Pak-India trade commences after 19 months, 22 days

LAHORE: With its decision to import sugar and cotton from India, Pakistan has hence formally commenced trade ties with its neighbouring nation after a gap of 19 months and 22 days.

When Pakistan had suspended business relationship with India on August 9, 2019, in the wake of the heightened political tensions, the two warring nuclear rivals were enjoying a bilateral business volume of only $5 billion, and a major chunk of these trade transactions was being carried out through a third country (Dubai), as both non-tariff trade barriers and an extremely strict visa regime were not letting things move smoothly.

Here follow some more salient features of Pak-India trade in recent years: Following the Pulwama incident in February 2009, India had withdrawn Pakistan’s Most Favoured Nation (MFN) status, and had gone on to slap a rather arbitrary 200% import duty on Pakistani products.

This move by New Delhi was totally contrary to the pledges it had inked under the South Asian Free Trade Agreement. The imposition of 200 percent tariff duty on Pakistani products had thus made Pakistani exports to India tumble to $262 million in 2018-19, from $324 million in 2017-18.

However, soon after the imposition of 200 percent tariff duty, the Commerce Ministry hierarchy in Islamabad had swung into action to successfully bail out the local dates and cement exporters by diverting their products to other countries such as Nepal, Bhutan, Bangladesh, UAE and Oman.

Similarly, the Pakistani cement exporter had managed to ship their products to Central Africa, Middle East and Afghanistan. After the duty imposition under review, Pakistan’s monthly exports to India had nose-dived to $4 million during April 2019, far below the average $30-35 million figure.

The Pakistani exports continued to rest at $3 million during May 2019, and at $4 million level in June 2019. It is imperative to note that India had extended the Most Favored Nation status to Pakistan in 1996, but New Delhi had alleged that Pakistan did not reciprocate.

Even at that time, or 25 years ago, Indian exports to Pakistan were touching the $1.84 billion mark, and Pakistani exports to India had just stood at $324 million, courtesy the huge non-tariff barriers. Research shows that in 2018, Pakistan had exported goods worth $383 million to India, which was hardly 1.6% of its global exports.

Pakistani exports comprised of dried dates ($92 million), cement ($63 million), sugar ($23 million), gypsum ($19 million), sesame seed ($15 million), leather ($14 million), steel scrap ($13 million), disodium carbonate ($12 million) and surgical instruments ($11 million).

During this corresponding period under discussion, the US $2 billion Indian exports to Pakistan were constituting a mere 0.7% of her global exports. The major Indian export items included cotton ($522 million), organic chemicals ($473 million), cotton yarn ($230 million), plastic articles ($139 million), dyes and pigments ($114 million), machinery ($93 million), pharmaceutical products ($65 million), iron and steel ($64 million) and tea and spices ($56 million).

The trade activities between Pakistan and India had slowed down during fiscal 2017-18, as the bilateral trade between the two rival nations had dropped to $1.25 billion from $2.4 billion in 2013.