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Additional <strong>Trade</strong> Challenges: Transport, Transit, and Non-Tariff Barriers<br />
other instead of from elsewhere in the world. In order to identify these<br />
items and assess the magnitude of trade possibilities (referred to as trade<br />
potential) between the two countries, in late 2011 the author calculated an<br />
estimate of potential bilateral trade. Products having trade potential were<br />
identified as those with (a) adequate demand in the receiving country and<br />
(b) adequate supply capabilities in the source country. The exercise was<br />
conducted by posing <strong>Pakistan</strong> as a supplier to assess its possibilities to <strong>India</strong>,<br />
and then by posing <strong>India</strong> as the supplier country.<br />
The results of the exercise show the existence of an estimated bilateral<br />
trade potential of $25.2 billion in 2010, which is 10 times larger than<br />
the current $2.5 billion trade (Taneja and Kalita 2011).<br />
<strong>India</strong> has an untapped export potential of $21.1 billion, of which<br />
$7.2 billion can be accounted for by petroleum products alone. Exports<br />
of petroleum products by <strong>India</strong> to <strong>Pakistan</strong> can increase manifold with<br />
<strong>Pakistan</strong>’s granting of MFN status to <strong>India</strong>. Compared to Bangladesh,<br />
Sri Lanka, and Nepal, <strong>India</strong>’s exports to <strong>Pakistan</strong> in this sector are quite<br />
low. In 2010, <strong>India</strong>’s petroleum oil and products exports to Nepal were<br />
the highest at $627.8 million, followed by Sri Lanka at $598 million, and<br />
Bangladesh at $110.1 million.<br />
The 10 largest items having export potential from <strong>India</strong> to <strong>Pakistan</strong><br />
accounted for 45.5 percent of total export potential. Cotton and organic<br />
chemicals like para-xylene, which are already major export commodities<br />
to <strong>Pakistan</strong>, are shown to have additional potential for exports of $459.8<br />
million and $230 million, respectively. Other items in the top 10 products<br />
having export potential include light petroleum oils & preparations,<br />
motor vehicles, telephones, and tea (see Table 2).<br />
<strong>Pakistan</strong>’s export potential to <strong>India</strong> in 2010 was $4.1 billion, of<br />
which $1 billion was petroleum products. The value of the 10 largest<br />
items with export potential from <strong>Pakistan</strong> to <strong>India</strong> was $2 billion, which<br />
accounted for 49 percent of total export potential. Dates have an additional<br />
export potential of $52.3 million. The top 10 products having<br />
export potential include petroleum oils, cotton, jewelry, and electric<br />
generating sets (see Table 2).<br />
It is to be noted that <strong>India</strong> and <strong>Pakistan</strong> have an export potential in petroleum<br />
oils. However, at a disaggregated level, <strong>Pakistan</strong>’s major petroleum<br />
oil export is base oil, while <strong>India</strong>’s comparative advantage within petroleum<br />
oil lies in high speed diesel, aviation turbine fuel, fuel oil, and lubricating oil.<br />
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