Pakistan-India Trade:

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The Pakistan-India Trade Relationship: Prospects, Profits, and Pitfalls however, despite the resumption of ministerial-level talks in early 2011 and a series of subsequent confidence-building measures, Pakistan-Indian political relations remain deeply troubled. 6 Hostility is still entrenched in public sentiment; a Pew poll released in September 2012 finds majorities on each side viewing the other unfavorably, with Indians describing the Pakistani state as more of a threat than the virulently anti-India Lashkare-Taiba militant group. 7 Many in Islamabad continue to regard India as an existential security threat that has never reconciled itself to Pakistan’s existence. New Delhi, meanwhile, remains angry about Pakistan’s refusal to pursue legal proceedings against the perpetrators of the 2008 Mumbai terror attacks, and is also anxious about Pakistan’s nuclear arsenal. Most critically, there has been no progress on resolving the territorial tensions that have triggered three wars between the two countries. Some observers, in fact, contend that Islamabad’s decision to liberalize trade with India could eventually produce great disillusionment in Pakistan, because India has no intention of making the territorial concessions, especially regarding Kashmir, that Islamabad hopes closer trade ties will eventually bring about. According to these observers, New Delhi sees stronger commercial relations as an end in themselves—and wishes that Islamabad would view trade ties in the same way. One analyst warns that by maintaining a rigid status-quo position on territorial issues, India “deprives itself of diplomatic flexibility, while also undermining the constituency for peace inside Pakistan.” 8 Amin Hashwani offers a more optimistic perspective in this volume’s final contribution. Hashwani, a Pakistani businessman and founder of the Pakistan-India CEOs Business Forum, insists that more trade truly can improve the bilateral relationship. In fact, he argues that a deep reservoir of goodwill is already well in place. “The positive chemistry that exists on a people-to-people level is unmatched and unprecedented,” he writes, underscoring the “warmth displayed for the other” on college campuses and in boardrooms in both countries. Additionally, he acknowledges that while Indian perceptions of Pakistan tend to be “dimunitional and frequently quite negative” due to distorted media portrayals, he points out that Pakistani writers and musicians have been making major inroads with Indian audiences in recent years. Trade normalization, Hashwani argues, will tighten these links “and create many other unforeseen and unintended interdependencies.” He | 9 |
Michael Kugelman commends each country’s politicians for initiating normalization, but underscores the potential for greater benefits to accrue if they “demonstrate the proper leadership to push this process further.” reCoMMendaTions Indeed, a recurrent theme in this volume is that while each country has taken promising first steps to intensify bilateral trade, there is still much to be done. These essays provide a range of suggestions about how to consummate Pakistan-India trade normalization; some of the major ones are described below. They appear here not for the sake of endorsement, but rather to spark additional debate about proper next steps. For Pakistan 1. Craft a more comprehensive trade policy. Current policies lack strategic focus, and are mainly concerned with protecting local monopoly interests. Pakistan should devise measures that promote open commerce, not protectionism. This will entail a stronger emphasis on improving transit trade, transport infrastructure, and cross-border banking. Pakistan’s trade policy should regard India’s economic growth as an opportunity, not a threat. It should draw on India’s skilled worker pool and cutting-edge technologies in order to enhance its own competitiveness. 2. Expand the national security paradigm to include economic stability and trade. Economic hardship is a driver of Pakistan’s widespread violence, yet trade can fuel growth in economically depressed areas. Additionally, economic liberalization can help ease security fears; experts estimate that trade volumes in the $10 to $15 billion range can make trade gains powerful enough to outweigh geostrategic concerns. 3. Protect liberalization’s losers. Islamabad should use its increased revenues from tariff collection, customs duties, and other outcomes of expanded legal trade to compensate those who do not benefit from | 10 |
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