April 19, 2005, Business Standard
New Delhi
Our Economy Bureau

“Since informal trade with Pakistan is more than the formal trade, any movement to get into formal and fair trade will benefit Pakistan’s consumers and our exporters,” Prabir Sengupta, director, Indian Institute of Foreign Trade, said.

Sharing a similar view, Pradeep Mehta, secretary-general, Consumer Unity and Trust Society (CUTS) said, “At present, consumers in Pakistan are paying a huge price for commodities like tea and automobile parts, as they are imported from sources other than India.

Similarly, Indian consumers will benefit from the import of textiles and handicrafts from Pakistan.”

Nagesh Kumar, director-general, Research & Information Systems for non-aligned and other developing countries, said even the local industry in Pakistan also stood to benefit, as machinery like those required by the textiles sector was proving to be costlier to import as they were routed through a third country.

The Federation of Indian Chambers of commerce and Industry (Ficci) estimated bilateral trade at $200-250 million, while trade through a third country was estimated at $1 billion along with contraband trade of $1-2 billion. The revenue loss for India and Pakistan was estimated at $200-400 million.

Trade between the two countries has continued without any trade agreement since 1978. The last trade agreement was signed in 1975, which expired in 1978.

Between 1965 and 1975, there was no trade agreement between the two. Later, in accordance with the Simla Agreement, a protocol was signed in November 1974 providing the most favoured nation (MFN) status to be the basis for trade.

The two countries are exchanging concessions under the South Asia Preferential Trade Agreement (SAPTA). Under the first and second rounds of SAPTA, India granted tariff concessions on a total of 383 products at the six-digit level to Pakistan at a preferential rate of 10 per cent.

In return, India received tariff concession of 10 per cent on 265 products. In the third round, India granted 20 per cent tariff concession on 18 products while receiving concessions on an equal number of products.

The balance of trade has been in favour of India throughout since 1993-94 barring 1998-99 when it was in favour of Pakistan. Major items of import from Pakistan include fruits, nuts and pulses while major exports to Pakistan include items like plastics and pharmaceutical products.

On the issue of the most favoured nation status, Kumar said after the phased implementation of SAPTA from January 2006, the signatories to the agreement would in effect get the “most favoured nation” plus status.

“If that is on track, then the most favoured nation will become implicitly taken care of,” Kumar said.

Mehta said the two countries should explore ways of complementing one another in the production of specific items and the benefit of approaching the Central Asian markets jointly.

India should look to Pakistan as a transit corridor to Central Asia, whereas Pakistan should use facilities in India to get better markets in South and Southeast Asia, he added.