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Trade boost

March 01, 2012

WHAT was almost unimaginable less than a year ago is fast becoming a welcome reality. Islamabad and New Delhi have moved at a remarkable pace since the resumption of the commerce secretary-level talks in April last year to normalise trade relations. With India agreeing to dismantle all Pakistan-specific non-tariff barriers, Islamabad has finally done away with the ‘positive’ list of items that could be imported from across its eastern borders and replaced it with a ‘negative’ list of items that cannot be imported. Even the negative list will be phased out by the end of this year. This will pave the way for full liberalisation of trade between the two largest South Asian economies.

The two countries are expected to meet again later this month to sort out the modalities of trade in energy. The unprecedented progress made by the two countries in such a short span of time would not have been possible without the strong political will shown by their governments. The commitment of the Indian and Pakistani governments to move ahead with trade normalisation despite opposition from right-wing groups on both sides of the border must be appreciated. The improvement in India-Pakistan trade relations is crucial to peace and economic prosperity in the entire South Asian region, which is at the moment the least economically integrated and among the poorest regions in the world.

At the same time, the role played by Pakistan’s business community in backing the government’s efforts for trade normalisation with India cannot be stressed enough. Islamabad would not have been able to move so swiftly if it did not enjoy the full support of Pakistani businessmen. That said, some sectors of the economy are still wary of fully normal trade ties with India. If Pakistan’s growers are worried about the import of cheap, subsidised vegetables and other agricultural products from across the border, the automobile industry, pharmaceutical companies and manufacturers of leather goods are afraid of the influx of made-in-India goods because of the cost differential. Although the commerce ministry has taken their concerns into consideration and doubled the number of items put on the negative list, they argue that the period of one year is too short for them to prepare for competition with their Indian rivals. It is advisable for the government to take effective steps to protect its growers and give the manufacturers a little longer — say, two to three years — to allow them enough time to ready themselves for competition. The Indians should not have any objection to this since such protection is the norm the world over.