Trade between India and Pakistan can never be delinked from politics. Pakistan High Commissioner Shahid Malik reiterated it once again on Thursday when he linked progress on bilateral trade issues to "resolution of political issues".
"Kashmir is at the heart of our relations," Malik told a business gathering at PHD House, adding that though economics is driving international relations, economic relations are sustainable only if there is political harmony.
The trade issues include granting of Most Favoured Nation (MFN) status to India, replacement of Pakistan's existing 'positive list' ( the handful of items in which it allow trade between the two countries) by a 'negative list' ( enumerating only the exceptions which cannot be traded, permitting trade of all other goods and services) and granting of transit rights for trade between India and Afghanistan.
Asked directly if Pakistan would accord MFN status to India soon, Malik again responded that there were "political connotations" to the issue.
"The proof of the pudding is in the eating," he said, pointing out that India's exports to Pakistan are already three times Pakistan's exports to India. He insisted, however, that the perception of Pakistan industry being 'scared' that their country would be swamped by Indian goods was a "myth". "Pakistani industry is confident that it can face competition," he said, "but we expect a level playing field from India." He cited India's agriculture and SMEs subsidies, "mega" public enterprises and "excessive standardisation requirements" as non-tariff barriers that must be brought down.
But Malik added that the Pakistan government has notified India that it is willing to negotiate its positive list approach as a quid pro quo for negotiating India's non-tariff barriers.
The two countries are negotiating expansion of the positive list to include items like textiles and machinery. India and Pakistan are also discussing import of wheat this year. According to Fazal Abbas Maken, the trade counselor with the Pakistani High Commission, the bilateral Joint Study Group on trade is negotiating import of 6 lakh tonnes of wheat from Pakistan. Pakistan has a 40 per cent production surplus, and due to geographical proximity, can provide wheat at a lower price.
Referring to another important issue under the South Asia Free Trade Agreement (SAFTA) – grant of transit rights for goods from India to Afghanistan and vice-versa – Malik said Pakistan has already allowed movement of Indian goods from its port Karachi to the Afghan border. Opening the Wagah land border to Indo-Afghan trade, however, would be "problematic" and could be done only after political issues are resolved, he said.
Trade and economic relations between India and Pakistan have benefited from the recent thaw in relations. Bilateral trade has grown from $237 million (Rs 972 crore) in 2002-03 to $1.2 billion in 2006-07.
Various studies have highlighted the potential of Indo-Pak trade. New Delhi-based think-tank ICRIER estimates that if Pakistan were to fulfil its commitments under SAFTA, bilateral trade could go up to $6.6 billionn. It counts textiles, agriculture, engineering, chemicals, pharmaceuticals, electronics, metals and minerals, rubber and plastic, health, entertainment, IT, energy and tourism among sectors that could drive this growth.
But all this is only possible if political relations keep improving.