Looking Beyond Conflict
Is trade between India and Pakistan a realistic possibility without the resolution of outstanding contentious issues?
“I think our relationship with Pakistan is becoming a little more stable than it was earlier.” Indian Foreign Minister, S. M. Krishna “The trust deficit that typically existed between the two countries for many years has been reduced to a large order. I can tell you categorically that the cabinet gave its approval for normalization of trade ties with India. We will not backtrack on cabinet decision.” Pakistan Foreign Minister, Hina Rabbani Khar
Not only did the Foreign Ministers of India and Pakistan express optimism about the normalization process on the sidelines of the SAARC summit recently held in the Maldives but the Prime Ministers of the two countries also spoke of opening a new chapter in their unpredictable relationship. The 17th SAARC summit held to “build bridges” in South Asia however, repeated its rhetorical stance about furthering the process of trade liberalization and promoting people to people interaction.
A significant shift is taking place in South Asia in terms of the regional environment and the positive han- dling of critical issues. For a long time, the approach that dominated the paradigm of regional cooperation in South Asia revolved around “nuisance value” of contentious issues between India and its neighbors, particularly that with Pakistan. Brain child of Bangladesh President, Zia-urRehman, SAARC was initially faced with serious reservations from various sides due to outstanding unresolved issues, particularly Jammu and Kashmir that were bound to impede any breakthrough for a meaningful economic and political cooperation in South Asia. Unresolved and contentious issues in South Asia today are not considered an obstacle for trans- forming SAARC from a stagnant to a vibrant regional organization but the fear remains that such issues possess the capability to vitiate gains accomplished in the realm of significant economic cooperation.
Trade and commercial ties in a region, which for decades remained a conflict zone, seem to have assumed a prominent position. Unlike European Union, ASEAN and NAFTA, where regional trade was able to build bridges of peace, cooperation and stability, in South Asia, inter-regional trade has remained merely 5% of the total trade of the regional countries. Under the South Asian Preferential Trade Arrangement (SAPTA) and World Trade
Organization ( WTO), bilateral and multilateral trade among the SAARC countries cannot be delayed.
The issue of granting Most Favored Nation (MFN) status is a case in point. For 16 years, Pakistan has refused to grant that status to India on account of unresolved issues with its eastern neighbor. It is only recently that the federal cabinet of Pakistan decided to grant MFN status to India and that too only in principle! However, if the decision of granting MFN status to India is implemented, can trade between New Delhi and Islamabad bring any qualitative change in ameliorating the political and security environment of South Asia? Will bilateral trade successfully build trust and confidence between the two countries or will the MFN status remain futile due to a lingering “trust deficit?”
Trade and economic cooperation in South Asia needs to be examined in the light of three major factors. Firstly, for the success of trade between two hostile countries, it is essential that the gains in mutual trade outnumber the costs. Some Pakistani traders have expressed reservations about granting the MFN status to India by arguing that Pakistan will not be able to protect its own industries because better prices offered by New Delhi will dominate the market. A mutually beneficial scenario will be one where Pakistan will attain a considerable market share in India for its commod- ities in return for Indian access to not only Pakistani markets but also those in Afghanistan.
Secondly, for a successful trade regime in South Asia, it is essential that bureaucratic nepotism and the unprofessional way of handling things be controlled. Unnecessary trade restrictions through tariffs and quotas will not benefit the people of South Asia. Efforts should be made to provide modern infrastructure for meaningful trade in the region.
Thirdly, trade can build bridges between India and Pakistan, provided mistrust, paranoia and negative rhetoric, which for more than half a century have jeopardized peace and stability in South Asia, are substantially reduced. Along with normal trade, a relaxing of visa regimes between the two countries is necessary so that the walls of suspicion and hostility are demolished. It is imperative that New Delhi and Islamabad relax unnecessary travel restrictions and facilitate greater exchanges of professionals, students, teachers, traders and those belonging to divided families. Denying travel to genuine visitors under the pretext of “national security,” is more of an embarrassment than a precaution.
Critics in Pakistan argue that normal trade with India without the resolution of contentious issues, such as Jammu & Kashmir, would be very risky. Terrorist or violent acts can instantly sabotage an already sensitive
... if the decision of granting MFN status to India is implemented, can trade between New Delhi and Islamabad bring any qualitative change in ameliorating the political and security environment of South Asia?
initiative but that is a risk that needs to be taken if a better and prosperous future is envisioned. Minimal trade already exists between the Indian and the Pakistani controlled parts of Jammu & Kashmir. A current potential of more than 10 billion dollars of formal trade between India and Pakistan already exists and can be expanded to another 5 billion dollars by 2015.
Changes will however, not be visible overnight. The actual benefits of normal Indo-pak trade will surface in ten years when trade and economic stakes will not only bring prosperity to the adjoining trading zones of the two countries but will also make it very difficult for ‘hawks’ to sustain the environment of high profile conflict and hostility.
Positive signs projecting optimism in the strengthening of Indo-pak trade are numerous. For instance, Pakistan’s Federal Commerce Minister, Amin Faheem and the Commerce Secretary, Zafar Mehmood recently visited India. Such visits help in bridging the trust deficit between the two erstwhile neighbors, particularly in areas of economic and commercial cooperation.
Since partition, negative preconceived notions have pitted India and Pakistan, the cradle of some of the world’s oldest civilizations, against each other. The beneficiaries of conflict have thrived while the ordinary people of the two countries have suffered tremendously. Perhaps, this time India and Pakistan may be able to pursue a groundbreaking approach, having missed several opportunities for peace in the past. Undoubtedly, a bright future of South Asia depends on meaningful regional cooperation and in essence, a vibrant bilateral Indo-pak trade. The writer is a Visiting DAAD Fellow at the Willy Brandt School of Public Policy, University of Erfurt, Germany and Professor, Department of International Relations, University of Karachi.