TRADE WITH INDIA AND THE ZERO-SUM GAME THEORY

SHAMSUL GHANI (shams_ghani@hotmail.com)
Aug 25 - 31, 2008

Ministry of Commerce, Pakistan, in its Mission Statement, vows to liberalize flow of trade, remove bottlenecks and wherever possible, move away from a regulated to a liberalized and open trading system. Despite a plethora of arguments from both segments - the liberalized-trade proponents and the hard-line India bashers the fact remains that the trade relations between the two countries have remained restrictive. India, being a far bigger economy, continues to play on the minds of conservative and orthodox segment of business community who rightly or wrongly believes that the beneficiary of all business ventures will be India. And since this segment sees all trade ventures between the two countries as a zero-sum game, Pakistan, in the ultimate analysis, turns out to the net looser. More disappointing is the fact that the politicians on either side have exploited the issue for political mileage without caring to look deeper and from economic standpoint. A few days back, one of the Indian journalists, while talking to a Pakistani Channel, referred to the zero-sum game syndrome. We need to come out of the bigger size and zero-sum syndromes and focus ourselves on the hard economic realities. Trade transactions are never zero-sum games. If entered into prudently, they all turn out to be win-win situations. Just concentrate on your own economic needs and try to strike the best possible deal. If India has anything in surplus that your economy needs to import anyway, just go for it and enjoy the benefit of saving on time and freight - compromise on price and quality not meant. And vice versa.

India and Pakistan bashers, on either side of the fence, appear to have diminished in their size and intensity during the last eight years or so. Businessmen, industrialists and trade organizations are orchestrating for a radical increase in the size of trade between the two countries. India has already accorded us the MFN status. We are still in the thinking mode. Perhaps we have much at stake than India for obvious economic realities. Let us take our own time. A cautious approach with measured steps is always better than a situation of no progress at all.

VOLUME OF TRADE WITH INDIA NEEDS TO BE INCREASED

The volume of trade with India in comparison to the total foreign trade of Pakistan needs much to be desired. Nevertheless, when compared with the previous three years starting from 2003, the volume in recently concluded last two years appears quite encouraging.

TOTAL TRADE & TRADE WITH INDIA

Amount in Million $

 

2007-08

2006-07

     

INDIAN

   

INDIAN

 

Total

With India

Trade %

Total

With India

Trade %

Import

39,970

1,401

3.51

30,540

1,340

4.39

Export

19,270

226

1.17

17,000

320

1.88

Trade Deficit

20,700

1,175

5.68

13,540

1,020

7.53

Total Trade Volume

59,240

1,627

2.75

47,540

1,660

3.49

The total volume of trade with India was a meager $344 million which rose by 79 per cent to $616 million in 2004-05. The year 2005-06 recorded an increase of 39 per cent when the total volume stood at $859 million. Next year witnessed an increase of 89 per cent, raising the total volume to $1,627 million. Finally, the year 2007-08 registered a nominal increase of 2 per cent. The reason could well be the global economic upheaval that sent the oil and food prices rocketing. The political turmoil in Pakistan could also be a contributing factor. The dust now having almost settled in Pakistan, the trading transactions between the two neighboring countries should pick up. The trading balance always remains in favor of India, but this should not be the cause for concern. Pakistan should concentrate on creating surpluses in the sectors having capacity to expand. Energy is one such sector. Pakistan can use its water and coal resources to geometrically expand energy generating capacity. This will not only solve its domestic energy problems but will also open avenues for surplus export to India. Pakistan, in turn can import diesel and oil from India which is now permissible under the trade policy of Pakistan.

FUTURE OUTLOOK

The industry lobby of India Assocham is upbeat about the trade potential between the two countries and foresees the trade volume grow up to $9 billion. Mr. Sajjan Jindal, the president of Assocham is of the view that the two countries, brushing aside the impact of some recent political setbacks, should concentrate on confidence building measures. Pakistan's Trade Policy 2008-09 has taken some liberalization measures to boost the Pak-India trade. The Trade & Commerce Minister, announcing the trade policy stressed the need to coming out from the India phobia to reap the maximum benefits of cost effective bilateral trade. While delivering his policy speech, he said:

"India is our neighbor and we are gradually liberalizing our bilateral trade. Composite dialogue process, especially on economic and commercial cooperation has been instrumental in addressing the bilateral issues. We are announcing to enlarge the list of importable items from India, which is based on the requests of our stakeholders. Cheaper raw material sourced from India would make our exports more competitive in international market."

The orthodox view relying more on our political past in total disregard of the present economic realities has taken the journalistic battle field to raise hue and cry against the India-specific policy concessions. Pardeep S. Mehta and Siddhartha Mitra report from India:

"Pakistani press, particularly the Urdu press, is crying foul on the new trade policy announced mid-July. The usual refrain is that Indian goods will flood Pakistan. With a common boarder of around 3,000 km, striking cultural similarities, a common DNA and almost no linguistic barriers, India and Pakistan are natural trading partners.