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Kalpana Kochhar and Ejaz Ghani<br />
base. Shares of both raw cotton and woven fabrics in <strong>India</strong>’s exports to<br />
<strong>Pakistan</strong> increased from almost negligible amounts in the year 2000 to<br />
more than 13 percent in 2010, whereas the share of oil-cake and other<br />
solid residues contracted from about 16 percent to 3 percent during the<br />
same period.<br />
The composition of official exports from <strong>Pakistan</strong> to <strong>India</strong> has been<br />
limited to just a few commodities: fruits and vegetables, wool and related<br />
products, petroleum products, chemicals, lead, and, more recently, cement.<br />
The sectors with large shares of exports from <strong>Pakistan</strong> to <strong>India</strong><br />
in 2010 were fruits (19 percent), followed by cement (11 percent), and<br />
petroleum products (7 percent).<br />
What about informal trade? The main <strong>India</strong>n products that reach<br />
<strong>Pakistan</strong> informally include tires, auto components, pharmaceuticals,<br />
engineering products, chemicals, and some textiles. These sectors in<br />
<strong>India</strong> are therefore expected to benefit from a better trade environment.<br />
<strong>Pakistan</strong>i consumers will benefit from reduced prices for these products.<br />
Meanwhile, <strong>Pakistan</strong>’s unofficial or informal exports to <strong>India</strong> include cement,<br />
fruit and vegetables, cotton, some specialized textiles, and sports<br />
items—currently arriving via Dubai. These are all expected to experience<br />
a rapid boost with more formal <strong>India</strong>-<strong>Pakistan</strong> trade.<br />
The CosT of TradinG<br />
<strong>Trade</strong> and good infrastructure are fundamental building blocks of economic<br />
development. <strong>Trade</strong> logistics encompass an array of essential activities<br />
for trade—transit trade, warehousing, cargo consolidation, border<br />
clearance, distribution, and payment systems. Poor logistics deter<br />
engagement in regional production-sharing. Countries with better logistics<br />
can grow faster, become more competitive, and increase their<br />
investment. Better logistics can have a greater effect on trade promotion<br />
than can tariff cuts; boosting logistics performance in low-income<br />
countries to the middle-income average could enlarge trade by around<br />
15 percent, according to some estimates. This would benefit firms and<br />
people, because they would receive lower prices. It would also support<br />
diversification into higher value-added exports, new goods, and modern<br />
services. Reducing the cost of trading can substantially increase<br />
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