WITH the opening up of Pakistan-India trade, one can expect a gradual improvement in their bilateral relationship.

It will increase the level of interaction between their business communities, offer cheaper goods and raw materials to consumers and industries, and create many other unforeseen and unintended interdependencies.

Eventually, if joint ventures and investments are allowed in each other’s country, they could plant the seeds of peace and sprout lobbies that create and sustain mutual interests in the long run, and cushion any negative impacts that may arise from future challenges or unfortunate incidents.

Existing misperceptions can be expected to disappear considerably once trade and other links gradually open up. Positive changes can perhaps happen sooner than anticipated if politicians on both sides demonstrate their determination to push this process further.

While there is considerable momentum today for deepening Pakistan-Indian — and broader South Asian — trade, it was not always this way.

India and Pakistan are both members of the South Asian Association for Regional Cooperation (Saarc) organisation. And they are both signatories to an agreement to form a concessionary trade regime, the South Asian Free Trade Area (Safta). However, Safta has been hostage to lingering political issues.

Until recently, India had bypassed the South Asia region and had focused its efforts on signing a series of bilateral trade agreements with countries and regional blocs around the world.

In South Asia, despite entering into bilateral trade agreements with all of its regional neighbours (except Pakistan) through arrangements outside the SAARC framework, India failed to open up its internal markets by maintaining high non-tariff barriers. As a result, no meaningful intra-regional trade took place, giving way to a deep sense of frustration in the region about India, particularly because very few efforts were made to address the region’s grievances.

Trade surpluses were invariably in favour of India, even though theoretically smaller nations should have benefited more. For a regional bloc to succeed, the largest economy has to play a generous role in the implementation of agreements that favour the smaller nations, both in letter and spirit.

In Pakistan, there was traditionally a fear that if too much progress was made in trade, other unresolved political issues, especially the Kashmir dispute, might be put on the back burner. Therefore, the prevailing Islamabad’s policy was to move on all issues in tandem, so that progress would be on a sounder footing and issues would complement, rather than compete with, each other.

Change for the better: All this has changed now. Both India and Pakistan are currently engaged in vibrant trade negotiations, with clearly defined goals and timeframes, and with the ultimate objective of entering into a concessionary trade regime — under the Safta agreement, and with all the countries of the region.

Since 2011, India has initiated efforts to engage with all its neighbours, not only redressing their trade grievances but also making substantial investment commitments through the large Indian corporate sector. This change of attitude by both India and Pakistan is due to a growing realisation that the world is changing, and that they need to adapt to these shifting ground realities.

As India moved from a reactive to a reflective mode, the importance of having a vibrant and stable region for long-term progress became clear. In Pakistan, the fear of undermining its political position by making disproportionate progress on trade with India has died down. This is primarily because the rules and benchmarks of engagement between nations have changed, as economic and political interests have now become intertwined in foreign policies around the world. In the long run, nations now recognise, progress on one front can actually help to resolve issues on other fronts.

China, which is one of Pakistan’s closest allies and perhaps a role model for economic development, has focused primarily on trade with its neighbours despite unresolved political issues. China/Taiwan and China/India are the two prime examples where trade and investments have exponentially grown in the last decade, even while political stances have remained intact. If anything, with this increase in economic activities, a vested interest for peace has been created; public discourse has changed; and rhetoric has given way to informed discussion and changing perceptions.

Currently, there is optimism that reasonable progress on trade can be expected if both sides implement the road map to which they have committed themselves.However, it is essential that other issues that were part of the earlier Composite Dialogue — be discussed and negotiated bilaterally between the two countries, and that progress be publicised so that stakeholders are encouraged to support the broader peace process.

Regional trade blocs generally succeed when the larger economy plays a pivotal part in integration. India must assume this leading role, and embrace the onus of addressing the grievances and insecurities of its neighbours by taking more generous actions.

The business communities on both sides are generally supportive of opening up markets and of increasing trade and investments, but such measures should be undertaken in a well-thought-out way so that there are no undue or disproportionate harmful effects to local industries.

India, due to its large industrial base, scales of production, indigenous availability of raw materials, and, in recent years, its acquisition of international companies, brands, and technology, enjoys an advantage over its neighbours. Relevant safety measures as allowed under the World Trade Organisation must be in place, and closely monitored to avoid any unscrupulous trade practices.

The business community should continue to play an important role in increasing the interactive and commercial activities that come with liberalisation of trade rules, but with managed expectations, as there is generally a time lag for trade to actually materialise on the ground.

Traditional trade zones such as the Punjab areas of both states — which were active and integrated pre-Partition — need to be revived and their natural synergies harnessed. Also, all stakeholders should be vigilant to the unanticipated opportunities that arise once trade between countries opens up after long gaps.

In the coming years, once the true benefits of trade and investment are felt on every level of society — and especially at the common person level, where the availability of cheaper goods from across the border can help mitigate the burdens of poverty and inflation — one can be sure of broad support for lasting and prosperous peace in the region.

The writer is founder of Pakistan-India CEOs Business Forum