For the last 64 years, Pakistan has not been able to decide whether to have liberal trade relations with India or not. However, the current government has once again decided to grant MFN status to India thus giving hope for trade liberalization between the two countries.
Very few issues in the history of Pakistan have been scrutinized and debated at every level like Trade Relations between India and Pakistan. The pro and anti groups are still unable to decide which way Pakistan’s trade policy should go as arguments from both sides are based more on emotions and less on logic. After the independence, India was the biggest trade partner of Pakistan with around 50% exports were made to India by Pakistan. However, the Kashmir issue in 1948-49 and later two wars in 1965 & 1971 resulted in a breakdown in ties between the two countries. However, recent move by the Government of Pakistan to grant MFN status to India has once again given hope of liberal trade relations with India.
However, this has also given rise to the old debate of whether these relations would bear fruits for Pakistan keeping in mind the faltering state of its economy and increasing economic influence of India in the region.Pakistan’s economy has experienced unpredictable trends over the years. India, on the other hand, has experienced sustained growth during the same period. This steady growth in economy has strengthened manufacturing sector of India thus giving it a competitive edge over Pakistan. Unfortunately, Pakistan’s manufacturing sector, though grew manifolds during the 60s, it could not continue its growth and lost the earlier momentum. Anti-liberal trade group believes that Pakistan has already been suffering from liberal trade regime with China, which has resulted in items from China being freely available in local markets at cheaper rates thus badly hurting the local manufacturing sector.
Any such ties with India would mean total collapse of the local manufacturing, which is already fighting with electricity and gas shortages and deteriorating law & order situation in the country. Such a decision would also result in increased unemployment in the affected sectors, which is something Pakistan cannot afford at this point in time. If we look at the current statistics of trade between Pakistan and India, Pakistan is facing a deficit of around US $ 1 billion, which means that difference between the import payments to India and export receipts from India is more than PKR 90 billion at the moment. Any liberal trade policy with India would mean sharp increase in this trade deficit resulting in adverse effects on Pakistan’s economy.
Pro-liberal trade group, however, believe that though opening up trade with India would probably hurt Pakistan in the short run, it would be beneficial in the longer run as Pakistan can be benefited from joint ventures with large Indian manufacturers, can get a chance to import technology from India and above all can get machinery and technology on cheaper rates from India as compared to European and American markets. Furthermore, a comprehensive policy can be developed by the two countries for joint ventures to cater the needs of Asian and European markets. So, Pakistan should look at the bigger picture by moving for the long run benefit rather than saving its industry in the short run thus depriving it from a chance to grow in the long run. Pro trade group also believes that linking liberal trade ties with solution of Kashmir and other issues is a reverse procedure.
Pakistan should concentrate on establishing stronger trade relations with India and then try to solve all the political and geographical issues.The fact is that after fighting each other for more than six decades, India and Pakistan both should realize that having liberal trade ties with each other would be beneficial for both countries giving them an opportunity to explore each other’s market and moving forward in the world dominated by European and Chinese economies. Also, it would give them a chance to solve their longstanding political issues and give this world a peaceful and prosperous South Asia. – Waqas Iqbal
Writer is a banker by profession.
