PAKISTAN AND INDIA TRADE TIES-THE UNTAPPED POTENTIAL

Abstract

Recent times have seen a renewed emphasis on improving upon the economic and commercial relations between Pakistan and India. In particular, the liberalization of trade between the two countries has become a growing issue at both regional and bilateral level meetings. The global trend of regional economic cooperation which has rapidly gained importance in the last few years has remained strong and persistent because globalization and the World Trade Order (WTO) are making such changes necessary. However, when it comes to South Asia, the situation is disappointing because intra-regional trade has remained stagnant at less than 2 percent of the total trade in the last twenty-five years. Similarly, bilateral trade between Pakistan and India, the two largest economies and trading nations in the region, is also not reflective of any remarkable progress given the history of acrimony between the two countries. This paper attempts to examine the issues concerning the move towards liberalizing trade with India and prospects for investment in Pakistan in an economic perspective. The book is structured as follows: Chapter 1 constitutes the introduction, stating an overview about the various forms and stages of regional integration. It also goes on to describe the two arguments regarding the formation and development of regional trade blocks.; Chapter 2 gives an explanation to the basic need for the two trading partners to review and enhance their trade relations. There are three key reasons why trade between India and Pakistan needs to be enhanced: First, viewed in a larger regional context, South Asia is the least integrated region and stronger economic relations between India and Pakistan is key element of regional integration in South Asia. Second, there are vast untapped trade and investment possibilities between the two countries which can be gainfully exploited with significant welfare gains for their populations. Third, as natural trading partners with a common border, trading with each other can be substantially higher as the potential is estimated to be 10 times the current level. Chapter 3 then reviews the structure of Pakistan’s trade with India through various channels. In addition, Pakistan’s trade policy with India, tariff and non-tariff trade barriers in both countries and the issue of granting the Most Favored Nation (MFN) status are discussed. Chapter 4 then elaborates opportunities and threats in some important sectors which are likely to emerge by the opening up of trade between the two countries are covered in Chapter 4. These sectors include Textiles and Clothing, Iron & Steel, Chemicals & Pharmaceuticals, Automobile, Small & Medium-sized Enterprises and Information Technology. Broad policy guidelines are spelt out in Chapter 5 for the two Governments enhancing the Indo-Pak trade. Chapter 6 finally gives the conclusion to the paper.