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#4296, 7 February 2014


Cross LoC Trade: Continuing Stalemate
Ayesha Khanyari
Research Intern, IPCS

Early in January 2014, Islamabad halted the movement of trucks across the India-Pakistan border in Kashmir, after Indian authorities impounded a narcotics-laden truck entering India from the Pakistan-occupied Kashmir (PoK). Additionally, Pakistan also suspended the Srinagar-Muzaffarabad and Rawalkot-Poonch bus services. Citing the Standard Operating Procedures that guide the trans- Line of Control (LoC) trade, Islamabad demanded the release and transfer of the custody of the detained truck driver to Pakistani authorities.

At a joint meeting between officials from both sides of the border that took place on 23 January 2014, a consensus was reached over resuming the bus service. However, they failed to end the deadlock over trade activities. Pakistan retaliated by detaining 27 Indian vehicles, demanding the release of the driver. Three meetings have been held so far; all have been inconclusive towards ending the month-long deadlock.

Pakistani officials have accused India of plotting to end the intra-Kashmir trade. India, on the other hand, blames Pakistan for the impasse along the LoC  citing Islamabad’s refusal to resume trans-LoC trade. While both players continue to play the blame game, there is a need to bring clarity to two issues:What are the key hurdles that obstruct the maintenance of cross-LoC linkages? Who is repeatedly trying to stall the forward-looking processes?

Security and Economic Hindrances to Cross-LoC Trade
In the recent years, the most promising development in the region has perhaps been the normalisation of the relationship between both sides of the border; and this has been made possible primarily due to the enhanced economic and human interaction through the trans-LoC trade and bus service. This increased economic activity could act as a catalyst for bridging the rift between the two nations, by creating strong economic linkages and interdependence – that can push for normalisation between two parts of the state.

However, unfortunately, although trans-LoC trade has been taking place since 2008, there is little effort on the ground to push the trade forward. This is precisely why the Federation of Jammu and Kashmir Chamber of Commerce and Industry could not proceed beyond its stage of establishment.

For long, Indian authorities suspected that the cross LoC trade route could be used for infiltrating militants, arms and drugs into the country. The ever-looming fear of illegal passage of contrabands has remained one of the core reasons why the Indian side remained sluggish about the entire process.

This recent incident is one among the many where the smuggling of contraband goods have been detected,. While the earlier instances were hyped by the media, this time, the media on both sides of the border took it slow; not much was reported. On the contrary, the news has already died out, and the drivers are still stranded across the border. This displays a lack of seriousness employed by the state and central governments, with regards to addressing this issue.

While India and Pakistan constantly pass the blame onto the other, the truth is that both might be equally responsible for building these hurdles. The symbolism of the development suits India and Pakistan, as it shows them as moving forward from their traditional stances. However, the strongest opposition comes from the political leadership, bureaucracies and the military on both sides of the LoC. The apprehension towards expanding economic and human exchanges in the region  lies in the fear that such an initiative could result in generating greater unrest in Indian Kashmir. Furthermore, scaling up the exchanges would also bring with it the increased deployment of officials by the intelligence services of both countries, across the LoC. Therefore, while the thought of finding an alternate path to normalisation of relations might seem attractive, in reality, the process gets repeatedly diluted.

The insecurity in Islamabad and New Delhi is not solely security-centric; there are economic concerns as well. Pakistan sees intra-Kashmir trade as a potential to give free entry for Indian goods into Pakistan’s market. In the long run, a truly liberalised trade regime between the two countries would lead to the free flow of goods from both sides; and the Pakistani government does not welcome the idea. In medium to long term, India can also use Pakistan as the transit route to enter Afghan and Iranian markets. Also, getting to trade with the PoK implies a reduced dependence of Kashmir on Jammu – the Valley’s only link to the rest of India. In this light, it is not surprising to see the passive efforts from the Indian side to enhance trade between the regions.

LoC Trade: Larger Issues
Among the several roadblocks faced by traders on both sides of the border is the absence of a formal financial and banking infrastructure; the lack of consensus on the currency to be used for trade and absence of a banking system, has thus reduced the exchange to a barter system. The business enclave in the Valley, while aware of the government restrictions and the existing hostile environment, prefer to stick to the status quo and resign to the fact that politics will continue to undo the process.

Lastly, apart from major security and economic obstacles to trade, there are factions from within the system that do not want the process to move ahead. The divergent interests of the Jammu and Kashmir trading blocks, along with their differing political identities, lack of political consensus within the state on the issue, and the presence of a strong separatist lobby in the Valley, explains the absence of joint efforts to consolidate cross LoC trade.

It is not one party playing the game. There are multiple players with their own agendas.

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