Pakistan-India Trade:

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The Pakistan-India Trade Relationship: Prospects, Profits, and Pitfalls trade normalization. Outside stakeholders should help soften the negative impacts of trade liberalization by promoting comparative advantage and fostering interdependencies in vulnerable sectors. For example, Japan should ensure that some of its automobile companies operating in Pakistan export to India, while some of its India-based firms export to Pakistan—even while it arranges for some of its Pakistan-based companies to import from sister companies elsewhere in Pakistan. For India 1. Promote a selective export policy toward Pakistan. India enjoys a sizeable trade surplus with Pakistan. At least in the short term, India should increase exports to Pakistan (such as machinery and technology) that the latter currently imports from other countries at high prices, but hold back on exports that could hurt Pakistan’s small and medium businesses. 2. Devise trade measures that are sympathetic to the region’s economic asymmetries. India’s economy—blessed with a large industrial base and skilled labor pool, and accounting for more than 80 percent of gross regional product in South Asia—is the most powerful in the region. New Delhi should grant more trade concessions to its smaller neighbors—including by unilaterally removing tariff and non-tariff barriers. It should also address the restrictions it imposes on remittances to Pakistan, which are problematic for India-based Pakistani service providers. Addressing these long-held grievances can increase both Pakistani and regional goodwill toward India. 3. Simplify, and make more transparent, all trade rules and procedures. To prevent confusion in, and miscommunication with, Pakistan about non-tariff barriers (whether real or perceived), India should make its trade regulations clearer—especially for food produce, pharmaceuticals, and other products requiring prompt processing. India should also boost the capacities of its laboratory and certification facilities used for trade purposes, and keep the WTO informed about its trade-related decisions pertaining to Pakistan. | 11 |
For Pakistan and India Michael Kugelman 1. Empower the private sector. Business communities must be on the front lines of trade liberalization. In South Asia, economic relations are better served by the action-oriented, proactive, problem-solving approach favored by the private sector than by the more plodding, reactive, and bureaucratic style associated with governments. Additionally, the private sector is a powerful shaper of public opinion on trade (popular support for trade normalization increased in Pakistan after its business community became convinced of India’s willingness to move forward). Public-private partnerships, particularly those that facilitate more interconnectivity through infrastructural improvements (such as by upgrading highways), should also be embraced. 2. Engage the media. In both Pakistan and India, media outlets, like the business sector, exert a powerful influence on public sentiment. The media can therefore be a useful tool to amplify the advantages of bilateral trade. Media reportage should spotlight consumers pleased about the cheap goods they import from across the border, and producers happy about the lower costs associated with importing raw materials and machinery. Notably, the Aman-ki-Asha initiative, a joint project of the largest media houses in Pakistan and India, has already spearheaded bilateral cooperation in business, the arts, and society. 3. Loosen restrictions on transit. India and Pakistan restrict each other’s ability to use the other’s territory to reach third countries. India has not allowed Pakistan to access Nepal, Bangladesh, and Bhutan via its territory, and Pakistan has not given transit rights to India to access export markets in Afghanistan. Such transit limitations (along with related concerns about rigid visa regulations) must be placed on the normalization agenda. This is essential if the full benefits of region-wide trade (stretching from China to Iran) are to be enjoyed. 4. Enhance the efficiency of trade routes. Swift and cost-efficient interstate (and intrastate) movement of goods will entail removing restrictions on the type and size of trucks and train cars; ameliorating the quality of the roads and railways used for trade in both | 12 |
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