through the South Asian Free Trade Agreement (Safta) under the auspices of Saarc to uplift their economies marred by the Covid-19 pandemic for the last one year. Cost-cutting measures can only be ensured through regional trade promotion. According to one estimate, the goods and services from the neighbouring countries can be available at half the price we import from the international market.

Foreign Direct Investment (FDI) can only be attracted by improving bilateral relations, where the role of the big brother comes first. This is the only way forward to make this great region greater by adopting visionary policies and abandoning hegemonic designs. Confidence-building measures are immediately needed.

ECO with its ten member states is another opportunity for Pakistan to promote trade in the West and in Central Asia by building concrete solid relations through this regional arrangement. The ECO member states are rich in energy with a lot of potential growth and investment opportunities. Luckily, in this there are no political issues unlike Saarc, and there are no barriers or stumbling blocks involved in trade promotion except for Iran that is suffering from international sanctions. A good thing about the ECO is that it consists of predominantly Muslim-majority countries which have a long history of trade and merchandise, as it used to be an integrated agricultural region facilitating trade of goods and services.

A lot of economic cooperation is underway between Pakistan and the ECO countries, paving the way to economic growth and investment, especially in the energy sector. The Iran-Pakistan Gas Pipeline (IP Gas Pipeline) is one and the Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline (TAPI Gas Pipeline) is another project for close regional economic cooperation, which would be meeting our energy requirements.

It would have been better had India not withdrawn from the IP Gas Pipeline Project, as it was initially designed and named as Iran-Pakistan-India (IPI) gas pipeline. The IP Gas Pipeline is the most feasible project, but it is stalled for the time being due to sanctions on Iran which are hurting regional economic cooperation. Hopefully, the issue of international and American sanctions on Iran will be resolved soon and the IP Gas Pipeline Project will be implemented.

The Belt and Road Initiative of China is another game-changer project integrating different regions of the world. It is basically meant for close meaningful economic cooperation through viable trade routes by developing a web road infrastructure providing easy mobility of goods and services as part of the cost-cutting measures.

Pakistan rightly appreciated this initiative and has become a part of the Belt and Road project in the form of the China-Pakistan Economic Corridor (CPEC), providing the opportunity of connectivity to South Asia, West Asia, Middle East and Central Asia. The project will be a harbinger of progress and prosperity for the region and for the people of Pakistan. The development of Special Economic Zones as part of CPEC will bring more investment, which in turn would provide greater opportunity to the people of Pakistan. The connected and other regions of the world will also be in a position to utilise and get economic benefits from this economic corridor and trade route.

Pakistan is at a very critical juncture, at a crossroads of history. It needs visionary policies and practical steps to strengthen its position vis-a-vis the region through regional cooperation, trade promotion and economic integration. Peace and stability in the region can ensure regional cooperation – ensuring sustainable economic development, which in turn helps support economic growth and investment in the country. Pakistan needs to focus more on this approach to earn respect, partnership and high place among nations.

The writer is an economist.