The Brass Tacks about Trade with India

The Brass Tacks about Trade with India | PakistanTribeSince Pakistan decided to liberalize trade with India in 2012, there has been controversy surrounding the topic of Pakistan-India Trade.

The grievances of certain sectors and stakeholders continue to be voiced even as Pakistan readies to give India “Most Favoured Nation” status. Pakistan Tribe spoke to MNA Maiza Hameed to obtain a snapshot of the situation right now and her viewpoint on it.

There must not be any doubt in our minds that normalising trade with any neighbour is a win-win situation for Pakistan. Research shows that liberalising trade with India can enhance exports to India by up to $2.5 billion in the short term, and since Pakistan can import raw materials at a cheaper rate from India than from the countries we are currently importing from, Pakistan’s exports to other countries is expected to be boosted by an additional $2 billion. In addition, we can save up to $1 billion if we import certain finished products from India as opposed to the more expensive countries we are currently importing from. These changes will lead to job creation for about 500,000 Pakistanis, and enhance our GDP growth rate within three years. We can also formalise the informal trade that is already occurring illegally between India and Pakistan, estimated to be as high as $2 billion, and lower the prices of these products for Pakistan’s consumers as they can be imported directly from India, rather than through Dubai or Singapore as is currently happening.

We must separate the political from the economic and have a clear vision for the strategic advancement of Pakistan’s trade agenda. The question is not whether liberalising trade is good for Pakistan, as the research states that it clearly is, but how we can ensure maximum gains from trade for Pakistan. We need to negotiate clauses or bilateral pacts that ensure that certain vulnerable industries, like agriculture, are properly cared for. There has been a lot of concern for Pakistan’s agricultural industry, and the government is taking this into account. If the Most Favoured Nation (MFN) status is given to India, the “negative list” Pakistan has in place, meaning the products that are not allowed to be exported to Pakistan, will be eliminated and there is concern that those items, especially agricultural-related, on the list being locally produced will suffer. However, the majority of the items on that list are either not exported from India, or are not locally produced. Items on the list that are locally produced, like tobacco products, already have a high Federal Excise tax, so will be protected.

There is a lot of concern about the subsidies India gives to its farmers, and it is a sensitive topic that, as Pakistan State Minister for Commerce and Textiles Khurram Dastagir Khan stated in January 2014, is “an international WTO issue.” Trade in agriculture has been open, more or less, since March 2012 when trade with India was expanded, and there has been no flood of agricultural products from India in the Pakistani market. There are also measures that can be put in place in the event of a surge of agricultural products, such as emergency safeguard duties, and Pakistan has the option to continue to keep key agricultural items on the SAFTA sensitive list. Other sectors in Pakistan that have concerns about liberalising trade with India are pharmaceuticals and auto-parts and auto industry, and the government is taking that into consideration.

The difference between MFN and Non-discriminatory Market Access (NDMA) is one of market access. NDMA means that the countries will cooperate for more than just trade, for example, for banking, easier visa procedures, etc. Market access is very important to enhance trade, so NDMA is what the government is seeking. We must accept that liberalising trade with India is favourable for Pakistan, and be strategic about ensuring maximum gains from trade and maintain efforts to smooth the transition for sensitive sectors.

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