Non-discriminatory market access: Pakistan, India all but sign trade normalisation deal

[Devil Soul]

Non-discriminatory market access: Pakistan, India all but sign trade normalisation deal
By Shahbaz Rana
Published: March 15, 2014

ISLAMABAD:
Pakistan and India are very close to clinching a deal on complete trade normalisation after New Delhi accepted Islamabad’s demand to remove textile products from its prohibitive list, an aide to Prime Minister Nawaz Sharif told The Express Tribune on Friday.

Both sides have reached a broader understanding on how to move forward on the issue of liberalising bilateral trade and overcome associated obstacles, said Miftah Ismail, special assistant to the prime minister and chairman of the Board of Investment.

Ismail is the first senior government official to speak at length about Pakistan-India trade talks, which have so far been held behind closed doors. He said both sides would simultaneously announce Non-Discriminatory Market Access on Reciprocal Basis (NDMARB) status for each other.

NDMARB was coined after the term Most-Favoured Nation (MFN) became controversial. The new term will grant India the same benefits as envisaged under MFN.

A special government panel chaired by Finance Minister Ishaq Dar has already decided to ask the federal cabinet to approve a fresh roadmap for granting NDMARB to India. A summary will be moved to the cabinet shortly and it is expected that both sides will notify changes by March 31, according to finance ministry officials.

According to Ismail, Pakistan will abolish the Negative List of 1,209 items which cannot be imported from India under the NDMARB agreement. Pakistan, in 2012, took a giant step by replacing the Positive List of 1,946 items, which could be imported from India, with the Negative List.

On the other hand, Ismail said that despite India’s claims that it had granted MFN status to Pakistan in 1996, New Delhi has so far not allowed Pakistan free market access. “There are restrictions on investment from and in Pakistan, for instance,” he said. “Until these restrictions are there, India cannot claim it has given Pakistan MFN status.”

Some of the items currently protected under the Negative List would subsequently be protected under the Sensitive List maintained under the South Asia Free Trade Agreement (SAFTA), Ismail said. According to him, automobiles and pharmaceuticals are two sectors which will be protected under the SAFTA Sensitive List, neutralising two lobbies against NDMARB status for India.

“As a nation we have sacrificed a lot while setting up the auto industry and we will protect it,” he said.

Meanwhile, India has accepted Pakistan’s demand to exclude 160 items – mainly textile products – from its Pakistan-specific Sensitive List, Ismail told The Express Tribune. India, he said, will also bring down the list from 614 items to 100 items.

As a first step towards NDMARB, Pakistan will allow India to import all goods through the Wagah-Attari border, Ismail said. The border would also remain open 24 hours a day, he added. According to him, the containerised movement of goods across the border will replace current labour-intensive practices.

Ismail said Pakistan has not compromised on anything while deciding to liberalise the trade regime with India. He said if India tried to create obstacles in the way of Pakistani goods, Islamabad would respond with the same intensity.

“Trade normalisation will triple the volume of Pakistani exports to India immediately,” Ismail said. He added that imports from India will substitute expensive machinery imports from Europe and West.

“In the end, it will be the consumers who will benefit from trade normalisation.”

Published in The Express Tribune, March 15th, 2014.

 

[PakPrinciples]

Now they're calling MFN an NDMA.

Pakistani's must fight this whether it's military or civilian this deal must not be allowed to go through and stopped at all costs.

Pakistan should not have any Free trade, NDMA or MFN agreements with any country let alone India.

I've already written a response on this matter outlining how badly this will affect Pakistan's economy which people can reference via the following links which also counters the argument regarding the value in our increase in exports:

Military blocking Pak-India trade deal: Shahbaz | Page 2
Military blocking Pak-India trade deal: Shahbaz | Page 2

Nawaz Shariff is a complete and utter failure. Instead of concentrating on raising Pakistan's tax to GDP ratio and investing in domestic industries this fat slob is offering NDMA/MFN to India a country that occupies our province of Kashmir continuing it's reign of terror as it slaughters our people on top of the thousands they've killed in three wars.

I've said this once and I'll say it again Pakistan needs to get rid of civilian politicians and parties.

 

[That Guy]

Good, this will give Pakistani exporters a huge market to send their products and increase Pakistan's overall revenue. Those that say this is a bad idea don't actually understand economics and make straw man arguments.

Pakistan's economy will grow this way, instead of importing from all the way in EU or NA, Pakistan can get products (such a heavy machinery) from it's neighbor at a much reduced cost. This will help Pakistan's local industry grow in size and scale. Once that happens, Pakistan will have enough money to start investing in R&D.

People who claim that the US doesn't trade with Iran and N.K and it gets along fine, fail to understand that the US controls the world market, so it doesn't need to trade with them. On the other hand, because Iran and NK have gotten on the US's bad side, their economy has suffered as a result. Also, the US's history needs to be taken into account. The US didn't start out like it is today, it relied heavily on trade and investment from foreign nations to grow it's economy. This resulted in the US becoming an economic hub of the world, and that is the reason why the US controls the world economy today. Every nation has a stake in the US, and because other nations invested in the US, the nation had enough money to grow it's industrial base and become an economic powerhouse.

Look at Germany and China today, they're also doing what the US did, even India relies on foreign investment to grow it's economy.

Over all, Indian investment in Pakistan is a good thing for the Pakistani economy, likewise, Pakistani investment is good for the Indian economy. The large markets that open up to both nations insures that Pakistan's and India's economies will only grow from here.

 

[Robinhood Pandey]

Over all, Indian investment in Pakistan is a good thing for the Pakistani economy, likewise, Pakistani investment is good for the Indian economy. The large markets that open up to both nations insures that Pakistan's and India's economies will only grow from here.

Sir,

i don't know why people overlook the positive aspects of this agreement , or they keep their personal ego above the national interest. .

the other day i was watching an old video where the analyst highlighted few of the points like

* urea costs 2-3 times cheaper in India as compared to pakistan . . so the Farmers in Pakistan can be a direct beneficiaries of this thing.

* cement rates are comparatively lower in Pakistan , so a good thing for Indians as poor families will be the direct beneficiaries.

* this will increase a sense of competition between the companies to capture the market. so rates will go down for so many things.

*Apart from that Some of the Indian products enter into Pakistani Market via Middle east and the end users pay twice or triple of the actual amount( shipping charges and other stuff ). that thing also be prevented/ reduced.

* most Important thing will be a bigger market and the similarities, thus providing more opportunities for the newcomers.

 

[Contrarian]

According to him, automobiles and pharmaceuticals are two sectors which will be protected under the SAFTA Sensitive List, neutralising two lobbies against NDMARB status for India.

“As a nation we have sacrificed a lot while setting up the auto industry and we will protect it,” he said.

Meanwhile, India has accepted Pakistan’s demand to exclude 160 items – mainly textile products – from its Pakistan-specific Sensitive List, Ismail told The Express Tribune. India, he said, will also bring down the list from 614 items to 100 items.

While I am a strong proponent of NDMA between Pakistan and India, and support increased trade 100%.
This deal seems to be ridiculously rushed from the GoI's side.

India has removed textile products from the Sensitive List for Pakistan. Textiles are Pakistan's greatest competitive advantage and are a source of huge employement in India itself.

On the other hand, under this deal, Pakistan gets to keep Automobiles and Pharmaceuticals in the Sensitive List to protect their industry. Automobiles and Pharmaceuticals are amongst India's greatest competitive advantages.

This does not bode well at all for India or sound like a fair deal. It seems as if we are incentivizing Pakistan to do something that it must do already under the IMF"s loan conditions - ie open up trade with India.

Manmohan Singh seems to be rushing in to this deal to leave behind a 'legacy' like he wanted to wrap up the Siachen and convert it to a 'mountain of peace'. He holds an extremely soft spot for Pakistan and wants a change. However..

Morally - Any trade deal must be left for the new Govt of India to be formed after elections as elections are less than 30 days away.

This does not seem right.

 

[Robinhood Pandey]

While I am a strong proponent of NDMA between Pakistan and India, and support increased trade 100%.
This deal seems to be ridiculously rushed from the GoI's side.

India has removed textile products from the Sensitive List for Pakistan. Textiles are Pakistan's greatest competitive advantage and are a source of huge employement in India itself.

On the other hand, under this deal, Pakistan gets to keep Automobiles and Pharmaceuticals in the Sensitive List to protect their industry. Automobiles and Pharmaceuticals are amongst India's greatest competitive advantages.

This does not bode well at all for India or sound like a fair deal. It seems as if we are incentivizing Pakistan to do something that it must do already under the IMF"s loan conditions - ie open up trade with India.

Manmohan Singh seems to be rushing in to this deal to leave behind a 'legacy' like he wanted to wrap up the Siachen and convert it to a 'mountain of peace'.

Morally - Any trade deal must be left for the new Govt of India to be formed after elections as elections are less than 30 days away.

This does not seem right.

Ok, After reading this, i'm feeling like i'm a complete idiot, Seriously

 

[guluchulo]

Now they're calling MFN an NDMA.

Pakistani's must fight this whether it's military or civilian this deal must not be allowed to go through and stopped at all costs.

Pakistan should not have any Free trade, NDMA or MFN agreements with any country let alone India.

I've already written a response on this matter outlining how badly this will affect Pakistan's economy which people can reference via the following links which also counters the argument regarding the value in our increase in exports:

Military blocking Pak-India trade deal: Shahbaz | Page 2
Military blocking Pak-India trade deal: Shahbaz | Page 2

Nawaz Shariff is a complete and utter failure. Instead of concentrating on raising Pakistan's tax to GDP ratio and investing in domestic industries this fat slob is offering NDMA/MFN to India a country that occupies our province of Kashmir continuing it's reign of terror as it slaughters our people on top of the thousands they've killed in three wars.

I've said this once and I'll say it again Pakistan needs to get rid of civilian politicians and parties.

From the article it seem fair deal, auto and pharmaceutical industry will be protected. As long as trade balance stay in balance then its ok.

 

[PakPrinciples]

Good, this will give Pakistani exporters a huge market to send their products and increase Pakistan's overall revenue. Those that say this is a bad idea don't actually understand economics and make straw man arguments.

You've referenced nothing in support of your argument in fact you're just parroting the nonsense quoted by fools in that article. Please do not be drawn in by their lies for the sake of Pakistan and it's peoples.

Ha-Joon Chang is possibly the world's foremost development economist today and has written a number of great books such as "Kicking Away the Ladder: Development Strategy in Historical Perspective" and "Bad Samaritans". I am going to advise you to go read his books first before you continue to push this neoliberal nonsense.

What you're seeing is a larger market but you're completely ignoring a host of other factors that will negatively impact trade for Pakistan:

1. India's businesses are much larger because of an economy of scale. Over the years India's businesses have developed to service a much larger domestic economy so they're buying more raw material at cheaper rates which allows them to produce cheaper value added products. How do you propose Pakistani businesses will be able to compete? The moment you drop tariffs and duties those larger business start dumping cheaper value added products into Pakistan's market resulting in an even larger trade deficit. Even without the tariffs and duties dropped trade currently favors India so what makes anyone stupid enough to think that this will change after the tariffs and duties are removed? Our businesses will only begin to outgrow India's when the government increasingly invests in our own industries and provides them with subsidies which they've continually failed to do under civilian governments.
   
   
2. Unlike India Pakistan is undergoing an energy crisis and businesses pay more for electricity which means each of Pakistan's businesses are now operating below capacity (which adds to our problems) which makes doing business even more expensive and uncompetitive all the more reason they need to be protected until the government resolves the energy crisis which requires it to raise tax revenue.
   
   
3. India provides massive subsidies to it's industries (ex. their agricultural industry get's four times the subsidies that Pakistan's agricultural industry does) this would kill Pakistan's agricultural industry (which employs almost 50% of the population and generates almost a 25% of the GDP).

Pakistan is not in a stage of economic development that it can give anyone NDMA/MFN or Free Trade and particularly not with a country like India which occupies Pakistani territory. We've already got a huge trade deficit with China you'd have to be an idiot to create one with India.

Let's be clear virtually every single major economy on the planet today developed under duties, tariffs and taxes that protected local industry from foreign competition. In fact the very country that controls the IMF (i.e. The United States) was in fact the most protectionist countries on the planet.

Here is an example citing Britain and France:

Here is an example of the US (one of the most protectionist countries on the planet):

Here is an example from Canada:

As those economies industrialized and eventually lowered trade barriers that protected local industries they would increase subsidies meant to protect local industries at the same time (ex. Japan during the Meiji restoration period). However, any time they under went a major economic catastrophe (ex. great depression in 1930) most reimposed trade barriers to protect local industries.

Pakistan needs duties, tariff and taxes to protect local industries.

On top of these protections the country needs tax revenue for investment into domestic industry.

The IMF is demanding Pakistan import electricity from India and grant it MFN status. It's conditions are literally eating away at Pakistan's sovereignty and its demands will hurt the country just like the group messed up in Greece and many other countries particularly in Africa in conjunction with the World Bank pushing for trade agreements that bolstered western economies at the cost of African economies. Pakistan doesn't need these loans but, like Zardari, Shariff is refusing to raise the tax to GDP ratio not just by increasing VAT collection efficiency but getting Pakistani's to file and pay their personal income tax which generally accounts for the bulk of developed nations tax revenues. Pakistan does not need these loans and I guarantee you that all this is going to do is bring more war to Pakistan on top of economic ruin.

Pakistan can easily triple it's GDP ever three years without a shred of trade with India.

Pakistan's economy will grow this way, instead of importing from all the way in EU or NA, Pakistan can get products (such a heavy machinery) from it's neighbor at a much reduced cost. This will help Pakistan's local industry grow in size and scale. Once that happens, Pakistan will have enough money to start investing in R&D.

How did you come to this conclusion?

For starters we already get heavy machinery and capital equipment from China which produces better quality goods at cheaper rates so why do we need India? China manufactures most of the parts and even entire machines for a lot of the worlds largest heavy machinery and capital equipment manufacturers (ex. Caterpillar - Caterpillar: China Facilities).

WTF does the EU or the West even come into the equation? This demonstrates how utterly retarded the government is and how completely gullible people are for believing them.

Pakistan's own Bureau of Statistics confirms that the total share of our imports from the EU was a measly 0.9%, Britain was 1.39% and the US was 3.94% in total that amounts to about $934 million. In the case of the US only about a quarter of it's total exports to Pakistan in 2011 was machinery the rest was cotton, veggie oil (most of which we import from Malaysia and Indonesia in the form of palm oil since it's the cheapest), arms/ammo and aircraft (most likely Boeing jets for the PIA) none of which we need from India nor could provide an adequate substitute (otherwise we'd have gotten it from China).
Pakistan | Office of the United States Trade Representative
http://www.pbs.gov.pk/sites/default/files/tables/14.7_0.pdf

Furthermore, don't you think it would be better for the government to raise tax revenue to invest in heavy industry?

There is no money for R&D even if Pakistan got the products it imports from the US, EU and UK for free since the country is running large fiscal deficits which accrue interest every year resulting in year on year increases in debt liabilities (16% in 2012, 11.5% in 2013, about 13.5% as of Q2 2014).
Annual Report 2010-2011 - State Bank of Pakistan - The Central Bank

Aside from some military related R&D to better Pakistan's defensive capabilities Pakistan should instead copy and manufacture less expensive versions of established product lines for export and to meet import requirements. Once the economy starts growing 9+% a year the country can increasingly put more money into R&D to help resolve other problems.

Look at Germany and China today, they're also doing what the US did, even India relies on foreign investment to grow it's economy.

FDI actually accounts for a very small percentage of overall investment in any country and is extremely unstable/unreliable.

Most investment within a countries economy will come from internal sources.

Take China for example which, according to the World Bank, had a gross capital formation of 49% of GDP in 2012. FDI inflows accounted for just 6% of total overall investment but when you subtract outflows from that then FDI only accounts for about 3.5% of investment within the country. The vast majority of what's being invested into the economy, particularly long term, comes from the government or domestic Chinese businesses/companies.

Pakistan's economic problems have nothing to do with the lack of cross border trade with India or FDI.

Pakistan's biggest problem is tax collection. Without collecting taxes the government accrues more and more debt on a year to year basis which it has to pay interest on (debt grew 16% in 2012, 11% in 2013 and set to grow 13+% in 2014) with more than 6% of the GDP (over half the budget) basically going towards debt servicing. What that has lead to is the government lacking the money needed to invest in projects that are absolutely necessary for continued economic growth (our capital gains formation has never exceeded 22.5% of GDP when it should be approaching 40% of GDP and routinely plummets every time the nation reverts back to civilian rule).

Thus, with deficits and the requirement to borrow money because the government can't collect the necessary tax revenue whether it's due to a lack of will or complete corruption on their part the country is forced to abide by terms of the IMF, ADB and World Bank all of whom are placing conditions that force Pakistan to relinquish sovereignty and pursue more costly alternatives to what we originally proposed/needed (ex. we wanted to build coal plants that used 100% local core but they refused to fund them, we asked for money to utilize our large lignite reserves but they refused to fund them, etc...)

People who claim that the US doesn't trade with Iran and N.K and it gets along fine, fail to understand that the US controls the world market, so it doesn't need to trade with them. On the other hand, because Iran and NK have gotten on the US's bad side, their economy has suffered as a result.

N. Korea and Iran's problems have little to do with trade unilateral US sanctions.

I gave that specific example to illustrate that the US doesn't need trade with every country in fact no one does and in the case of Pakistan considering India occupies our territory of Kashmir and slaughters our citizens it is imperative that we impose a complete trade block. India is a threat and an enemy that needs to be eliminated not assisted. Iran has done pretty well for itself without trade with the US in fact it could have done better

Would you do business with someone who murdered your brother in cold blood and assaults your mother and occupies your home?

Iran's issues centre around it's failure to raise tax revenue to invest in industry to diversify it's economy and replace imports to reduce the impact sanctions on petroleum product exports have on overall growth. Instead the government has been handing out billions in oil/gas subsidies for years while keep taxes low.

In the case of N. Korea it has to do with the countries leadership and culture that has been built up particularly during the reign of Kim Jong-il. What people may not know is that North Korea is possibly the Saudi Arabia of rare earth metals and estimates suggest 2/3 of all rare earth metals on the planet may be located there. That essentially means the country is worth Trillions but in all this time no one in the government has ever attempted to mine the minerals or hire outsiders, like Japan (which is desperate for them), to mine them and this is related to the necessity for state secrecy to ensure Kim Jon-il's and now Kim Jong-un's rule.

The US can do very little to actually stop others from trading with each other lest it locks itself out of foreign markets and hurts its own economy.

From the article it seem fair deal, auto and pharmaceutical industry will be protected. As long as trade balance stay in balance then its ok.

Read my posts to “The Guy” above.

However, just as a quick side note, the balance of trade is already highly skewed in India's favour so what makes anyone think that things are going to change? In fact the touted increase in exports some are referring to was all raw material goods. Ha-Joon Chang covers this in his books citing that economies which export raw materials remain poor or hamper their own growth while those countries that import those raw materials and export value added products see significant improvement in economic performance and standards of living.

We have a massive trade imbalance with China following our Free Trade agreement giving MFN to India is going to make things worse. Pakistan needs protection for its industries along with investments to help them grow.

To be frank from what I've read all they've really done is just stopped using the name MFN and instead call it NDMA instead. I haven't read of any real protections for the auto or pharma industries but aside from killing any hopes of further developing our heavy industry sector I haven't heard of any protections for the agricultural sector that employs about 50% of the population and generates about 25% of the GDP.

As I covered in my post above the reason Nawaz is pushing for MFN/NDMA is because he's completely refusing to do his job when it comes to collecting taxes so he's resorting IMF loans that are forcing these conditions on the country along with demanding the country import electricity from India. As I've stated before none of the major industries (auto, pharma, agriculture, etc...) actually wants MFN/NDMA for India.

I am telling you guys not to listen to the West. The IMF/World Bank fucked up Greece, they're responsible for the giving poor advice and pushing bad trade deals that are responsible for the debt problems in Africa, etc...

This agreement is going to bring poverty and war to Pakistan.

 

[That Guy]

You've referenced nothing in support of your argument in fact you're just parroting the nonsense quoted by fools in that article. Please do not be drawn in by their lies for the sake of Pakistan and it's peoples.

Ha-Joon Chang is possibly the world's foremost development economist today and has written a number of great books such as "Kicking Away the Ladder: Development Strategy in Historical Perspective" and "Bad Samaritans". I am going to advise you to go read his books first before you continue to push this neoliberal nonsense.

What you're seeing is a larger market but you're completely ignoring a host of other factors that will negatively impact trade for Pakistan:

1. India's businesses are much larger because of an economy of scale. Over the years India's businesses have developed to service a much larger domestic economy so they're buying more raw material at cheaper rates which allows them to produce cheaper value added products. How do you propose Pakistani businesses will be able to compete? The moment you drop tariffs and duties those larger business start dumping cheaper value added products into Pakistan's market resulting in an even larger trade deficit. Even without the tariffs and duties dropped trade currently favors India so what makes anyone stupid enough to think that this will change after the tariffs and duties are removed? Our businesses will only begin to outgrow India's when the government increasingly invests in our own industries and provides them with subsidies which they've continually failed to do under civilian governments.
   
   
2. Unlike India Pakistan is undergoing an energy crisis and businesses pay more for electricity which means each of Pakistan's businesses are now operating below capacity (which adds to our problems) which makes doing business even more expensive and uncompetitive all the more reason they need to be protected until the government resolves the energy crisis which requires it to raise tax revenue.
   
   
3. India provides massive subsidies to it's industries (ex. their agricultural industry get's four times the subsidies that Pakistan's agricultural industry does) this would kill Pakistan's agricultural industry (which employs almost 50% of the population and generates almost a 25% of the GDP).

Pakistan is not in a stage of economic development that it can give anyone NDMA/MFN or Free Trade and particularly not with a country like India which occupies Pakistani territory. We've already got a huge trade deficit with China you'd have to be an idiot to create one with India.

Let's be clear virtually every single major economy on the planet today developed under duties, tariffs and taxes that protected local industry from foreign competition. In fact the very country that controls the IMF (i.e. The United States) was in fact the most protectionist countries on the planet.

Here is an example citing Britain and France:

Here is an example of the US (one of the most protectionist countries on the planet):

Here is an example from Canada:

As those economies industrialized and eventually lowered trade barriers that protected local industries they would increase subsidies meant to protect local industries at the same time (ex. Japan during the Meiji restoration period). However, any time they under went a major economic catastrophe (ex. great depression in 1930) most reimposed trade barriers to protect local industries.

Pakistan needs duties, tariff and taxes to protect local industries.

On top of these protections the country needs tax revenue for investment into domestic industry.

The IMF is demanding Pakistan import electricity from India and grant it MFN status. It's conditions are literally eating away at Pakistan's sovereignty and its demands will hurt the country just like the group messed up in Greece and many other countries particularly in Africa in conjunction with the World Bank pushing for trade agreements that bolstered western economies at the cost of African economies. Pakistan doesn't need these loans but, like Zardari, Shariff is refusing to raise the tax to GDP ratio not just by increasing VAT collection efficiency but getting Pakistani's to file and pay their personal income tax which generally accounts for the bulk of developed nations tax revenues. Pakistan does not need these loans and I guarantee you that all this is going to do is bring more war to Pakistan on top of economic ruin.

Pakistan can easily triple it's GDP ever three years without a shred of trade with India.



How did you come to this conclusion?

For starters we already get heavy machinery and capital equipment from China which produces better quality goods at cheaper rates so why do we need India? China manufactures most of the parts and even entire machines for a lot of the worlds largest heavy machinery and capital equipment manufacturers (ex. Caterpillar - Caterpillar: China Facilities).

WTF does the EU or the West even come into the equation? This demonstrates how utterly retarded the government is and how completely gullible people are for believing them.

Pakistan's own Bureau of Statistics confirms that the total share of our imports from the EU was a measly 0.9%, Britain was 1.39% and the US was 3.94% in total that amounts to about $934 million. In the case of the US only about a quarter of it's total exports to Pakistan in 2011 was machinery the rest was cotton, veggie oil (most of which we import from Malaysia and Indonesia in the form of palm oil since it's the cheapest), arms/ammo and aircraft (most likely Boeing jets for the PIA) none of which we need from India nor could provide an adequate substitute (otherwise we'd have gotten it from China).
Pakistan | Office of the United States Trade Representative
http://www.pbs.gov.pk/sites/default/files/tables/14.7_0.pdf

Furthermore, don't you think it would be better for the government to raise tax revenue to invest in heavy industry?

There is no money for R&D even if Pakistan got the products it imports from the US, EU and UK for free since the country is running large fiscal deficits which accrue interest every year resulting in year on year increases in debt liabilities (16% in 2012, 11.5% in 2013, about 13.5% as of Q2 2014).
Annual Report 2010-2011 - State Bank of Pakistan - The Central Bank

Aside from some military related R&D to better Pakistan's defensive capabilities Pakistan should instead copy and manufacture less expensive versions of established product lines for export and to meet import requirements. Once the economy starts growing 9+% a year the country can increasingly put more money into R&D to help resolve other problems.



FDI actually accounts for a very small percentage of overall investment in any country and is extremely unstable/unreliable.

Most investment within a countries economy will come from internal sources.

Take China for example which, according to the World Bank, had a gross capital formation of 49% of GDP in 2012. FDI inflows accounted for just 6% of total overall investment but when you subtract outflows from that then FDI only accounts for about 3.5% of investment within the country. The vast majority of what's being invested into the economy, particularly long term, comes from the government or domestic Chinese businesses/companies.

Pakistan's economic problems have nothing to do with the lack of cross border trade with India or FDI.

Pakistan's biggest problem is tax collection. Without collecting taxes the government accrues more and more debt on a year to year basis which it has to pay interest on (debt grew 16% in 2012, 11% in 2013 and set to grow 13+% in 2014) with more than 6% of the GDP (over half the budget) basically going towards debt servicing. What that has lead to is the government lacking the money needed to invest in projects that are absolutely necessary for continued economic growth (our capital gains formation has never exceeded 22.5% of GDP when it should be approaching 40% of GDP and routinely plummets every time the nation reverts back to civilian rule).

Thus, with deficits and the requirement to borrow money because the government can't collect the necessary tax revenue whether it's due to a lack of will or complete corruption on their part the country is forced to abide by terms of the IMF, ADB and World Bank all of whom are placing conditions that force Pakistan to relinquish sovereignty and pursue more costly alternatives to what we originally proposed/needed (ex. we wanted to build coal plants that used 100% local core but they refused to fund them, we asked for money to utilize our large lignite reserves but they refused to fund them, etc...)



N. Korea and Iran's problems have little to do with trade unilateral US sanctions.

I gave that specific example to illustrate that the US doesn't need trade with every country in fact no one does and in the case of Pakistan considering India occupies our territory of Kashmir and slaughters our citizens it is imperative that we impose a complete trade block. India is a threat and an enemy that needs to be eliminated not assisted. Iran has done pretty well for itself without trade with the US in fact it could have done better

Would you do business with someone who murdered your brother in cold blood and assaults your mother and occupies your home?

Iran's issues centre around it's failure to raise tax revenue to invest in industry to diversify it's economy and replace imports to reduce the impact sanctions on petroleum product exports have on overall growth. Instead the government has been handing out billions in oil/gas subsidies for years while keep taxes low.

In the case of N. Korea it has to do with the countries leadership and culture that has been built up particularly during the reign of Kim Jong-il. What people may not know is that North Korea is possibly the Saudi Arabia of rare earth metals and estimates suggest 2/3 of all rare earth metals on the planet may be located there. That essentially means the country is worth Trillions but in all this time no one in the government has ever attempted to mine the minerals or hire outsiders, like Japan (which is desperate for them), to mine them and this is related to the necessity for state secrecy to ensure Kim Jon-il's and now Kim Jong-un's rule.

The US can do very little to actually stop others from trading with each other lest it locks itself out of foreign markets and hurts its own economy.



Read my posts to “The Guy” above.

However, just as a quick side note, the balance of trade is already highly skewed in India's favour so what makes anyone think that things are going to change? In fact the touted increase in exports some are referring to was all raw material goods. Ha-Joon Chang covers this in his books citing that economies which export raw materials remain poor or hamper their own growth while those countries that import those raw materials and export value added products see significant improvement in economic performance and standards of living.

We have a massive trade imbalance with China following our Free Trade agreement giving MFN to India is going to make things worse. Pakistan needs protection for its industries along with investments to help them grow.

To be frank from what I've read all they've really done is just stopped using the name MFN and instead call it NDMA instead. I haven't read of any real protections for the auto or pharma industries but aside from killing any hopes of further developing our heavy industry sector I haven't heard of any protections for the agricultural sector that employs about 50% of the population and generates about 25% of the GDP.

As I covered in my post above the reason Nawaz is pushing for MFN/NDMA is because he's completely refusing to do his job when it comes to collecting taxes so he's resorting IMF loans that are forcing these conditions on the country along with demanding the country import electricity from India. As I've stated before none of the major industries (auto, pharma, agriculture, etc...) actually wants MFN/NDMA for India.

I am telling you guys not to listen to the West. The IMF/World Bank fucked up Greece, they're responsible for the giving poor advice and pushing bad trade deals that are responsible for the debt problems in Africa, etc...

This agreement is going to bring poverty and war to Pakistan.

What a bunch of nonsense, you've posted some charts and using correlationed = causation type of argument. Your entire comment is filled with logical fallacies and assumptions, they're also filled with false assumptions.

In fact, you didn't even read my entire comment, you just nitpicked, despite the fact that I went ahead and bunked your argument.

Unless and until you actually read my entire statement, and quite ignoring my comments, your words a meaningless.

The US was not protectionist, it was in fact one of the biggest economic hubs in the world from the 20th century on wards. The reason why it became so rich (like I mentioned before) was because it got direct foreign investment into it's industrial base, this is what made the US competitive, same thing with Germany and China. In fact, just mentioning China debunks your entire argument. An even better example, South Korea.

With Iran and NK, their problems are entirely linked to the will of the US. If the US decided that it no longer wanted to sanction Iran and NK, you can bet your bottom that their economies would grow exponentially. Same thing with Cuba, which has suffered massive economic problems because the US refuses to lift sanctions on it, despite the fact that the cold was has been over for decades.

No one is saying that India won't dominate the trade between the two, but it's completely foolish to say that Pakistan wouldn't benefit. How is Pakistan's industrial base supposed to produce if it isn't getting any money? How is Pakistan suppose to produce energy for it's industries, if it doesn't make any money to support such production?

While I agree that tax collection is a problem, it isn't the only problem. Increasing tax collection is only a part of the over all deal that has been worked out by the IMF and Pakistan. If Pakistan doesn't increase it's tax collection, the IMF has stated it would halt it's payments. Considering that the IMF is closely monitoring the situation in Pakistan, you can bet that they know more about getting Pakistan's economy on track than you and I do.

Your arguments are filled with holes the size of the moon. You're arguing for the sake of arguing and completely ignoring the benefits and bringing up the negatives. A trade deficit doesn't mean you're losing more money than you're making, a trade deficit refers to you're importing more than you're exporting. In terms of the sheer scale of production rates of India and Pakistan's future potential, Pakistan would never in a million years be able to stop a trade deficit against India, but that doesn't mean Pakistan should just not do anything and sit on it's ***.

This isn't the early 20th century when a nations economy didn't rely on globalization, it's the 21st century where you have no choice but to trade in order to grow and become competitive. having access to large markets insures that Pakistani production rates will grow, Pakistan will therefore start profiting and will be able to actually afford these massive energy projects that it's working on. These are logical conclusions that anyone can see. Making straw man arguments and using post-hoc logic is only hurting your argument instead of helping it.

Ignoring facts doesn't falsify them.

 

[KingMamba]

No trade with India until Kashmir is resolved, this should and probably will get stonewalled.

 

[That Guy]

Sir,

i don't know why people overlook the positive aspects of this agreement , or they keep their personal ego above the national interest. .

the other day i was watching an old video where the analyst highlighted few of the points like

* urea costs 2-3 times cheaper in India as compared to pakistan . . so the Farmers in Pakistan can be a direct beneficiaries of this thing.

* cement rates are comparatively lower in Pakistan , so a good thing for Indians as poor families will be the direct beneficiaries.

* this will increase a sense of competition between the companies to capture the market. so rates will go down for so many things.

*Apart from that Some of the Indian products enter into Pakistani Market via Middle east and the end users pay twice or triple of the actual amount( shipping charges and other stuff ). that thing also be prevented/ reduced.

* most Important thing will be a bigger market and the similarities, thus providing more opportunities for the newcomers.

Completely agree, though ignoring nationalist concerns is bad for both sides, as they do bring some valid points. My personal opinion is that the benefits outweigh the negatives.

No trade with India until Kashmir is resolved, this should and probably will get stonewalled.

Let's be realistic, Kashmir will probably not be resolved in our life time if progress on the gov to gov front isn't made. It's best to lower tensions and extend good will towards the other to build trust, that is the only way to approach Kashmir.

 

[kurup]

No trade with India until Kashmir is resolved, this should and probably will get stonewalled.

So no trade with India till eternity .....

 

[KingMamba]

So no trade with India till eternity .....

That is fine in fact wagah should be sealed permanently and India should not be allowed transit through Pakistan to Afghanistan either through land or air.

 

[kurup]

That is fine in fact wagah should be sealed permanently and India should not be allowed transit through Pakistan to Afghanistan either through land or air.

Pakistan is not the only route to Afghanistan .....

 

[WAR-rior]

No trade with India until Kashmir is resolved, this should and probably will get stonewalled.

U mean there wont be trade between us EVER ?

Anyhow, Indians are not dying for trade with Pakistan. We are lot betteroff than You. So it actually doesnt matter to India.

That is fine in fact wagah should be sealed permanently and India should not be allowed transit through Pakistan to Afghanistan either through land or air.

There is a 3rd matter called Water.