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Trade remains static

September 07, 2012

THE recent visit of parliamentarians from Pakistan to India was a welcome event.

The Indian foreign minister is visiting Pakistan, and the Indian prime minister is hoping that internal political dynamics will allow him to accept his counterpart’s invitation later this year. While all this goes on, the real position on the ground stays static.

Out of the eight issues identified in the Composite Dialogue, going on for the last eight years, there has been zero progress. Now the Indian prime minister is reported to have said that Sir Creek is ‘doable’. One does not know what that means. Is it that now he has permission from his establishment to ‘do’ it?

India’s top priority continues to be trade, controlled people-to-people contact, and prosecution of Pakistanis accused in the Mumbai carnage. Pakistan wants to talk on Kashmir but is afraid to raise the issue for fear of jeopardising all talks. It is not very clear about how to raise matters relating to water and is defensive on the trade issue.

Pakistan is defensive on trade, because while it does not want to say anything against its liberalisation, having already announced a conditional MFN, it is apprehensive that India, with its effective bureaucracy, is capable of continuing to impede the free import of Pakistani goods.

The MFN announcement included a condition whereby the negative list of imports from India will only be done away with if the commerce ministry informs the cabinet that the non-tariff barriers have been removed by India.

In order to achieve the removal of non-tariff barriers, the two sides have initialled three safeguard agreements due to be formally signed by them, namely i) Mutual Recognition Agreement, ii) Agreement for Redressal of Grievances iii) Agreement on Customs Cooperation.

These agreements are supposed to provide a forum for Pakistani exporters to try and overcome numerous impediments like regulations of numerous testing requirements, custom issues, travel restrictions, etc.

While procedural solutions in the form of these agreements are likely to be put into operation, it is not clear how promptly the complaints of the Pakistani exporters will be sorted out. Apart from verbal assurances, there has not been any known gesture from the Indian side to show that it is willing to open up the market to Pakistani manufacturers.

For example, Pakistani cotton lawn is one product which Indians find an attractive buy when they visit Pakistan. But lawn manufacturers here are not yet allowed to open their own outlets across the border. It may be advisable for Pakistan’s commerce ministry to devise a methodology to quantify removal of hurdles in exports before recommending doing away with the negative list.

India has a more developed industry, especially in certain engineering products, but Pakistani manufacturers have a price advantage because of various factors including a weak rupee.

An example could be the comparative price of cars manufactured in India. Toyota is a manufacturer on both sides of the border. A Toyota Corolla Altis 1.8 sells for 13.52 lakh Indian rupees in India, equal to a little more than $24,000, while the same model made by Indus Motors sells for Rs19.89 lakh in Pakistan, equal to approximately $21,000. So in dollar terms Toyota Altis is more expensive in India. The same is the position with other products like fans and consumer durables. So, a number of manufactured products of Pakistan could find a market in India. But is India ready for that or has it convinced itself that Pakistan can only export agriculture products at best?

Pakistanis crib about high prices, especially petrol, but the price of petrol in India is significantly higher. On an average, it sells for Rs70 per litre which is equivalent to $1.25 per litre, whereas petrol in Pakistan is Rs104 or $1.09 per litre.

The biggest impediment in restoring friendly relations between the two countries is the negative role played by the official and private media in painting each other as the devil.

Pakistan is portrayed as the aggressor against a peaceful India, a terrorist country out to destabilise India. These stories appear to be fed to the average Indian through feature films, plays, books, negative news coverage and hostile television anchors.

On the Pakistani side, while resentment against India is given coverage, it is not on the same scale or as effective. There is, however, little appreciation for the Pakistani perception that India has perhaps been the unfair big brother, which has usurped Pakistan’s inheritance by forcefully occupying Kashmir. This is seen as providing motivation to extremists in Pakistan.

It is impossible to do away with this prejudice in the short run. I have seen many first-time Indian visitors being pleasantly relieved at what they see here. They come as if to a war front. Perhaps consistent people-to-people contact through a liberal visa policy may help. But the most practical step that the two sides can take is to arrange for Pakistani television channels to be available with ease to Indian homes.

When the Indians see that Pakistan is also debating issues of inflation, law and order, corruption in high places and sectarian and terrorist carnage, it may help them form a more civilised opinion about Pakistan.

For this to happen, the Pakistani government will have to take steps to incentivise our electronic media, enabling it to go across the border, and India should remove any difficulties faced by Pakistani telecasters.

It should be very clear to policymakers on both sides that unless trade liberalisation has benefits for the manufacturers of both countries, the strong anti-trade lobbies that exist will succeed in rolling back progress at any time, and if that happens, we will be even behind square one.

The writer is former secretary commerce.