The improvement in Indo-Pak trade ties would not only increase the bilateral trade 10 times but also expand market access, economic growth, energy benefits, and regional stability, a top international business school professor has said.
Strongly arguing the case for improved Indo-Pak trade ties, Professor Kishore Dash of the Thunderbird School of Global Management said India no longer can ignore its own base in South Asia, where it enjoys a comparative advantage in almost every economic sector.
It makes sense for India to include Pakistan, South Asia's second-largest country, in its search for new markets.
Greater trade with Pakistan also would open possibilities of transit trade and market access beyond Pakistan into Central Asia, he wrote in the Winter/Spring 2013 issue of Georgetown Journal of International Affairs.
Increased trade relations between in India and Pakistan would not only increase the bilateral trade 10 times but also expand market access, economic growth, energy benefits, and regional stability.
Similarly, Pakistan's need for market access has led it to sign bilateral free-trade agreements with several countries, but those markets pale in comparison to India's huge market potential for Pakistani goods.
In addition, India shares the largest common border with Pakistan, offering immediate access for Pakistani goods if border negotiations were to prove successful, he said.
Given its relatively larger economy, India would likely reap greater benefits than Pakistan with a free-trade agreement.
However, several studies show that any increase in Pakistani trade with India would produce a positive impact on Pakistan's economy.
Several recent studies show that removal of tariffs would lead to a spike in the volume of bilateral trade with a profound impact on each country's GDP growth, Kishore said.
Under the Trade Liberalisation Plan of the South Asian Free Trade Area (SAFTA), India and Pakistan have agreed to reduce tariffs to below 5 percent.
If implemented, it would mean that Pakistan's general exports of small manufactured goods would find ready markets in India.
"In addition, some illegal transactions would become legal, resulting in the substantial reduction of transportation costs and transit time. Free trade also would foster more cross-border investments in several areas, including information technology.
"This ultimately would boost Pakistan's emerging IT and knowledge infrastructure and enhance its ability to attract foreign investment," he said.
Further, a proposed
Turkmenistan-Afghanistan-Pakistan-India gas pipeline project would allow Turkmenistan to supply 33 billion cubic meters of gas to India and Pakistan for a 30-year period.
Pakistan also will most likely benefit because of transit fees and foreign exchange earnings, he wrote.
Despite political tensions, trade expansion between China-Taiwan, India-China, US-China, and US-Russia illustrate that trade cooperation is an effective instrument in improving interstate relations.
"From the Indian perspective, expanded trade with Pakistan would likely provide an opportunity for India to counter China's growing influence over Pakistan and the South Asian region," Kishore said.