INDIA-PAKISTAN TRADE PROSPECTS

For so many years now, opening up of trade between India and Pakistan has dominated the discussions at policy forums and among concerned groups. The issue gained particular importance after India granted the Most Favoured Nation (MFN) status to Pakistan, to comply with the principles of World Trade Organisation (WTO) regime in 1995. Pakistan is, however, reluctant to reciprocate the Indian gesture for fear that its markets will be flooded with Indian goods once it grants the MFN status to India, thus giving a body blow to its own industry.
And now it has gone to the extent of linking the MFN status with a solution to the Kashmir issue, a lame excuse for not fulfilling its obligations under the WTO regime.
If relations between the two neighbours become normal, it is estimated that bilateral trade between them could easily go up to ten billion US Dollars within no time. Presently, the official trade between the two sides is to the tune of just about two billion Dollars while the illegal trade through the Gulf route continues to increase at a breath-taking speed.
A Preferential Trade Agreement (PTA) between the two countries, that would seek to reduce duties on products of export interest of them, might also not see light of the day till Pakistan grants the MFN status to India. The last round of talks on trade and economic links between the two countries were held in April this year. Both sides were of the view that improving trade would economically benefit both countries and the region. However, in practical terms, they did very little to strengthen trade and economic links.
The apex chambers of commerce in both countries have been repeatedly urging their respective governments not to mix political issues with trade and economic relations. But they too realise that the political leaderships in both countries have to consider ‘out-of-the-box’ ideas to promote trade and economic ties.
Recent studies have suggested that transportation links between the two countries are also inadequate and suggest that new rail and road links should be opened.