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Indo-Pak amity heralds hope on prospects for mutual trade benefits

G. Srinivasan

New Delhi , April 19

PAKISTAN President General Pervez Musharraf's three-day whistle-stop schedule in India and his meeting with the Prime Minister, Dr Manmohan Singh, on the sidelines of a one-day cricket match between the two countries , got the attention of the sub-continent riveted. This is more so on the outcome of the political game than the real sporting event because any resultant peace dividend from the dialogue of the region's two nuclear powers is cherished devoutly not only by the people in the region but far beyond.

Close on the heels of a "very successful" visit of the Chinese Premier, Mr Wen Jiabao, to India only a week ago when both India and China upgraded their relations to one of strategic partnership for peace and prosperity, both New Delhi and Islamabad conceded forthrightly that any synergy for enhanced economic and commercial co-operation would contribute to the wealth of the people of both countries.

For two nations, driven by rivalries, mistrust and strategic calculations to build arms, the atmosphere of amity would help devote time and effort in building their economies instead of wasting precious resources in the sterile pursuit of internecine conflict. From this perspective, the joint statement issued by both the leaders credibly contended, "The peace process was now irreversible".

With the decision of both the Governments to allow increased contacts between people living on either side of the divided Kashmir and the inaugural of the bus service between Srinagar and Muzaffarabad a few days ago and extension of the route to be used by trucks to promote trade, both India and Pakistan have come a long way, heralding hope that prospects for mutual benefits through this goodwill gesture would be huge.

For Pakistan, currently using circuitous route to get its import consignments from India, the advantages of opening up land route are too glaring to be gainsaid. The Federation of Indian Chambers of Commerce and Industry has said the advantages of land contiguity and low transaction cost for India-Pakistan bilateral trade is lost due to the closure of land route. With bus service between Lahore and Amirtsar to be introduced, which will be followed by truck movement, the traditional movement of goods between the two neighbours would get a renewed impetus for increased trade and transaction at a reduced cost.

The Director-General of the Research & Information System (RIS) for Non-Aligned and Other Developing Countries, Dr Nagesh Kumar, told Business Line here that for Pakistan which is importing Indian goods through third country, the land route opening would help drastically cut down the cost to its traders who source their goods from India.

This needs to be viewed against latest official statistics, which show that India registered a massive growth of exports to Pakistan during April-December 2004 of 175 per cent at $365.92 million, compared to $132.88 million in the corresponding months of 2003-04.

So the continuing rise in Pakistan's imports from India could be seen as more helpful now, particularly in the wake of the SAARC (South Asian Association for Regional Cooperation) Commerce Ministers meeting in Islamabad in November 2004 when India underscored the need to have a positive agenda centring around economic co-operation. There was a consensus in the meeting that negotiations on the South Asian Free Trade Area (SAFTA) to proceed as per schedule so that it comes into force on January 1, 2006. A roadmap was accordingly drawn up to complete the lingering issues pertaining to SAFTA, as also for signing of four trade facilitation pacts so that they come into force along with the SAFTA Agreement.

These agreements include, mutual administrative assistance on Customs matters, promotion and protection of investments, SAARC Arbitration Council and Arbitration rules and limited multilateral trade treaty/agreement on avoidance of double taxation. With early operationalisation of SAFTA from next year, Dr Kumar sees little reason to carp about Islamabad not extending most favoured nation status to India since the tariff barriers would tumble down following the advent of SAFTA.

Commerce Ministry officials contend that SAFTA would catapult the region into a much higher level of trade and economic cooperation by bringing down barriers to cross-border flow of goods and by reducing/eliminating tariffs and removing roadblocks to trade by way of non-tariff barriers. Ultimately, the normalisation of relations between India and Pakistan would undoubtedly unlock the untapped potentials for cross-border trade and investment for mutual benefit, trade policy experts say.

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