During his recently concluded visit to Pakistan, Indian Commerce Minister Anand Sharma held talks with his Pakistani counterpart Makhdoom Amin Fahim (15th February, 2012 – Wednesday) and signed three trade pacts and laid the groundwork for not only opening more land trade routes, but also bank branches in each other’s countries for the first time since their creation. Pakistan’s Cabinet on Tuesday approved the signing of the three agreements but deferred a decision on switching over from a positive list of 1,945 tradable items, to a negative list of 636 items barred from trading, after some stakeholders expressed reservations. Pakistan & India has agreed to move from a positive list to a small negative list by the end of February. The negative list is to be phased out gradually and the timing for that will be announced by the end of February. The complete phase-out that will automatically lead to full normalisation of trade relations, commonly known as the most-favoured nation (MFN) status.
The economic calculus of formal Indo-Pak trade is trivial, at least for India. With total formal Indo-Pak trade of around $2 billion, this translates into 0.27% of India’s foreign trade basket. For Pakistan, it means more, with around 3% of its external trade. In comparison, Pakistan transacts 10.83% of its international trade with China, 10.65% with UAE, 8.41% with USA and 7.26% with Saudi Arabia. Very few people realise that after the US, Afghanistan has become Pakistan’s most favorite destination, which accounts for close to 10% of our exports, whereas the US accounts for 16%. With Pak-USA diplomatic terms at far from their best and with Afghanistan now always in an aggressive tone towards Pakistan, we are fast losing our business partners. The last decade has pushed India to the centre of the world stage because of impressive economic progress, market size and sustained democracy. Its huge military has enhanced its appeal to global interests. Its tourism and film industries further reinforced its international image.
It is ironic that our foreign policy and trade trends seem to be working at odds. The notion that India will be the main beneficiary, while Pakistan, with its smaller economy, will lose out is also misplaced. Simple economics and history suggests that trade with reduced barriers is a ‘win-win’ situation for both sides. Smaller economies, in fact, have benefitted greatly. Take the case of Mexico, which exports more than quadrupled after the North American Free Trade Agreement went into effect in 1994. This was good not only for Mexico’s producers but also its consumers. They had a greater variety of goods to choose from at reduced prices because the influx of imports increased competition.
More than one-fifth of humanity cannot be in bondage indefinitely because some people would prefer to prolong the agony. One of the most remarkable developments of the 20th century has been the capacity of nations to bolster economic ties even though they remain sharply divided on many vital issues. The people and government of Pakistan, need to take a cool look at the progress made by some of the most successful countries during the last fifty years. It is high time we realised that we need to learn from what they did to achieve progress and not by yielding to what the West has been telling us to do with our country and people. There are many major international alliances based on simple common sense and the basic principal that close relations and cooperation among neighbouring countries must be the foundation for formulating foreign and economic policies. The European Union is a key example. It was formed by the devastated and divided countries of Europe after World War II as an integrated body of 27 nations, including the reunited Germany, with a single currency and free movement of goods and people across borders.
There is no remedy better than people-to-people contacts to remove mutual suspicion and hatred between Pakistanis and Indians. Helping students, youth, artists and sportsmen to travel to each other’s countries would generate goodwill and bring the two nations closer. Simplifying the cumbersome visa process for businessman shows that both countries were not simply indulging in cheap rhetoric but have realised the mutual benefits of cross-border trade. My dream is of free trade for the entire South Asian region. One day we should be able to have an economic union along the lines of Europe. We can either look at the glass as half full or half empty. I see it as half full.