GIVE TRADE A CHANCE

Sandeep Banerjee

A couple of years ago, the Iran-Pakistan-India (IPI) pipeline was the policy issue in India and provided a subject for endless editorials as well as relentless debate in political and diplomatic circles. Pakistan had cleared the proposal but the United States had made clear it was not too keen on this tripartite arrangement. So when Indian journalists met the visiting Pakistani commerce minister in New Delhi, they were curious to know if the US wanted Pakistan to opt out. Pat came the reply from Humayun Akhtar Khan: “Jab mian bibi razi, to kya karey ga kazi.”

This was an unusual articulation of South Asian unity. It didn’t mean India-Pakistan relations had reached a state of conjugal ecstasy but simply that the pipeline made good business sense for both Pakistan and India and they were responding to a sound business proposal. But even though they seem to agree more when they use their economic faculties, India and Pakistan seldom talk business. The political crowding out the economic, Indo-Pak talks almost always end in political rhetoric. And political rhetoric — used to negotiating the semantics of ‘boundary’ and ‘self-determination’ — is incapable of addressing issues like duty structures or non-tariff barriers. The net result is dismal trade figures: Indo-Pak direct trade stood at a little over US$600 million in 2004–05. Compare that to Sino-Indian trade of over US$17 billion in 2005–06.

But to be fair, official India-Pakistan trade data doesn’t paint the complete picture. There is a huge volume of illicit trade as well as trade in goods which originate in either country but are imported through a third country. The most conservative of estimates puts unofficial trade at three to four times that of trade through formal channels. Supplementing official figures with this data would show that despite unfavourable conditions, there exists substantial (though unofficial) trade between India and Pakistan. Indian and Pakistani establishments acknowledge this fact; they now need to code this reality into their actions.

In the past, opportunities to uncouple economics from politics haven’t succeeded in negotiating the rough terrain of India-Pakistan relations. Take, for instance, the South Asian Free Trade Agreement (SAFTA) that proposes a free trade area in South Asia. As Pakistan notified the agreement, it issued a positive list for trade with India, citing the old faithful — security concerns. This meant that the goods that could be traded were spelt out. The international norm is to trade on the basis of a negative list (trade is allowed in all goods except those listed). In response, the Indian Commerce Minister Kamal Nath has written to the SAARC (South Asian Association for Regional Cooperation) secretariat claiming Pakistan is sabotaging the SAFTA, a claim that is not without merit.

Some say it is difficult to love thy neighbour, especially if you have fought three wars with each other and have a territorial dispute that goes back six decades. But then, India-Pakistan relations would do well to follow the Sino-Indian paradigm. Like Pakistan, China too has a boundary dispute with India; China and India claim portions of each other’s territories as their own. They also fought a war in 1962.
But they still manage to trade. And even speak of Free Trade Agreements.

In fact, Indian commerce ministry projections show China could be India’s largest trading partner (surpassing USA, and a figure of US$20 billion) by 2008. The contentious issues — of boundary and territory — haven’t been forgotten. It’s just that they don’t impinge on business.

Today, as we speak of globalisation, the global economy and the global village, we say capital has no nationality or race. This world-view is constantly undermining the older ethic of nation and of political boundaries. That is the nature of the world we live in and political establishments the world over are only gradually grasping this new radicalism. China and India — by de-linking politics from economics — perhaps show they have not just imbibed the message of globalisation, but have also internalised it.

Chinese and Indian embrace of globalisation isn’t a matter of simple ideological predilection. These countries are home to a huge chunk of the world’s poor. The performance of these two economies — dubbed the Asian powerhouses — are gradually lifting their populations out of poverty and giving them a better life. This is not just a function of welfare. There is a deeper political import. Economic prosperity essentially leads to durable regimes and consequently, stable countries. And in that, there is perhaps a message for Pakistan.

With the dialogue process once again chugging, there is need to reassess the old salients. Progress on Kashmir need not be linked to movement on commerce; cross-border terrorism cannot be the reason for a lull in cross-border trade. Pakistan needs to bring enlightened moderation to the table. India, with the balance of trade hopelessly in its favour, simply needs to be more gracious about trade concessions.

Pakistan and India are home to over 1.4 billion people. The governments of these countries owe it to their citizens to help them lead better lives. And there really is no substitute for economic activity to generate more jobs and fight poverty. India and Pakistan have been trying, for long, to give peace a chance. It is time to change tack and give trade a chance. The rest will follow.
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This article was published in Daily Times, Lahore on November 16, 2006. The original article can be found here.