Should Pakistan and India be equal trade partners?

For Pakistanis, relations with India have been a controversial subject for many decades. Issues like free trade and awarding New Delhi the most-favored nation (MFN) status have been especially emotive, and never found a balanced opinion.

After the Pakistani government announced last week it would award non-discriminatory market access (NDMA) to India very soon, several associations of growers, industrialists and traders voiced strong protests. Some cultivators’ groups are preparing to stage a sit-in at the Pakistan-India border on March 31 if the decision is not withdrawn.

A large majority of Pakistanis consider India as the arch enemy, and is against having any bilateral or trade relations with New Delhi until the core dispute between the two nations – the Kashmir issue – is solved justly. This is why the government of Pakistan's Prime Minister Nawaz Sharif chose the term ‘NDMA’ as an alternative to ‘MFN’, probably in an attempt to disguise the move.

On the other side of the argument is the small but influential section of Pakistan society wants friendly and free trade relations with India.

Two sides

This side comprises at least three main groups. The liberals want close ties with India to the extent of having a soft border between the two countries. The second group comprises NGOs which receive funding from the abroad and work to promote the agenda of their respective donors. The third group is of capitalists and traders who see a financial interest in boosting trade with India.

No doubt, trade between neighboring countries has many benefits due to lower transportation costs and supply time, etcetera. This argument is forcefully advanced by the supporters of free trade with India with the rhetoric that tension between the neighbors could not be carried for long. They ask how long we should remain captives of our past at the cost of our future. They argue that we must now bury the hatchet, improve our economy, make the entire region a trade zone and reap its benefits for ourselves and future generations.

The opposing voice is raised mainly by traditional right-wing quarters known for their emotional and extremist view towards India. They see India in the light of New Delhi’s six-decade history of aggression and conspiracies against Pakistan. To me, the issue of trade is a serious matter that needs serious arguments, not emotions. It needs to be debated on a professional basis, without referring to ‘bitter’ history and becoming a hostage to the past.

Top priorities for Pakistan

First, protecting the interests of Pakistan’s growers and industrialists should be Islamabad’s top priority. With the kind of subsidies Indian growers and industrialists enjoy, and the advantage of having lower manufacturing costs due to subsidized power and cheap labor, allowing Indian goods into Pakistani markets would surely destroy the local industrial and agriculture sectors. Indian-made cars, motorcycles and electronics are much cheaper than their Pakistani counterparts. The same can be said for the Indian pharmaceutical sector, where the price of drugs is much lower than in Pakistan.

Indian growers enjoy cheap power, fertilizers and seeds. Under free trade, Indian goods would flood Pakistani markets primarily because of low prices, completely destroying the local industry and trade within a few months, and leaving millions of people unemployed.

Second, the Indian establishment has always had an agenda of acquiring regional supremacy, for which it has been spending huge amounts on defense. It has been very focused on this goal and prepared to go to any extent to realize this objective. India’s aggressive agenda in Afghanistan for over a decade is well known, and Pakistan has proof of secret Indian support to militancy, terrorism and separatist movements in Pakistan’s tribal areas and Balochistan.

Before lifting trade restrictions on India, Pakistan should first demand guarantees from the Indian establishment that it must withdraw support to militants and separatists in Pakistan, stop its consulates in Afghanistan from anti-Pakistan activities and end such campaigns in the wider world.

Third, it should be clearly understood that India will benefit the most from free trade with Pakistan, taking the lion’s share of profits given its much bigger economy. Some Pakistani manufacturers whose products are in demand in India would benefit. But the rest would be ultimate losers since Indian goods would wipe out their products from their own market. The likely trade balance between Pakistan and India would favor India by a 1 to 10 ratio, and with much lower prices.

Trade route

Pakistani manufacturers are already suffering from inflation and recession, and the country from a huge trade deficit. Indian manufacturers however are eying bigger and potentially lucrative markets in central Asia, Afghanistan, the Middle East and Eastern Europe, with Pakistan offering a short and cheap export route. If Islamabad allows Delhi this kind of historic chance to earn billions or trillions of dollars, then why not demand reciprocal benefits, something really beneficial and long lasting. Earning a few million dollars would be a folly, and Islamabad should use Pakistan’s potential as a trade route as leverage for strategic and economic benefits that should serve the national interests for at least next few decades.

Besides cutting off Indian support to terrorists and separatist elements on its soil, Pakistan has a golden chance to solve its water shortage problem. Islamabad should have a new water accord with India in place of the Indus Water Treaty which was often violated by Delhi in the past because of blunders committed by Pakistani bureaucracy.

It should be upon the pro-India lobbies in Pakistan to persuade their friends in the Indian government and establishment to give big concessions to Islamabad in return for the chance for historic trade access. If the Kashmir issue cannot be solved immediately, then the withdrawal of Indian forces from Siachen and Sir Creek could be done instantly, to begin with. India must come out with genuine confidence-building measures, something it has always been demanding from Pakistan.

If Prime Minister Nawaz Sharif and his comrades feel that it is the best time to strike peace with India, they should win the confidence of the opposition, establishment and other stakeholders like a mature and sensible nation, so as to prevent any possible reversal of this policy in future. Otherwise, any haste in allowing trade concessions to India would either mean Sharif is under some foreign pressure, or that he has very little time left in office.

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Mansoor Jafar is Editor of Al Arabiya Urdu based in Islamabad. He can be reached via Twitter: @mansoorjafar