Pakistan-India Trade:

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Additional Trade Challenges: Transport, Transit, and Non-Tariff Barriers | 75 | NISHA TANEJA India-Pakistan trade relations have drawn considerable attention from the world at large, with the two countries now at a point where significant economic gains could serve as a powerful means for conflict resolution. After a hiatus of three years, commerce secretary-level talks were resumed in April 2011. They proceeded at an unprecedented pace, and culminated with the Pakistani federal cabinet’s decision to grant Most Favored Nation (MFN) status to India in November 2011. Such progress is not surprising. In the last few years, several notable trade-facilitating measures have been undertaken despite events such as the Samjhauta Express blasts in March 2007 (The Samjhauta Express train service runs between New Delhi and Lahore) and the Mumbai terror attacks in November 2008. This represents a marked change from the past (for example, after India’s Parliament was attacked in December 2001, the country stopped trade via air and land routes until 2004). In 2004, Pakistan increased the list of items permissible to be imported from India—more often termed the “positive list”—to 767 items (the number was 600 in 2000). In 2005, India and Pakistan revised the restrictive Maritime Protocol that had been in operation since 1975 by allowing the lifting of cargo originating from India or Pakistan to other countries by third-country vessels. This amendment also now allows Indian and Pakistani vessels to lift such cargo from a port in either country that is destined for a third country. Another significant measure involved the opening up of the road route through the Attari-Wagah border for limited commodities in 2005, 58 years after its closure during Partition. In nisha Taneja is professor at the Indian Council for Research on International Economic Relations.
Nisha Taneja 2006, Pakistan increased the positive list further to 1,075 items. And in yet another historic move, Indian and Pakistani trucks in 2007 were allowed to unload cargo on each other’s territory, thereby ending the antiquated practice of porters unloading goods from trucks and carrying them across the border as head-loads. Finally, in 2009, the positive list was increased to 1,934 items (Taneja, Prakash, and Kalita 2011). An examination of trade trends between India and Pakistan (Figure 1) reveals that in the period between 2004–05 and 2007–08, when a number of positive measures were undertaken, trade more than tripled from $616 million to $2.2 billion (in this paper, all dollar figures refer to U.S. dollars). This occurred even with the politically sensitive events during this period. In 2008–09, following the Mumbai terror attacks and the global recession, bilateral trade fell to $1.8 billion—but then trended upward again, reaching a total of $2.6 billion in 2010–11. The high trade growth in the last couple of years can possibly be attributed not only to the post-recession recovery, but also to the substantial additions to the positive list. Clearly, the two countries had established a track record of undertaking trade-facilitating measures well before 2011—even in the after- figure 1: india-Pakistan Bilateral Trade (us$ Million) 3,000 2,500 2,000 1,500 1,000 500 0 2000– 2001 2001– 2002 Cross-border truck movement allowed Parliament Samjhauta blast attack Positive list 1075 items Rail & Maritime Protocol amended air routes closed Road route opened Rail & air routes open Positive list 767 items 2002– 2003 2003– 2004 2004– 2005 Source: Directorate General of Foreign Trade, Ministry of Commerce, government of India. | 76 | 2005– 2006 2006– 2007 2007– 2008 Mumbai attacks 2008– 2009 Positive list 1934 items 2009– 2010 2010– 2011
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