India and Pakistan have offered preferential tariff rates under SAPTA

 Apr 18 - 24, 2005

Despite having positive sentiments and earnest desire, amongst the trade communities of India and Pakistan for expansion in trade relations in real terms, notwithstanding the invisible irritants like mistrust, tariff and non-tariff barriers and an unfounded sense of insecurity are the real snags in the way of strengthening economic ties between the two countries.

Contrary to the aspiration of the people at both sides and the policy statements for taking confidence-building measures at both sides, the bureaucratic approach does not match practically to what it is being claimed for resolving the issues in the way of cordial relations.

For example, the Indian government had opened its door for Pakistan yarn by facilitating zero rated customs duty for its import from Pakistan. The step was widely hailed by the business community both in India and Pakistan. Since Pakistan is producer of fine count and quality yarn it grabbed almost 25 percent share of the Indian market last year. Looking fearfully at the faster growth in imports of Pakistani yarn, the Indian authorities immediately recalled their decision by doing away with the zero rated customs duty and imposed a tariff of 20 percent on imports of Pakistani yarn. Had the Indian government patience to allow the facility, the gesture could be a better contributor in the confidence building efforts. But it was not allowed to prevail for a longer time.

Commenting on the overall India-Pakistan scenario, Khalid Firoze, President Karachi Chamber of Commerce and Industry (KCCI) who recently led a trade delegation to India, observed that on one hand the Indian leadership is playing with the gallery claims for promotion of regional cooperation on social, economic and political fronts, but on the other hand it creates tariff and non-tariff barriers to discourage trade promotion. It is generally claimed by the Indian side that it has reduced tariffs to the level of 20 percent, however, a rider has been attached with the tariff regime to discourage easy sailing of trade relations. Wherever the customs duty has been reduced to 20 percent and additional amount of something Rs115 per kg whichever is higher has been imposed on the imports from Pakistan.

The trade pattern between the two countries reflected in the balance of trade which has always been in favor to India because of its huge market and production at the economy of the scale. Currently, Pakistan's imports from India are estimated around $500 million as against a meager export worth $93 million to India.

Amazingly, Pakistan being a smaller economy and has no match with the huge India economy, yet they are always look with a fear towards Pakistan.

Both Pakistan and India produce around 47 percent of the world cotton. Unfortunately, a sense of mistrust perturbing the minds of the policy makers never allowed the business community to make joint efforts for value addition to this cash crop to optimize benefits for the people of the region.

"We must compliment and supplement to each others in the world market to serve the interest of our people by earning economic stability and prosperity aimed at fighting against growing poverty in our region. We should see each other eye-to-eye to accomplish the destined objective. We must accelerate the pace of economic and commercial activities in the region to avoid inflow of resources to other countries," said Khalid Firoze.

He was of the view that all efforts currently being made for promotion of bilateral relations might turn into a futile exercise unless credibility gap is bridged effectively.

The Karachi Chamber of Commerce has a plan to organize its second exhibition "My Karachi" sometimes in June 2005. In order to use this occasion, the Indian, Sri Lankan and Bangladeshi businessmen are also being invited to participate in this fair. A positive nod has already been received from Sri Lanka and Bangladesh, while a formal consent is yet to be received from India. The business community in Pakistan is cognizant to the need for expanding trade relations with the regional countries and therefore signed as many as 20 Memorandum of Understandings with them including Confederation of Indian Industry during Expo-2005, held in Karachi.

It may be recalled that in March 2003, Pakistan had allowed import of 78 more items from India with concession in tariff which it had committed under the Kathmandu round of South Asian Preferential Trading Arrangement (SAPTA).

India and Pakistan have offered preferential tariff rates to each other under SAPTA as both countries are the members of SAARC.

The total number of items to enjoy concessionary tariffs under first round negotiations of SAPTA were 226 including 106 items from India and 35 from Pakistan. The second round of negotiations under SAPTA were more far reaching and 1,871 items were covered including 902 from India and 363 from Pakistan. In third round of SAPTA in 1997, trade concessions were increased to 34,556 commodities.

So far, four rounds of trade negotiations were concluded under SAPTA covering over 5,500 commodities. However, extremely poor response to this concession is glaringly reflected in the volume of trade from both sides.

President Pervez Musharraf is scheduled to visit India this month to watch the last One-day cricket match between the two cricket giants in Asia. Though his visit apparently related to cricket, yet actually it is above the cricket diplomacy. Things will take a brighter change on the outcome of his forthcoming visit hopefully.