Misplaced fear over Pak-India trade

[Neo]

Misplaced fear over Pak-India trade​

Some misguided people have dubbed the Trade Policy 2008-09 as “India specific”. This has given rise to some one-sided articles in the national press. Conservative opinion wishes to retain the hostile status quo even though a majority of Pakistanis clearly think otherwise and support the peace process. A couple of Urdu column-writers have appeared on TV to say that it would be “dangerous” to make Pakistan “dependent” on Indian imports of crucial raw materials as long as New Delhi is conspiring against Pakistan in Afghanistan and secretly interfering in Balochistan. In this context, a reference is being made once again to the fate of the trade gap between the two countries. Indian exports to Pakistan are worth $1.8 billion while Pakistani exports to India are worth only $350 million. The reason for this is India’s restrictive tariff regime which, it says, applies to the entire world and is not Pakistan-specific. But the latest “concession” made to India in the trade policy through enlarging the list of importable items by the PPP government is bound to exacerbate the already skewed trade balance. According to the critics, this will bring Pakistan in a relationship of further “inequality” with India. With the addition of more importable items, India’s exports to Pakistan are supposed to rise to $4 billion.

The economics of the trade gap aside, the real reason for opining thus is contained in the following observation: “But who will ensure the sustainability of supply of these items from India, keeping in view the ongoing war against the militants on the western borders along which India has established more than 13 consulates in the various provinces of Afghanistan”. That this objection to a liberalised import regime with India is political rather than economic becomes more manifest when reference is made to a statement by the Interior Advisor, Mr Rehman Malik, that India is out to destabilise Pakistan by providing “financial and weaponry support” to some militants in Pakistan.

After decades of subordinating economics to politics we are now at a crossroads. The primary crisis in Pakistan is economic despite the fact that we keep distracting ourselves with other less relevant issues. The politics that has constantly overridden economics has not succeeded but it persists in our mental attitude. Arguments given above have long been refuted by circumstance; only those whose ideology was thus hurt did not care to take account of it. When the embargo was placed on imports from India under General Zia-ul Haq, the reason was political; and the economic wisdom of Dr Mahbubul Haq was defeated by a federal secretary who put forward the theorem that helping India profit from trade with Pakistan was a “betrayal of the Kashmir cause”.

The theory of not relying on Indian imports has been disproved over time, to the disappointment of the intelligence agencies. From Gen Zia’s 40 items we are now importing 1500, most of them strategic raw materials. And we have not been “let down” or become “dependent” on India in any negative way. On the basis of this experience, in fact, we would be well advised to create an “interest group” in India comprising exporters to Pakistan. (There is already a beginning of it in Punjab, Haryana, and Delhi Chamber of Commerce and Industry.) The intermeshing of economic interests is always more reliable compared to political compacts made when there is little mutual trust. On the other hand, the “profit motive” is blind to politics and endures beyond the alarums of war and finally compels states to allow peace to prevail “for profit”.

Pakistan has signed free trade area (FTA) agreements with Iran, China, Sri Lanka and Malaysia, but no increase in Pakistani exports to these countries has occurred because of the unstable situation in Pakistan. Therefore, it is hardly valid, on the basis of this “trade imbalance theory”, to block trade with India. Imports of Indian raw materials and some other items are attractive because transport costs are relatively low across the border. If the increase in Indian imports is expected to be 30 percent, it will displace the import of the same volume of more expensive imports from elsewhere. This will help Pakistan cut its manufacturing costs and reduce the level of inflation. In fact, the whole theory of trade is built on the notion of comparative advantage and there is much advantage to Pakistan in trading with India.

The irreducible objection is therefore political. Pakistan is not the only state which succumbs to fear. The fear is bilateral, and it came to the fore when India was first compelled to consider the import of Iranian gas across Pakistani territory. The bureaucracy in New Delhi was so entrenched over this fear that it got India to prepare a fleet of ships to import gas in the form of LNG instead of conceding the gas pipeline, but the “profit motive” won out in the end despite Pakistan’s more scary posture of a revisionist state vis-à-vis India. Today India has overcome its fear of Pakistan with regard to the Iranian gas pipeline. So by taking in more Indian imports — because they suit us — we may well disarm the Indian fear further and persuade it to relent in its actions in Afghanistan because it will not be “profitable” to do so any more. *

Daily Times - Leading News Resource of Pakistan

 

[niaz]

I could never understand why we could import onions from India but not petroleum products. With the trade deficit at $20-billion! It is need of the hour to have the best quality at the cheapest price. Why pay more for South African coal if we could get the same cheaper from India? ( an example only).

Reliance in loacted at Jam Nagar, virtually next door to Karachi. Their efinery is going to exapnd to 1.2-million bbls per day in 2009. I therfore welcome the new Trade Policy. Buy from whosoever sells you the quality you require at the least price. This is the only way to get best value for your money.

Regarding Kashmir: we have gotten no where by keeping Indian goods out. Dont think importing goods from India is going to make the situation any worse.

 

[AgNoStiC MuSliM]

If the increase in Indian imports is expected to be 30 percent, it will displace the import of the same volume of more expensive imports from elsewhere. This will help Pakistan cut its manufacturing costs and reduce the level of inflation. In fact, the whole theory of trade is built on the notion of comparative advantage and there is much advantage to Pakistan in trading with India.

Absolutely correct.

I used to be a strong opponent of any trade with India, and to some extent I still oppose unregulated trade, but the steps taken make sense.

 

[sunny_aus]

Absolutely correct.

I used to be a strong opponent of any trade with India, and to some extent I still oppose unregulated trade, but the steps taken make sense.

Sir business is based on only and only profit margin. there is no friendship or relationship is business. only and only profit margin matters. and if pakistan has to import something, whether petroleum, steel or manufactured products or whatever, pakistan would go for the best price/quality for the imported products, regardless its country of origin. and if there will be some savings of foreign currency, it may be used for other sectors including defence also

 

[Energon]

I used to be a strong opponent of any trade with India, and to some extent I still oppose unregulated trade, but the steps taken make sense.

What are/were your reasons for opposing unfettered trade with India?

Sir business is based on only and only profit margin. there is no friendship or relationship is business. only and only profit margin matters.

I think you're over simplyfing the issue. There is a whole lot more involved beyond just the 'bottom line' when it comes to any kind of relationship (trade or otherwise) between countries like India and Pakistan who have a turbulent past.

 

[sunny_aus]

What are/were your reasons for opposing unfettered trade with India?

I think you're over simplyfing the issue. There is a whole lot more involved beyond just the 'bottom line' when it comes to any kind of relationship (trade or otherwise) between countries like India and Pakistan who have a turbulent past.

Now days, better relationship between countries is mainly defined by trade relationship between them. I mean, how much benefits they are getting from each other. For example, no matter how much turbulent past two neighbours had before, when they start getting benefits from each others, even their own family members say “we will solve the past later first get whatever is possible from each others”. Even in close friendships or relationships, it generally gets more fun when we start getting some benefits out of it also

 

[AgNoStiC MuSliM]

What are/were your reasons for opposing unfettered trade with India?

I'm opposed to unfettered trade with India at this point due to the impact on businesses from the instability in Pakistan, possibly rendering them uncompetitive. Plus, I think that a gradual movement on trade should be part of a reciprocal process of CBM's, as the two nations move beyond 'blame game' politics, and mutual distrust is removed.

Some major changes in policy have now been made on the Pakistani side in terms of trade with India - Pakistan should wait and see what the impact of these policies is before moving towards further trade liberalization.

I think it is also important to note the atmosphere in which these changes have been made - the accusations by India of 'certain interests' sponsoring terrorism against it. The new trade policy is a good clarification of what the GoP's official position is.

 

[BATMAN]

I could never understand why we could import onions from India but not petroleum products. With the trade deficit at $20-billion! It is need of the hour to have the best quality at the cheapest price. Why pay more for South African coal if we could get the same cheaper from India? ( an example only).

Reliance in loacted at Jam Nagar, virtually next door to Karachi. Their efinery is going to exapnd to 1.2-million bbls per day in 2009. I therfore welcome the new Trade Policy. Buy from whosoever sells you the quality you require at the least price. This is the only way to get best value for your money.

Regarding Kashmir: we have gotten no where by keeping Indian goods out. Dont think importing goods from India is going to make the situation any worse.

Mr. Niaz, My view is that next door we have Iran as well and we failed to close a gas deal since last many years, than how come imports from india comes in so smoothly as compare to other countries.
Same goes with the buses and fruits as well. I rather prefer to buy Irani tomatoes and buses instead of indian.

Favortism to india is not only limited to privilege in imports (over other friendly countries), instead raw cotton will be sent and this has already resulted in increased prices in local markets which was a part of same game plan to disturb the local industry and eventually taking over their foreign clients.

With destruction of local industry we will slowly be moving towards indian dominance and our engineers will become their slaves helping india in their dream to producing indeginous products.

One reason for my view is more we buy from india more we loose the opportunity to develop trade relations with other countries, and since we have demand than why can't our rulers think to construct a refienry?
Which will not only save foreign exchange but will also creat jobs and pool of experts.

Second reason is that every penny india earns has a share to support anti Pakistan activities enabling indians to increase their defence budget. Which in turn also pressure Pakistan to look for a deterrent.

Third reason is indian products are cheap quality and does not match international standards.
Indian buses are mere junk and indians are in process of changing their out look so indian govt. came up with plan to install a new plant to replace their old buses but they need to be thrown out some where hence Zardari came up with this proposal to use Pakistan as indian junk yard.
It does not stop here next comes the spareparts for those junks and a big market at indian disposal for free.

If we buy buses from any other country than it will be difficult for Zardari to make them associates in his sole corruption bussiness but indians would love to over imvoice their junk hence rolling Zardari's stealing industry.

Fourth, I can bet if we allow indian products in Pakistan than market will be flooded with those but 80% will be smuggeled in.

Fifth, I'm personally not in favor of people to people contact with indian people. We gain nothing and they learn and earn from us.

Sixth, I'm shocked menon adressed the world media that Pakistanis are terrorists and Bashir return him next moment with trade favors!

 

[Energon]

I'm opposed to unfettered trade with India at this point due to the impact on businesses from the instability in Pakistan, possibly rendering them uncompetitive. Plus, I think that a gradual movement on trade should be part of a reciprocal process of CBM's, as the two nations move beyond 'blame game' politics, and mutual distrust is removed.

I don't think the mutual distrust will vanish any time soon (as long as the current crop of politicians are in power) but cross investments are the only thing according to me that will ensure stability because potential economic loss will be the biggest deterrent.

As far as competition is concerned, the Indian model has shown that keeping the economy closed is far more harmful to local industry than anything else. IMO with competition from India, the Pakistani industrial establishment will be a lot more hard pressed to rise up.

 

[Neo]

CBM's and trade go hand in hand, this is a golden opportunity for both countries to look beyond political indifferences and to enhance trade facilities since it will benefit both of them.

We may not like the idea but India will dominate regional market, the sooner we accept this and step into joint efforts to create a comon market the better it would be for our local industry.
Yes, some will lose but most will gain.

 

[Neo]

China and USA are adversaries in political and defence arena, yet mutually largest trade partners.

Why can't we delink trade from politics and move on with free trade???

 

[indiapakistanfriendship]

With destruction of local industry we will slowly be moving towards indian dominance and our engineers will become their slaves helping india in their dream to producing indeginous products.

Bollocks India already has a large pool of engineering graduates and students that graduate from engineering institutions, so don't even start off with human resources especially in engineering division, you don't even compare to some states in India that produce more engineering grads annually than you can imagine.

Infact on the contrary more jobs from Indian firms in Pakistan will mean more jobs, translating to increased demand for education which will lead to more private investments in engineering education.

One reason for my view is more we buy from india more we loose the opportunity to develop trade relations with other countries, and since we have demand than why can't our rulers think to construct a refienry?
Which will not only save foreign exchange but will also creat jobs and pool of experts.

Fifty to sixty odd years, what prevented you from doing this?

Second reason is that every penny india earns has a share to support anti Pakistan activities enabling indians to increase their defence budget. Which in turn also pressure Pakistan to look for a deterrent.

Nowhere close in creating such an impact and incase you worry too much, we already have a huge gap in defence spending between the two nations.

Third reason is indian products are cheap quality and does not match international standards.

Major Indian manufacturing firms and engineering firms follow TQM, six sigma and CMM standards.

A Tata or Ashok Leyland AC bus with automatic doors and GPS navigations system costs around 20 lakhs while Volvo costs around 90 lakhs. Yuo can choose whichever you want.

Indian buses are mere junk and indians are in process of changing their out look so indian govt. came up with plan to install a new plant to replace their old buses but they need to be thrown out some where hence Zardari came up with this proposal to use Pakistan as indian junk yard.

What are you saying?

It does not stop here next comes the spareparts for those junks and a big market at indian disposal for free.

It is as simple as Indian manufacturers enjoying from low cost machinery from China. If we can enjoy the benifits from low cost machinery why can't Paskiatani manufacturing firms which can use savings for expansions.

If we buy buses from any other country than it will be difficult for Zardari to make them associates in his sole corruption bussiness but indians would love to over imvoice their junk hence rolling Zardari's stealing industry.

Like Zardari was the only human being in Pakistan who was corrupt in its entire history. Welcome to South Asia.

Fourth, I can bet if we allow indian products in Pakistan than market will be flooded with those but 80% will be smuggeled in.

Then Beef up you anti smugglig activities. Also you under estimate the enormous impact of black market goods and its stimulus to economy. Today Millions of Indians own their computers and PC's thaks to black market vendors.

Fifth, I'm personally not in favor of people to people contact with indian people. We gain nothing and they learn and earn from us.

Point me one thing we can learn from you .. Just one thing.

Sixth, I'm shocked menon adressed the world media that Pakistanis are terrorists and Bashir return him next moment with trade favors!

So America and China never accused each other?

 

[niaz]

Hon BATMAN,

I am in total agreement with you on this. IMO, there is a lobby in Pakistan which distrusts Iranians because they are Shias. I can quote the following to prove this point.

During the hey days of RCD, when Shah was all powerful (early to mid 60’s). At that time Iran was having difficulty selling the heavy crude produce from Naurooz and Saroosh offshore fields. Shah allegedly offered to build a refinery n Pakistan provided Pakistan signs a 20 year agreement that they buy crude from these fields. An ex DG Oil told me that Shah was willing to make an exception and even give Pakistan a small equity. The offer was however declined.

This happened during Ayub Khan's time, fear was that there had to be an ulterior motive behind this move and with direct investment by Iran, Shia influence would grow disproportionately. (GM of Shell Pakistan in the late 70’s. with whom I used to play Bridge confirmed this).

After the revolution, our relations with Iran worsened and nosedived when it was feared that Pakistan would go to war with Iran if Iran attacked Taliban after the Mazar Sharif massacre by the Taliban. Nevertheless there has always been a thriving trade in smuggled goods. Petroleum products from Iran have always found their way into retails outlets along the Koh Taftan road. Additionally, main consumption and production centres of Pakistan and Iran are a long way from the Iran/Pakistan border.

A far more important reason is that whether we like it or not; we have a lot more in common with the north Indians and we also speak the same language.

 

[AgNoStiC MuSliM]

Energon,

I was actually going to suggest that one factor that makes me supportive of increasing trade and investment between India and Pakistan is the fact that economic benefits tied in the other nation makes it far harder to support policies of destabilization - you beat me to it.

Batman,

Other than the possible CNG buses, I don't think there is going to be any 'mandatory' redirection of trade towards India. What has been done is that four billion dollars worth of products that we import from elsewhere, are now also importable from India.

Businesses will still have to make the decision of who they want to buy from, and if buying from India makes sense from a quality/cost perspective, it is the choice of the individual business, but that doesn't mean that all four billion is guaranteed to go to India.

If the products imported from India are poor quality, India's reputation suffers and they do not get any repeat business. Private businesses at least will import products from whoever offers better cost/quality mix, per their requirements - its about the bottom line for them, not CBM's.

On the ten thousand CNG buses plan - I think this should be opened to international bidding, and RFP's issued, rather than just settling on an Indian or Iranian company. The original plan is approximately ten thousand buses, so it is conceivable that in the long run this will turn into tens of thousands of buses, with the associated expenses of spares, maintenance etc.

Bids should be evaluated for domestic offsets as well, not just price, especially in terms of the local auto part vendors and manufacturing facilities. If the Indians submit the best proposal then sure why not?

 

[Vinod2070]

Guys, do understand that you are doing no favour to India by trading with them and vice versa. Trade is one game where both parties win.

I do want that Indian bus exporters export to Pakistan on one condition: all those who are opposing the bus imports from India are not allowed to board the buses!