Lessons in diplomacy

April 08, 2011


IT’S a lesson one learns very early on in life: if you want a favour from someone, be nice to that person. Go out of your way to be polite; smile; and make sure others know the extent to which you are going out of your way to be accommodating. In other words, be tactful and diplomatic. If you can’t do this, then stop expecting the other side to make any gesture of goodwill.

As Pakistan lobbies and waits for the World Trade Organisation (WTO) to give its go-ahead to special European Union tariff concessions for Pakistani exports, including textiles, policymakers in Islamabad need to adopt this simple yet effective recipe for making friends. In other words, if Pakistan wants WTO members India, Bangladesh and others to give their blessing to the EU initiative, it should become a better neighbour and economic partner.

Yes I know: ‘it is not that easy’. South Asian cooperation has never really taken off, sabotaged by India-Pakistan rivalries. Safta, the South Asian Free Trade Area, remains a dream.

Despite all the recent talk of ‘cricket diplomacy’ and the upcoming meeting of Indian and Pakistani commerce secretaries, the trust deficit between the two countries remains deep and seemingly insurmountable. Certainly both Delhi and Islamabad are to blame for the lack of progress in bilateral trade ties. Official trade between the two countries is modest but has great potential for growth. Recent studies show that bilateral trade could grow to $11bn from the current $1.8bn if India and Pakistan get serious about improving trade relations.

Since a significant amount of business is carried out through third countries or through cross-border smuggling, opening up direct trade ties with India would help Pakistan improve its revenues. And yet, in India-Pakistan relations, politics trump the economy each time. What a shame. Like it or not, both India and Pakistan are paying the price for such curmudgeonly attitudes — and so is the rest of South Asia.

Readers of this column know that I am a fervent believer in regional economic cooperation and integration. In Europe, such ties were the basis of today’s European Union. The Association of Southeast Asian Nations (Asean) is following the EU lead by working hard to build a common market. South Asia can learn from these examples. While waiting for the regional dynamic to gain traction, India and Pakistan can take unilateral steps to improve trade relations.

Significantly, if Pakistan wants India to give way on the WTO waiver on the EU’s trade initiative, it should take a more serious look at granting Most Favoured Nation (MFN) status to India. A breakthrough on the MFN issue will of course increase competition on the Pakistani market, with more Indian exports expected to enter the country, giving local manufacturers and service providers a run for their money. But as Southeast Asian countries have shown, competition is good for business. It pushes firms to become more productive and efficient. And although Indian firms are now global movers and shakers, there’s no real reason why competitive Pakistani companies cannot make inroads into India.

If not MFN, then Pakistan had better look at other ways of convincing India not to block the EU tariff scheme. True, the prime responsibility for ensuring that the EU initiative gets the WTO green light lies with the European Commission. The European Parliament has done its bit by putting its weight behind the EU move. But unless Pakistan moves equally skilfully to win over India and the others, it can say goodbye to the promised concessions.

The EU proposal dates back to September last year, when EU member states agreed in principle to help Pakistan’s post-flood economic reconstruction by temporarily removing tariffs on key Pakistani exports. They said this should be done on a non-MFN basis so that other WTO members would not benefit from the lowered duties. The European Commission came up with a list of 75 tariff lines to receive the preferential access. The scope and duration of the tariff cuts were watered down in the face of opposition from some EU member states.But winning consent from all WTO members has thus far proved almost impossible. However, there’s no way around this, since WTO rules require that any move to deviate from the ‘most favoured nation’ obligation must secure a waiver from all members. At a meeting last month of the WTO Council for Trade in Goods, India, Bangladesh and Peru said they were still consulting on the matter with the EU. Vietnam is also believed to be in talks with the EU on the waiver.

The EU has said that while the discussions are proving useful in helping to ease some concerns, delaying the WTO decision would defeat the purpose of the proposed tariff cuts i.e. to provide immediate post-flood help to Pakistan’s economy. A meeting in May of the General Council, the WTO’s top permanent decision-making body, could present that last real opportunity to resolve the issue. India and others argue that if the EU wants to help flood victims in Pakistan, it should focus on increased humanitarian aid, not help Pakistan’s textile industry. Pakistani officials, for their part, say India should stop mixing political arguments with economics.

Such arguments are naïve. If Pakistan wants the EU tariff preferences, it should get serious about building a constructive relationship with its South Asian neighbours. In trade diplomacy, as elsewhere, it’s all about give and take.

The writer is Dawn’s correspondent in Brussels.