WILL INDO-PAK TENSIONS AFFECT BILATERAL TRADE?

TN ASHOK

In the 21st century, no country wants a full scale war, leave alone even a limited engagement militarily to exert ones armed superiority over the other in a game of sabre rattling or muscle flexing. India withdrew the Most Favoured Nation treatment (MFN) status accorded to Pakistan in trade soon after its alleged involvement in the Pulwama massacre of 41 CRPF soldiers in a truck in Kashmir.

Indian’s retaliatory attack on terrorist camp of Balakote in the hill tops of Pak occupied Kashmir (POK), well inside the Line of Actual Control (LOC) in the disputed areas with IAF Mirage scramble jets dropping 1,000kg laser guided bombs claiming loss of JeM terrorists numbering 300 to 400 and Pakistan denying the same as fake encounter, the question is, will this escalate into even a limited military engagement between the two countries to seriously affect Indo Pak bilateral trade.

That’s the million dollar question. Even the US after its superior military might and two sordid engagements in Vietnam and Iraq faced stiff domestic opposition even as its foreign policy on anti-Communism and WMD guided the assault. US is one country, which can run normally even with a one trillion dollar deficit. Even on the North Korean nuclear threat, US President Donald Trump has used all his diplomatic skills to bring both SouthKorea and NorthKorea to the table for peace talks.

But neither India nor Pakistan can afford any armed conflict at this stage especially when India’s economy has come out of the throes of the demonetisation and GST effects and is poised to grow at 7% and rein in fiscal deficit at 3.4% of GDP, after the massive dole out to farmers in the FY 2019-20 budgets.

Successive governments in India and Pakistan have failed to take the Shimla Peace accord forward that both Indira Gandhi and Zulphikar Ali Bhutto formalised in a historic moment, as Pakistan subsequently failed to honour the spirit of the agreement for the talks and India insisting that should be be the base to move forward.

Given this scenario of constant bickering between India and Pakistan on disputed territories in Kashmir and using Pakistan territory for terror camps, where is Indo Pak trade stuck? Does withdrawal of MFN complicate matters for Pakistan further. Here’s a look at the stats.

The India -Pakistan trade volume posted a growth of nearly 5% in the first seven months of the current fiscal year from a year ago despite border tensions.Trade sources claim as late as February 24. But India withdrew the MFN Following the alleged Pak inspired JeM Pulwama terror attack, ,which was granted in 1995.

MFN statusis defined as one, in which a country will treat all WTO member states equally in matters of tariffs on imports. A day later, India slapped 200% import duty on Pakistani goods.However, the Indian government’s decision to impose 200pc additional duty will bring them no tangible results as Pakistan’ annual exports to the country are worth only a few million dollars, Pakistan’s leading newspaper Dawn claimed.

However, Trade statistics show a different picture that on the contrary New Delhi may feel the pinch of the current stand-off. The total aggregate volume of bilateral trade between July-January 2018-19 has reached to $1.122 billion, up by 4.96% up from $1.069 billion over the corresponding period of last year. The first seven-month data of this fiscal year shows that Indian exports to Pakistan constitute 79.33% of the total bilateral trade volume.

Pakistan imports from India between July-January 2018-19 have reached to $890.05 million from $871.71 million over the corresponding period of last year, showing an increase of 2.1%. Pakistan’s imports have already entered negative growth with almost all countries except India, an official report claims.

In the year 2017-18, Indian exports to Pakistan touched $1.84 billion as against $1.64 billion over the previous year, showing an increase of 12.2%. On India’s move to revoke Pakistan’s MFN status, Secretary Commerce Younus Dagha told Dawn that Commerce Division has already worked out different options.However, he did not disclose the details.

‘No plan yet to announce it anytime soon,” he said, adding “But we will ive a measured response whenever the government also decides.” Strangely, amid escalation of tensions between India and Pakistan, trade across the Line of Control continued on Tuesday, as 70 trucks crossed LOC from both sides of northern Kashmir with high level security arrangements.

The cross LoC trade is scheduled for four days a week from Tuesday to Friday, while as travel is scheduled once every week, trade sources said adding :“Today 35 trucks carrying tomatoes, embroidery and grapes crossed the Kaman Post from Uri to the other side and 35 trucks came even after Jaish-e-Muhammad attack on CRPF convoy in Pulwama on February 14.

Even as suspense prevails in the Valley on what will happen next, the trade across the LoC continues.

On February 26, when India attacked the terror camps across the border leading to tensions escalating ,the trucks crossed the LoC from Uri, which is extremely sensitive area and prone to shelling by Pakistan. Last week, 140 trucks crossed the LoC from the Indian side while 70 trucks came in from Pakistan, carrying various items both from Uri and Poonch trade facilitation centers.

Trade was temporarily halted in Poonch for two days last week due to curfew in Jammu district because of which transport was not plying, media reports claim.

CROSS-LOC BARTER TRADE HAS HAD A RICKETY JOURNEY SINCE ITS INCEPTION IN 2008, BUT IT IS STILL CONSIDERED TO BE THE BIGGEST CONFIDENCE-BUILDING MEASURE (CBM) BETWEEN INDIA AND PAKISTAN. HOWEVER, IT IS OFTEN SUSPENDED IN THE WAKE OF POLITICAL STRAIN BETWEEN THE TWO COUNTRIES.

ALSO, THESE TRADERS HAVE BEEN FREQUENTLY TARGETED BY THE INVESTIGATING AGENCIES LIKE NIA FOR THEIR ALLEGED INVOLVEMENT IN NARCOTICS AND ILLEGAL
MONEY EXCHANGE, WHICH HAS NOT ALLOWED THE TRADE TO FLOURISH.

In January 2018, J&K government informed that goods worth Rs 3,432 crores have been traded via cross-Line of Control (LoC) trade during last three years.

MUCH BEFORE THE TENSIONS BETWEEN INDIA AND PAKISTAN ESCALATED, THE INDIAN ENVOY IN PAKISTAN HAD CALLED FOR REMOVING NON-TARIFF BARRIERS BETWEEN INDIA AND PAKISTAN, ASBOTH THE COUNTRIES NEEDED TO SHUN VIOLENCE AND NORMALISE RELATIONS IN ORDER TO TAKE THE TWO-WAY TRADE TO $30 BILLION FROM THE PRESENT $5 BILLION.

THIS WAS SOMETIME IN MARCH LAST YEAR. BUT A LOT OF THINGS HAVE CHANGED SINCE THEN.

Indian High Commissioner to Pakistan Ajay Bisaria, while addressing the Lahore Chamber of Commerce and Industry (LCCI), had said that there is no better way of improving bilateral relations than mutually beneficial economic ties.

India has been pushing Pakistan for normalisation of trade on the basis of the September 2012 roadmap that mentioned removal of all restrictions on trade through the Wagah border and grant of the Most Favoured Nation (MFN) status to India by December 2012.

Pakistan, however, did not adhere to the timeline. India had already given Pakistan the MFN status – which is nothing but a promise not to discriminate against imports from the country that has got the status.

Bisaria said mutual relations between the two countries should be built on the basis of trade and economy, and violence and war should not be an option.Bisaria’s statement came at a time when relations between the two nuclear-power neighbours were at a low amid heightened tensions following claims and counter-claims by both the countries about harassment of each other’s diplomats.

The Indian High Commissioner also said that India and Pakistan should have the future different from the past and must not carry the burden of history.”Both Pakistan and India need to take more steps to remove non-tariff barriers that are a major impediment to bilateral trade relations.

“We should not talk about negative and positive lists rather we should work on the windows of opportunities. At present, over $5 billion trade is being done through third country but after removal of non-tariff barriers, liberalisation of visa and normalisation of mutual relations, the two-way trade could touch a high $30 billion,” he had said.

LCCI President Malik Tahir Javaid had said then that at present an unfavourable scenario has developed both at political and diplomatic fronts.”We have been witnessing time and again that first there is a trust deficit, then some joint efforts are made for trust building, then some
incident happens and we end up yet again at trust deficit. One such (terror) incident must not halt the process of relation building.

Both countries should give the peace another chance to prevail in the region for our youth and coming generations,” he had said adding “Pakistan and India need to show a lot of maturity and act very sensibly”.

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