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A positive step for trade with Pakistan

Monday 18 April 2005

One of the positive outcomes of the Manmohan-Musharraf summit is the decision to set up a Joint Business Council (JBC) that can provide a momentum to bilateral trade. The two Federations of Chambers of Commerce and Industry already have a joint business commission, but it has not been able to achieve anything substantial. Official bilateral trade figures are nothing much to write home about, and the fact that a large chunk of the trade is either illegal or routed through third countries speaks volumes about the potential held in check by politically-inspired barriers. While India has been demanding the Most Favoured Nation (MFN) status to get the road blocks to freer trade removed, Pakistan has been harping on the tariff and non-tariff barriers (NTBs) that it feels have been hampering exports from that country. Now that a JBC is to be set up very soon and the joint study group discussing the MFN issue will be meeting in June to take a final view, industry and trade are hoping for a breakthrough before the year ends.

The objective of the JBC and the demand for MFN status is to increase bilateral trade tenfold, from $ 0.5 billion now (according to the official data) to about $ 5 billion by 2006. Given the track record, this may seem a little too ambitious, but if the two Governments are serious enough in their endeavour the target should be well within reach. The joint statement of the two leaders has also spoken of opening up the Srinagar-Muzaffarabad route to truck traffic so as to lend substance to the border trade. This is of a piece with the announcements regarding the resumption of train services on the Kokhrapar-Munabao route, the operation of buses with increased frequency, and the continuation of serious talks on building gas pipelines from Iran and Turkmenistan to India. Enhanced people-to-people contact may create a greater awareness of travel and trade possibilities and the kind of products that the other country can provide at competitive prices.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has promptly welcomed the JBC idea. But its president, Onkar S. Kanwar, has rightly focussed on the limited list of items that Pakistan has so far been willing to import from India. Obviously trade volumes cannot build quickly if a huge list remains banned. FICCI is clear that infrastructure facilities will have to be developed to give a push to easy flow of goods across the Wagah border, with custom-bonded warehouses on either side. In addition to commodities and manufactured goods, bilateral trade will also have to encompass trade in services as India could offer expertise in areas such as health, and Information Technology and its related services. The fact that South Asia will be moving into a Free Trade Area (SAFTA) next year must propel India and Pakistan to free up trade between them.

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