Trade agreements are perhaps the most convenient tools for Pakistan’s commerce ministry to play tricks on the people. Mounting trade gaps and rising import bill for tea and edible oil had forced late Dr Mahbubul Haq to introduce the concept of counter trade agreement in mid eighties.

This was substituted by state trade agreements in 1988 and 1989 when PPP took over the government. And now the Commerce Minister Abdul Razzak Dawood is all set to sign free trade agreements (FTA), virtually, with all countries of the world. India of course remains outside the area of Pakistan’s interest.

Pakistan is signing an FTA with Sri Lanka in September and has offered similar arrangement with war-torn Afghanistan. Pakistan also wants to sign similar agreements with Bangladesh, Morocco and Kenya.

But Afghanistan prefers to have a triangular overland trade link with Pakistan and India. The proposal is to allow overland trade via Wagah border between India, Pakistan and Afghanistan. Eventually, this over-land triangular trade link has the potential to reach Muslim republics in Central Asia and even beyond upto North Europe. The response is a big NO from the commerce minister who had earlier refused to grant India the status of Most Favoured Nation (MFN).

This NO to Afghanistan proposal looks conflicting as Pakistan supports Iranian oil pipeline project. This pipeline project is designed to bring oil, pass through Pakistan and carry oil to India. As this oil pipeline will create inter-dependence for all the three countries, so will the volume of trade goods that will travel both ways from Wagah. This inter-dependence on oil pipeline and overland trade should serve as most effective deterrent to any future eruption of big troubles in the region.

What has been the main purpose of signing the counter trade and state trade agreements and what is the commerce ministry upto in signing FTAs. The main purpose of entering into counter trade or state trade agreements during the eighties was to create market for Pakistan’s value added products—particularly engineering goods—in Kenya, Sri Lanka and Indonesia—during the eighties. What was the end result?

All these state trade agreements proved non-starter. They were declared “dead” before any movement could be made. No arrangement could be reached with Kenya because of lack of inter bank arrangement. Pakistan signed $20 million agreement with Indonesia. International brokers demanded a very high rate of commission for tea import from Indonesia. They could not see anything worth buying in Pakistan.

Bangladesh then bought certain items against tea import. But then the international brokers charged heavy commission on this tea import. There was no demand for Pakistan’s engineering items and finally engineering goods had to be replaced with rice.

In short, all these counter trade and state trade agreements brought frustration and disappointments for the Pakistani businessmen and price escalation for the consumers in local market.

The recent moves to sign FTA with Sri Lanka and Bangladesh are perhaps too late for Pakistan. India has already entered into bilateral trade agreements with almost all SAARC countries except Pakistan. Since Indo-Pak differences did not allow South Asia Preferential Trade Agreement (SAPTA) to work, India took the initiative and signed bilateral trade agreements with most of the SAARC countries. Under the original schedule, the SAPTA should now have been graduated to South Asia Free Trade Agreement (SAFTA).

But with forces of the two countries deployed, face to face, on the international borders, and tension mounting in Kashmir, there hardly looks any chance of normalisation of trade links between India and Pakistan and any further improvement in trade within SAARC framework.

Following the footsteps of late Dr Haq, the commerce ministry is exploring the possibility of exporting engineering goods from Pakistan to Sri Lanka. A meeting of auto vending industry, bicycles manufacturers, cutlery and sport goods manufactures was held in Islamabad to inform them of the export opportunities available for them in Sri Lanka.

But what emerged from this meeting is the fear of Pakistani traders on Sri Lanka’s insistence to supply PVC and polypropylene products. In Pakistan raw material of PVC is subjected to 20 per cent duty plus other levies. Sri Lanka imports duty free PVC. Decision makers are now caught up in a dilemma. Either they will have to bring down import duty on PVC raw material in Pakistan or refuse Sri Lanka.

Other apprehension from FTA with Sri Lanka is that Colombo has signed a trade agreement with India much earlier. There are a lot of Indian goods in Sri Lanka which can easily find their way into Pakistan. Pakistan wants a certificate of country of origin to prevent this. But then lot of Indian goods are trickling in Pakistan through Dubai which is an established international warehouse.

Official trade figures of Federal Bureau of Statistics show that Dubai is now the second biggest market of Pakistani goods. During ten months of the last fiscal year Dubai absorbed about Rs 35 billion worth of Pakistani goods. Dubai’s share in Pakistan’s export during July 01-April 02 period is 7.7 per cent as against about Rs 28 billion in the same period last fiscal year. Bulk of this export is for movement to other countries.

Dubai is also the second biggest importing country for Pakistan. It is mainly because of the crude oil. Total imports from Dubai have increased to Rs 38.5 billion from Rs 35 billion last fiscal year. Besides oil, a lot of other goods mainly consumer items are also coming from Dubai to Pakistan. A considerable amount is Indian products which are easily available in Pakistan market.

Singapore is the other port which is also serving as a warehouse for Pakistan and India. The global operators are carrying out this trade from Dubai and Singapore between Pakistan and India at a much higher margin.

Razzak Dawood is a great believer in free trade. He is on a signing spree of free trade agreements. He wants Pakistan to be a nation of traders. “I want to see potatoes being exported from berth number 3 at Karachi and potatoes being imported from berth number 4” he declared in the MAP meeting recently in Karachi. But when it comes to trade with India, political consideration is given all the priority and immense benefits to more than 1.2 billion consumers living on both side of the borders is overlooked.