Growing hope for trade ties between India and Pakistan

Karachi: Business leaders from India and Pakistan say there’s new optimism about the efforts their governments are making to improve trade ties. But critics warn that overcoming decades of mistrust may not be that easy. For first time in 35 years, Pakistan Commerce Minister led business delegation to India last week which included 80 leading industrialists, traders and high-ranking officials.

Pakistani industrialists, businessmen met with their equally eager-for-business Indian counterparts, spoke not just of profits their businesses could make if their governments removed long standing hurdles but also of how much people of two countries, and indeed wider region, stand to benefit from freer movement of goods, money and commodities.

Vijay Kalantri, President All India Association of Industries said traders on both sides feel business between India and Pakistan is a win-win situation for everyone. “Why are Indians and Pakistanis forced to trade unofficially via third countries like Dubai or Sri Lanka?” he told the BBC from Mumbai. “All we are asking is, let there be direct business-to -business contact between us.”

After talks in Delhi, Ministers from two sides announced agreement to boost their annual bilateral trade from current $2.7bn to $6bn by 2015. They also pledged to ease business travel and promote bilateral trade through land route. For Pakistan, significant announcement was pledge by India to drop its opposition to European Union’s plan to grant Pakistan tariff waiver on select commodities to help it recover from 2010 floods devastation.

There was hope Pakistan might reciprocate and grant India Most Favoured Nation status (India granted Pakistan MFN status in 1990s). Pakistan committed itself to a road map to implement preferential trade ties with India, under South Asia Free Trade Agreement SAFTA.

BBC report says there is a sense in Pakistan that while the country should continue to push for a negotiated settlement of Kashmir issue, trade and commerce should not be held hostage to resolution of political disputes.

The second is protectionism. For years, Pakistan’s industry feared it would be swamped by imports from India. But even there, mood appears to have shifted. Senator Haji Ghulam Ali, President Federation of Pakistan Chambers of Commerce & Industry, says there’s “a consensus that Pakistan should open up to Indian business. Everyone now recognizes it will be beneficial for both sides. It’s just a matter of time before it’s done,” he told the BBC.

However, more plausible, obstacle is non-tariff barriers issue. “In my experience, India has one of most restrictive trade regimes in the region,” asserts Dr Ashfaq Hasan Khan, a former advisor to Pakistan’s Finance Ministry. His view matters, given decades of dealings with South Asian governments on trade liberalization.

He told BBC that despite granting Pakistan MFN status, India has variety of non-tariff barriers in place – such as, stringent certification codes, customs rules, security clearances, movement restrictions – which make it virtually impossible for Pakistani traders to do business in India.

“The only way I see realization of trade potential between our two countries is for India to remove its non-tariff trade barriers and for Pakistan to reciprocate by granting MFN status to India,” says Dr Khan. “Unless there’s political will to do that, everything else is just talk and photo-op.”

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