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Should Pakistan and India be equal trade partners?
Published in The Saudi Gazette on 27 - 03 - 2014


Mansoor Jafar
Al Arabiya
For Pakistanis, relations with India have been a controversial subject for many decades. Issues like free trade and awarding New Delhi the most-favored nation (MFN) status have been especially emotive.
After the Pakistani government announced last week it would award non-discriminatory market access (NDMA) to India very soon, several associations of growers, industrialists and traders voiced strong protests. Groups of cultivators are preparing to stage a sit-in at the Pakistan-India border on March 31 if the decision is not withdrawn.
A large majority of Pakistanis consider India to be an arch enemy, and they are against having any bilateral or trade relations with New Delhi until the core dispute between the two nations – the Kashmir issue – is solved justly. This is why the government of Prime Minister Nawaz Sharif chose the term “NDMA” as an alternative to “MFN”, probably in an attempt to disguise the move.
On the other side of the argument is the small but influential section of Pakistan society which wants friendly and free trade relations with India. This side comprises at least three main groups. The liberals want close ties with India to the extent of having a soft border between the two countries. The second group comprises NGOs which receive funding from abroad and work to promote the agenda of their respective donors. The third group is made up of capitalists and traders who see a financial interest in boosting trade with India.
No doubt, trade between neighboring countries has many benefits due to lower transportation costs, supply time, etc. This argument is forcefully advanced by supporters of free trade with India with the rhetoric that tension between the neighbors should not be allowed to continue for too long. They ask how long we should remain captives of our past at the cost of our future. They argue that we must now bury the hatchet, improve our economy, make the entire region a trade zone and reap the benefits for ourselves and future generations.
The opposing voice is raised mainly by traditional right-wing quarters known for their emotional and extremist views of India. They see India in the light of New Delhi's six-decade history of aggression and conspiracies against Pakistan.
To me, the issue of trade is a serious matter that needs serious arguments, not emotions. It needs to be debated on a professional basis, without referring to a “bitter” history and becoming a hostage to the past.
First, protecting the interests of Pakistan's growers and industrialists should be Islamabad's top priority. With the kind of subsidies Indian growers and industrialists enjoy, and the advantage of having lower manufacturing costs due to subsidized power and cheap labor, allowing Indian goods into Pakistani markets would surely destroy the local industrial and agriculture sectors. Indian-made cars, motorcycles and electronics are much cheaper than their Pakistani counterparts. The same can be said for the Indian pharmaceutical sector where the price of drugs is much lower than in Pakistan.
Indian growers enjoy cheap power, fertilizers and seeds. Under free trade, Indian goods would flood Pakistani markets primarily because of low prices, completely destroying the local Pakistani industry and trade within a few months, which would leave millions of people unemployed.
Second, the Indian establishment has always had the agenda of acquiring regional supremacy for which it has been spending huge amounts on defense. It has been very focused on this goal and is prepared to go to any extent to realize this objective. India's aggressive agenda in Afghanistan for over a decade is well known, and Islamabad has proof of secret Indian support to militancy, terrorism and separatist movements in Pakistan's tribal areas and Balochistan. Before lifting trade restrictions on India, Pakistan should first demand guarantees from the Indian establishment that it will withdraw support to militants and separatists in Pakistan, stop its consulates in Afghanistan from engaging in anti-Pakistan activities and end such campaigns in the wider world.
Third, it should be clearly understood that India will benefit the most from free trade with Pakistan, taking the lion's share of profits given its much larger economy. Some Pakistani manufacturers whose products are in demand in India would benefit. But the rest would ultimately be losers since Indian goods would wipe out their products in their own market. The likely trade balance between Pakistan and India would favor India by a 10 to 1 ratio, and with much lower prices.
Pakistani manufacturers are already suffering from inflation and recession, and the country suffers from a huge trade deficit. Indian manufacturers, however, are eying bigger and potentially more lucrative markets in central Asia, Afghanistan, the Middle East and Eastern Europe, with Pakistan offering a short and cheap export route. If Islamabad allows Delhi this kind of historic chance to earn billions or trillions of dollars, then why not demand reciprocal benefits, something really beneficial and long-lasting. Earning only a few million dollars would be foolish. Islamabad should use Pakistan's potential as a trade route as leverage for strategic and economic benefits that would serve the national interests for at least the next few decades.
Besides cutting off Indian support for terrorists and separatist elements in Pakistan, Islamabad has a golden chance to solve its water shortage problem. Pakistan should have a new water accord with India in place of the Indus Water Treaty which has often been violated by Delhi in the past because of blunders committed by Pakistani bureaucracy.
The pro-India lobbies in Pakistan should persuade their friends in the Indian government and establishment to give big concessions to Islamabad in return for the chance for historic trade access. If the Kashmir issue cannot be solved immediately, then the withdrawal of Indian forces from Siachen and Sir Creek could be done to begin with. India must come up with genuine confidence-building measures, something it has always been demanding from Pakistan.
If Prime Minister Nawaz Sharif and his comrades feel that this is the best time to strike a peace deal with India, they should win the confidence of the opposition, establishment and other stakeholders, so as to prevent any possible reversal of this policy in the future. Otherwise, haste in allowing trade concessions to India would either mean that Sharif is under foreign pressure, or that he has very little time left in office.
— Mansoor Jafar is editor of Al Arabiya Urdu based in Islamabad. Follow him on Twitter @mansoorjafar


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