The dialogue between the two Secretaries of Commerce concluded on November 15 on a happy note that the Government of Pakistan will reduce the negative list, and it is likely to be phased out by the end of 2012. This is a move in the right direction to pave the way for full MFN status to India.

This decision of the Government of Pakistan has been warmly welcomed by the representatives of trade and industry; they strongly believe that this move, being demanded by the business communities of both countries, will not only help in enhancing the low trade volume between the two countries, but would also open up new avenues for various sectors of Pakistan's economy, particularly the textiles sector.

Non-tariff barriers

Trade between the two countries remains largely restricted due to the fact that there have been high non-tariff barriers, which have restricted imports from Pakistan. However, the latest composite dialogue between the two countries seems to provide a glimmer of hope, as India gave assurances that it would effectively deal with non-tariff barriers being faced by Pakistani businessmen. The moves being considered by India include liberalisation of the visa regime, addressing logistics constraints, simplifying trade procedures, removing quotas and specific duties, among other bottlenecks. Regarding non-tariff barriers, it was India's view that these were not just for Pakistan; even so, if they were acting as a stumbling block in the smooth flow of trade between the two countries, they could be resolved by joint meetings.

India also needs to take steps against anti-smuggling measures, whereby Indian products are smuggled into the Pakistani market. Converting informal trade to formal trade therefore remains the key in this regard.

Another positive outcome of the recent round of meetings between the Commerce Ministers of both countries was India's decision to withdraw its objections to the EU unilateral trade concession offered to Pakistan last year, in the wake of the devastating floods. EU offered Pakistan specific tariff concessions in the form of autonomous trade preferences, under which 75 Pakistani products, mainly textile-related products, would benefit from duty-free access to European markets.

ONUS ON PAKISTAN

In order to derive full benefit from the slew of developments, the Pakistani business community, particularly the textiles sector, must get ready for enhanced exports to India and the European Union. In this regard, experts strongly believe that the textile sector must focus on enhancing production, improving quality of goods, and value addition, while the government should facilitate them by ensuring availability of adequate infrastructure.

We need to effectively develop modern infrastructure and manage state-of-the-art industrial zones in the textile sector, thereby greatly enhancing Pakistan's earnings potential, employment opportunities and skill development.

The total trade between India and Pakistan has the potential to increase to $42 billion from the current levels of $ 2.1 billion, if certain roadblocks are sincerely addressed. Besides granting MFN status to each other, both countries must also focus on improving the transport linkages that remain relatively poor and raise the cost of trade. These include railway and road connections which remain inadequate, along with sea shipment that is mainly constrained by bureaucratic inertia, red tape and political opposition.

Furthermore, visa constraints and regulations on modes of payments and cumbersome customs procedures further limit the scope of trade. Pakistan accounts for less than 0.5 per cent of India's trade, while India accounts for a little more than 1 per cent of Pakistan's total trade. The relationship between Pakistan and India has remained fragile during the years, however, and it needs to be understood that there is a great potential for trade between the neighbouring states.

Trade growth between India and Pakistan will also add to growth of the manufacturing sector in both countries, and shouldn't be seen as a limiting factor or threat by the manufacturing sectors in India and Pakistan. Imagine the possibilities with a market of almost 1.4 billion people! Trade should be opened up, and the time is right to seize this opportunity for the prosperity and well-being of one-sixth of the global population.

(The author is industrialist and Chairman, Pakistan Garments City.)

Related Topics