Trade between Pakistan and India has experienced many upheavals since
partition of Sub-Continent, and after lapse of almost 72 years; the trade
between the two countries hardly surpassed the figure of just over $2 billion
knowing the fact that both the nuclear states have the potential of annual
trade of $37 billion between them, a top official at commerce ministry told
‘The News’.
“Soon after the partition, in 1948-49, 23.6 percent of Pakistan’s global
exports went to India and 50.6 percent imports of Pakistan’s global imports
came from India, but over the years and decades on account of wars the trade
between the states went down and currently stands at just over $2 billion,”
he said.
History shows, the official said, that first trade bickering between the two
countries started when Pakistan Finance Minister Ghulam Muhammad in
October 1949 announced to remove some articles imported from India from
the exemption list for import duty and in return Indian Commerce Minister
KC Neogy told the Lok Sabha that India suspended export of coal to Pakistan
because Pakistan had deliberately detained enormous quantities of jute
purchases paid by Indian nationals. After 1965 war and then 1971 war,
bilateral trade tumbled to zero.
The official while quoting the World Bank report titled A Glass Half Full: The
promise of Regional Trade in South Asia, said that the current trade between
the two nuclear states is just $2 billion and it could touch the staggering
figure of $37 billion if the trade barriers are removed.
Prior to Pulwama incident the trade between the two neighbouring countries
stood at $2.5 billion out of which imports from India were at $1.7 billion and
exports from Pakistan were at $350 million. Following war like situation,
India imposed 200 percent customs duty on Pakistani products virtually
ending to tariff concessions under MFN status earlier extended to Pakistan.
The one sided imposition of 200 percent duty on Pakistani products also ate
up the tariff concessions earlier available under SAFTA (South Asia Free
Trade Agreement). Now Pakistan’s export to India is subject to lifting of 200
percent duty.
Soon after India imposed 200 percent duty on Pakistani products, the top
authorities in the Commerce Ministry had worked out tit-for-tat strategy.
Under the strategy it was proposed to place Indian 90 items in the negative
list under which import from India will immediately be curtailed by $500-
600 million. Ministry also proposed to ban Indian items worth $600 million
being exported to Afghanistan under transit trade agreement. But the top
leadership did not accord approval to it.
However, both countries currently have no bilateral trade agreement, rather
it was SAFTA accord signed between SAARC countries and being WTO
member, under which all countries give MFN status to each other and under
that status, India was giving to Pakistan the tariff concession which it is
giving to all trading countries. However, under WTO regime, member
countries can have bilateral agreement such as Preferential Trade Agreement
and Free Trade Agreement.
The South Asian Free Trade Area (SAFTA) is an agreement reached on
January 6, 2004, at the in Islamabad and the said agreement came into force
on January 1, 2006 creating a free trade agreement of 1.6 billion people in
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri
Lanka (as of 2018, the combined population is 2.08 billion people, about 27%
of the world''s population). India and Pakistan ratified the treaty in 2009,
whereas Afghanistan as the 8th member state of the SAARC ratified the
SAFTA protocol on 4 May 2011.
In case of Pakistan, India has withdrawn MFN status and tariff concessions
under SAFTA regime which is why export to India at the moment came to
halt. Pakistan established the negative list under which India cannot export
1209 items to Pakistan.
India granted MFN status to Pakistan in 1996, a year after the formation of
WTO. But India under Prime Minister Narendra Modi has withdrawn the
MFN treatment to Pakistan. Pakistan still hasn’t granted MFN status to
India. Pakistan argues it has no benefit of MFN status as NTBs are creating
hurdles for smooth exports of Pakistani products to Indian market.
The official said Pakistan switched over to Negative List regime for trade with
Pakistan in March 20, 2012 and to this effect an SRO (Statutory Regulatory
Order) was issued under which 1209 items were included in the Negative List
(Over 500 of which were auto, iron and steel products). Only 137 item were
importable from India. Major items included in the list of importable items
are livestock, vegetables and newsprint in rolls or sheets.
For the manufacture of pharmaceutical products, the manufacturer also
import raw material (except basic manufactured locally) and packing
material approved by the Director General Health Government of Pakistan.
Pakistan, currently, trades with India under positive list regime and imports
items through other countries which increases the cost of the items in the
local market. To a question, official said that trade with India in negative list
regime was allowed only to protect our local industry and the phasing out of
negative list had been linked with removal of Non-Tariff Barriers (NTBs) by
India ensuring the access of Pakistani products in the Indian markets. The
official said that neither India removed NTBs nor Pakistan phased out
Negative List.
Pakistan is currently exporting 74 products to India. Pakistan export in 2015-
16 stood at $312.2 million, in 2016-17, exports were at $348 million and in
2017-18 export were at $ 350 million. However, Pakistan imports 137
products through wagha. The import from India remained in 2015-16 at
$1.66 billion which slightly came down to $1.64 in 2016-17 and slightly went
up to $1.79 billion in 2017-18.
Source: Business Recorder, Pakistan Thursday, 07 March 2019