LAST week, a routine matter made headlines. The government approved appointments of trade ministers in several Pakistani embassies, including our high commission in New Delhi. Suddenly, several circles started speculating that Pakistan was about to open trade with India. Sensing the uproar, the government clarified that there was no change in Islamabad’s policy on trade with India.
The incident raised a broader question on how Pakistan should pursue geo-economics if it chooses not to trade with its neighbours. Geo-economics essentially means leveraging geography to enhance the socioeconomic well-being of the people. For Pakistan, geo-economics calls for enhancing trade with its four neighbours — Afghanistan, China, India and Iran.
Trade relations are a formidable peace constituency. The most instructive is the example of the European Union. Other regions, like those constituting Asean, have also discovered the huge benefits of regional trade for their people. South Asia, however, remains the least integrated region of the world. No doubt, much of the blame can be apportioned to India, which has not encouraged regional integration, allowed conflicts to fester, and kept Saarc marginalised.
Yet, at the end of the day, it is the South Asian countries that suffer more from intraregional conflict than India does. One major reason is that India, because of its economic size and military muscle, has become relevant for the US’s Indo-Pacific strategy to contain China. The US tilt towards India has emboldened the Indian leadership to pursue aggressive Hindutva-driven policies, destabilising the region and even the Indian polity, compromising the promise of regional trade.
What Pakistan needs is a change of mindset.
So, what should Pakistan do under the circumstances? Should trade with neighbours be hostage to disputes or differences? Or should we begin to view trade relations with our neighbours through the prism of geo-economics and socioeconomic well-being of the people of Pakistan? Our trade with Afghanistan had expanded to over $3 billion, but has shrunk since then despite the heavy dependence of Afghanistan on trade with and through Pakistan. With Iran, US sanctions have kept us away from substantial bilateral trade. We did not avail the innovative solutions that were available, such as border markets. The result is that the bordering regions of Pakistan continue to receive smuggled goods from Iran with no net gain for Pakistan’s exchequer.
With China, bilateral trade did receive a boost after the Free Trade Agreement of 2006, but the balance of trade is largely in China’s favour. With India, during the peace process (2004-8), bilateral trade had jumped to over $3.6bn. But since August 2019, all trade ties remain suspended.
Likewise, transit trade if handled well can bring enormous benefits to transit countries. However, the Pakistan-Afghanistan transit trade has often been misused, leading to the flooding of Pakistani markets with smuggled goods. India has often asked for the transit of its goods to Afghanistan and Central Asia, but the pressures this could generate for our roads and customs infrastructure have inhibited progress.
Does this mean that Pakistan should continue to lose the enormous benefits that can accrue to it by establishing trade and investment relations with its neighbours? The obvious answer is that we should not. Look at India and China, which despite their border and other disputes, have a thriving bilateral trade that has now touched the figure of $125bn. Likewise, China and the US maintain a robust trade and investment relationship despite the onset of strategic competition between them.
What Pakistan needs is a change of mindset. Nothing should matter more to our policymakers than the socioeconomic well-being of our people, which in turn would enhance our national security. The world is changing rapidly. Nations have learned that cooperation and competition can coexist as long as there is mutuality of benefit.
No confidence-building measure is more potent than bilateral trade as it can help reduce mutual distrust and position countries to address tougher issues on the bilateral agenda. In economic terms as well, low transportation costs, availability of road and rail links, and socially identical consumer bases provide a clear edge to trading with neighbours. The economic activity thus generated provides our traders access to vast regional markets. We need a whole new approach to positively engaging with all our neighbours in securing for our traders more opportunities of balanced and mutually beneficial trade and investment opportunities, in the larger interest of economic security of the people of Pakistan. In due course, trade and investment ties can become a building block towards durable peace in South Asia.
The writer, a former foreign secretary, is director general of the Institute of Strategic Studies Islamabad, and author of Diplomatic Footprints.
Published in Dawn, May 18th, 2022