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| Walking across Wagah | | India must work harder on encouraging Pakistani imports |
| Business Standard / New Delhi Feb 14, 2012, 00:08 IST |
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On Monday, Commerce Minister Anand Sharma walked across the Wagah land border between India and Pakistan on his way to attend the closing ceremony of the extremely popular “India Show”, a trade fair organised to highlight Indian products in Lahore. The agenda for his visit is to move forward on liberalising trade between the two neighbours, following along from negotiations in Islamabad last year. The “normalisation” of trade has been repeatedly touted by New Delhi as a possible game-changer in bilateral relations. Yet it does not appear that Mr Sharma’s visit will pay the dividends that would have been possible had India’s bureaucracy capitalised on the gains made last year. Trade relations seem to still be held hostage to a mindset that believes that the only successful outcome is if the other side appears to have given more than you have. This is always a problematic point of view, but in the case of India-Pakistan trade – of $2.7 billion, of which India’s exports are as much as $2.3 billion – it is particularly misguided. Studies have estimated that if restrictions are relaxed somewhat, the volume of trade can go up by as much as a factor of ten. (The two governments have targeted, more modestly, $6 billion in official trade by 2014.)
The Indian government’s position is that Pakistan needs to move quicker in replacing a current “positive” list of trade items with a “negative” list. This is, indeed, necessary, and Mr Sharma has said that Pakistan’s commerce secretary assured the Indian government in a November visit that it will be done. Yet it is unclear why India’s promises to ease non-tariff barriers on trade need Pakistan to act first. As the much larger economy, it should clearly move first. The largest barrier to Pakistani goods that India has imposed is theoretically neutral and applicable to all trading partners: restrictions on textile imports. Of course, it hits India’s textile-intensive neighbours, Pakistan and Bangladesh, most; but the Indian textile producers’ lobby has consistently pushed New Delhi against relaxing barriers. New Delhi must make a more reasonable comparison of the benefits of protecting this industry with the great strategic and economic benefits of expanding trade with its neighbours. Non-tariff barriers include the undercapacity at the Wagah border; an integrated checkpost to ease trade is still not absolutely ready, though it was supposed to be so last year. Customs harmonisation should be worked out, but there is no news yet on how grievance redressal systems for those traders whose goods are subject to arbitrary confiscation will be put in place. India has also, in the past, insisted that goods imported be subject to Indian certification as to their standards; other international hallmarks of quality were not considered acceptable.
These are bureaucratic restrictions that, if there was political will, should have been cut through by now. That New Delhi has not yet done so would lead observers to conclude that the supposed mission to improve relations through trade was not meant to be anything more than talk.
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