Trade with India

December 08, 2018

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AS both Pakistan and India continue to trade barbs and engage in a Twitter war, a powerful reality in their equation sits like a silent spectator. It has been said before, and has been repeated once more, that both countries have far more to gain from cooperating and working with one another than they do from being rivals. The World Bank has just estimated that the full trade potential between the two regional rivals is around $37bn, whereas the actual trade volume is closer to $2bn — much below potential. The news comes in a report on the promise of regional trade in South Asia released on Wednesday, and casts the actual state of the relationship between the various countries in the region in sharp relief. Pakistan has a total trade potential of more than $39bn with all countries of the region according to the report, but the figure for the actual regional trade volume is just $5bn.

This is a yawning gap, and filling it would need a sound roadmap for Pakistan as well as its neighbours to define their future course. Each country has its role to play in making this happen. Pakistan, for one, can make headway in allowing economic issues to play a greater role in its foreign policy, and allowing its domestic economic policy to be weaned off its addiction to donor-driven inflows and geopolitical rents. But some of the impediments to normalising trade ties that are identified in the report require attention from the Indian side. Chief among these is the resort to nontariff barriers that India is notorious for, using these not only against Pakistan but all countries of the world. Also significant, according to the report, is the lack of trust between the governments of both countries, and the absence of contact between the people of both countries means there is hardly the sort of mutual trust that is necessary for a trade relationship to thrive. The authors suggest an incremental approach towards building this trust, and steps like the opening of the Kartarpur corridor are an example of what the path ahead should look like. But for trust to thrive, the leaderships of both countries need to pull back from the strident rhetoric that they have been employing against each other ever since the corridor was opened. Perhaps the trade potential that sits silently between them can be some inducement towards this end.

Published in Dawn, December 8th, 2018