Delhi Round of Indo-Pak Talks - IV Trade and Commerce

21 Nov, 1998    ·   158

D. Suba Chandran says Pakistan's attempt to link trade with the “core issue” may prove to be the real hurdles to achieve any success on bilateral trade between India and Pakistan

India-Pakistan bilateral trade forms less than 1 percent of world trade. The trade balance between the two countries is in India 's favour. During 1996-97, India 's exports to Pakistan were around $150 million whereas its import from Pakistan was around $36 million only.The Indo-Pak talks held in Delhi on trade and Commerce focussed mainly on the following issues: MFN status to India by Pakistan and Importing Sugar and Power from Pakistan by India .



MFN Status to India :



India accorded MFN (Most Favoured Nation) status to Pakistan in the 1970s itself. Pakistan has been refusing to confer the MFN status upon India . But, for the first time during these talks, Pakistan did not rule out the possibility of granting MFN status to India . Pakistan , however, refused to give a time frame for the same, and cited domestic compulsions such as adverse impact on the Pakistan industry. Pakistan has been refusing MFN status to India for two reasons – economic and political. Pakistan fears that this might result in Indian goods flooding the Pakistani market, and Pakistani goods being replaced by Indian goods. This, Pakistan fears, will have an impact on its domestic politics. The second reason is lack of political will to improve trade relations and bilateral with India .



India has been demanding MFN status from Pakistan for a long time in accordance with Pakistan 's obligations under the World Trade Organization (WTO). India , during the current round of talks, proposed that if Pakistan faces difficulties in according MFN status then it could allow certain commodities to be imported from India which Pakistan is importing from other countries. ( Pakistan allows a list of only 600 items to be imported from India ) Pakistan negated this proposal, stating that it could only be done after a detailed study of the impact of such a move on Pakistani industries. Pakistan fears that if the imports are liberalised, it would result in the smaller industries in Pakistan closing down.



Purchase of sugar by India from Pakistan :



One area in which there is scope for improving economic ties is sugar. India has been importing sugar from various states, including Pakistan . Pakistan   exported sugar to India worth Rs. 300 crore during the period between April and August. During the talks, Pakistan accused India of obstructing sugar movement, especially by creating problems in unloading sugar in Amritsar . This results in a backlog, which affects the Pakistani traders adversely. Pakistan accuses India of deliberately obstructing Pakistani sugar imports by bureaucratic delays. India 's stand regarding the purchase of sugar from Pakistan is that the traders are free to purchase sugar from any place where the prices are low and competitive. Besides sugar imports are on Open General License (OGL); hence the question of delay does not arise. India believes the delay is due to  two factors: One, the availability of only one route between India and Pakistan , which is the train route between Amritsar and Lahore . Second, is the use of outmoded rail wagons by Pakistan , which are not compatible with India 's railway system.



Purchase of power by India from Pakistan :



The offer to sell power to India by Pakistan was proposed by Nawaz Sharif during 1997, but was later withdrawn. Early this year Pakistan again proposed the same due to its economic compulsions. India has proposed a technical meeting between the two countries to decide on tariffs, and peak and off-peak demands by India . India , have already formed a technical committee to look into this aspect. Pakistan said they are assessing the surplus to decide whether the surplus is of a magnitude that justifies the kind of investments needed. Pakistan also conveyed that it would soon extend a formal invitation for an Indian delegation to visit Pakistan and discuss the technical details.



Other Issues:



Another proposal from India was on measures to speed up movement of goods by rail between the two countries, and expedite the issue of visas for Indian railway staff, which was agreed to by Pakistan .



However, both countries had different views on the outcome of the talks. While Indian officials said that "good progress" after the commerce secretary-level talks between the two countries  has been made, the Pakistani foreign ministry spokesman Tariq Altaf maintained that "There are unlimited possibilities of cooperation between the two countries provided an environment of peace and security is created. Sky is the limit, but peace and security is the bottomline. Otherwise it is very difficult to carry out unfettered trade... Kashmir is the core issue. Unless there is progress on this issue, the climate (for talks) will not be conducive"



Thus there is great scope to improve bilateral trade between India and Pakistan . However the infrastructural and bureaucratic bottlenecks in importing sugar from Pakistan by India and