Pakistan to liberalize trade with India

DELHI -- Two nations set aside old rivalries to normalize trade relations.
Written by Betwa Sharma, Correspondent

DELHI -- Setting aside political differences for the moment, Pakistan is boosting its business relations with India by substantially increasing the number of products that both countries can soon trade.

The decision by Pakistan to phase out a “negative list” by the end of the year will help normalize commercial relations between the two nuclear-armed rivals, which have fought three wars since 1947. This list presently bans 1209 items from India.

India had granted Pakistan “most favored nation” status in 1996, which is a World Trade Organization requirement of no discrimination between trading partners. But the MFN status was not reciprocated particularly because of opposition from the military and Islamist factions in Pakistan that want Kashmir to be free from India.

The term “most favored nation” also created confusion because people in Pakistan thought it meant the Islamabad would be granting New Delhi special privileges. But following the “unanimous” decision reached by Pakistan’s cabinet of ministers, it seems likely that MFN status will be granted to India by Jan 2013. Still some local manufactures, for instance from the textile industry, are wary of the competition of less costly Indian imports. They would prefer the opening up to happen in stages.

The annual bilateral trade between both nations, estimated to be over $2 billion, is expected to increase to $6 billion by 2015. Will trade improve broader relations between two nations as well? A little bit perhaps. Kashmir will remain a tough cookie to crack. Pakistan has already indicated that the shift in its trade policy doesn’t mean a slackening on its Kashmir position. Still, these developments are viewed as a major breakthrough especially in the backdrop of the icy relations that set in after the 2008 Mumbai attacks blamed on terrorists from Pakistan. Despite strained relations, both countries also persisted with barter trade across the Line of Control that divides the Indian and Pakistan sides of Kashmir.

In February, this year, Anand Sharma was the first ever Indian trade minister to visit Pakistan for substantive bilateral meetings. Sharma described Pakistan's decision as a “dramatic shift" that allows trade in 90 percent items as  opposed to 17 per cent earlier. “We believe that strengthening economic engagement between India and Pakistan lies at the heart of building enduring peace and stability in this region. Flourishing trade is the biggest confidence building measure among any two nations,” the minister said.

“During my visit to Pakistan, I saw considerable enthusiasm in industry leaders and the trading community of both countries for deepening this engagement. We now need to continue the momentum of regular exchanges which we have started since mid-2011,” he continued.

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This post was originally published on Smartplanet.com

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