Trade resumption on the cards?

March 14, 2021

Given the sore bilateral ties between India and Pakistan, neither country helped the other during much of the Covid-19 pandemic crisis. Is this about to change?

After more than one-and-a-half years of suspension, it is being said that Pakistan and India are possibly looking towards trade diplomacy and the resumption of bilateral trade.

Historically, Pakistan-India bilateral relations have always been a bumpy road, punctuated by brief intervals of calm wherein tourism and people-to-people and business-to-business exchanges gather some momentum. However, the Kashmir issue has always loomed large and a lack of resolution has cut short any period of improved ties. Bilateral trade between India and Pakistan was suspended in the aftermath of growing tensions on Kashmir and Pulwama attack. India withdrew the MFN status awarded to Pakistan in the mid-90s and slapped 200 percent duties on products of Pakistani origin. The increasing cross-border tensions and the MFN withdrawal decision by India was reciprocated by Pakistan in August 2019 and so trade was suspended. With the suspension of trade, the traditional backdoor channels efforts were initiated by the concerned quarters, the results of which are now showing arguably in the form of some sort of movement towards normalisation of ties.

However, Abdul Razak Dawood, the advisor to Prime Minister on Commerce, Industry and Trade does not foresee a breakthrough on bilateral trade resumption anytime soon. In a brief telephonic conversation with this correspondent, he says that “there is no resumption of bilateral trade in sight”. However, without a mention of the Kashmir issue, he says that “there are many things other than trade between the two countries, which need to be addressed alongside trade”.

When asked about import of yarn from India as the readymade garments sector believes that they will get relatively lower-priced yarn in a shorter delivery time from India as compared to other parts of the world, Dawood says that everything is under discussion and all options are under consideration. However, he reiterates that “nothing has been decided”.

It is worth mentioning here that Pakistan is currently facing a cotton crisis due to a 50 percent decline in cotton production. The textile sector, the largest contributor to Pakistan’s exports, is now dependent on imported cotton. The value-added sector is also facing a yarn shortage.

Ijaz Khokar, the chief coordinator of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) tells this correspondent that the sector has already briefed the government, including the advisor, about the situation.

“We have requested the government to allow yarn import from India. This will also help the government justify revival of trade with India”, he says.

He admits that the Kashmir issue has been a major concern and has loomed large.

Given the sore bilateral ties, neither country helped the other during much of the ongoing Covid-19 pandemic crisis. Osman Khalid Waheed, the chief executive of Ferozsons Laboratories Ltd, believes that normalisation of bilateral ties is always great news and good for the pharmaceutical and health sector industries.

“Globally, the health sector is always protected from politics and opened for the people and industry. This should also be the case for Pakistan”, he says, mentioning that initially the pharmaceutical sector had suffered after suspension of bilateral trade between the two countries. China and India are the two largest producers and suppliers of pharmaceutical raw materials. The world, and Pakistan, are dependent on them. The industry successfully negotiated with the cabinet, and the ministry of health after trade suspension in regards to allow import of required raw materials and other items for pharmaceutical industry. The government helped the industry and resolved the issues, he says.

In the latest developments, according to Indian media reports, India will be supplying Covid-19 vaccine for Pakistan.

Waheed believes that there are a lot of opportunities for collaboration, including development and up-scaling of Covid-19 vaccines. However, he also holds that effective regional trade cannot prosper without normalisation of relations and creating peace. He says the research and development in Indian health sector is quite strong. There is also space for Pakistan to compete with India. India is largely an exporter of raw materials whilst Pakistanis can look to further improve itself in finished products for the health sector, he adds.

Waheed stresses the need to remove the non-tariff barriers imposed by Indian authorities on Pakistani products. He adds, however that the removal of the NTBs would likely require normalisation of trade ties.

Iftikhar Ali Malik, the SAARC Chamber of Commerce and Industry president, endorses the resumption of bilateral trade between India and Pakistan and normalisation of ties. However, like Waheed, he says that without resolving the political issues, no significant achievement can be made.

“We’ve struggled hard for the last three decades, fighting for the establishment of the SAARC CCI Headquarter in Islamabad, Pakistan. None of the efforts will bear desired benefits until free trade among the SAARC region is established”, he says.

Malik says that one does not get to choose one’s neighbours. He says there is a need to develop good relations with them to live together, work together and grow together. He argues that trade relations and ties should be protected from the volatility of politics.

“We have seen this in Sino-Indian trade. Despite tension on the border, trade remained consistent. We need to adopt similar practices”, he says.

The writer works for The News, and has reported extensively on Indo-Pak trade ties for over one a decade and a half. He tweets @Jawwadrizvi. He can be reached at: 

Pak-India trade resumption on the cards?