PAKISTAN-INDIA TRADE RELATIONS [dateline 2013]
India and Pakistan were major trading partners after independence. In 1948-49, 56% of Pakistan’s total exports were destined to India and 32% of Pakistan’s imports were from India. Till 1965 the normal trading relations continued. Between 1966 and 1974, no formal trade took place. Based on Simla Agreement of 1972 which contained provisions for resumption of trade and economic relations, trade resumed but was restricted to public sectors of both countries for few goods like cotton, engineering goods, jute, railway equipment, rice & tea. Later, trade by private sector was allowed and number of goods gradually increased (positive list of importable items from India was maintained by Pakistan). In 1995, both India and Pakistan became member of the WTO. In 1996 India accorded MFN status to Pakistan. However, Pakistan continued with the Positive List approach. In March 2012, Pakistan shifted from Positive (1963 allowed items only) to Negative List and placed only 1209 items out of 8000 product lines as non-importable items from India accordingly.
ROUND OF TRADE TALKS BETWEEN PAKISTAN & INDIA
The composite Dialogue between India and Pakistan started in 1998. Besides Kashmir, regional security, Wullar barrage, Siachin, Sir Creek and terrorism, economic and commercial cooperation was initiated to enhance bilateral trade. Seven rounds of Talks on Economic and Commercial Cooperation have been held so far:
§ First Round (8 August, 2004, Islamabad)
§ Second Round (9-10 August, 2005, New Delhi)
§ Third Round (28-29 March, 2006, Islamabad)
§ Fourth Round (31 July – 01 August, 2007, New Delhi)
The dialogue process came to a standstill due to Mumbai attack. The process resumed in April 2011 and following rounds were held:
§ Fifth Round (27-28 April,2011, Islamabad)
§ Sixth Round (14-15 November, 2011, New Delhi)
§ Seventh Round (20-21 September 2012, Islamabad)
- 5th Round of Pakistan-India Talks on Commercial & Economic Cooperation
In continuation of the previous rounds of meetings under the Composite Dialogue, the 5th Round of Secretary Commerce Level Talks on Commercial & Economic Cooperation was held on 27-28 April, 2011 at Islamabad. The Joint Statement issued at the end of the Talks contains significant decisions on consultation with the stakeholders for switch from positive to negative list, addressing the issues of trade through 3rd country and tariff and non-tariff barriers to trade between the two countries.
- Commerce Minister’s Visit to India
Subsequent to the Commerce Secretary Level Talks held in April 2011, Mr. Anand Sharma, the Indian Commerce Minister invited Mr. Makhdoom Muhammad Amin Fahim, Federal Minister for Commerce to India along with a business delegation. A 72 member delegation visited India under the leadership of Commerce Minister from September 26 to October 3, 2011. India dropped its opposition in WTO to the Concessionary package provided by EU to Pakistan. The occasion not only provided political ownership to the bilateral economic and commercial relationship but was also helpful in creating linkages between the leading chambers of commerce of the two countries.
- 6th round of Pakistan-India Talks on Commercial and Economic Cooperation
The 6th round of India-Pakistan talks on Commercial and Economic Co-operation was held during 14th-16th November 2011 at New Delhi between Commerce Secretaries of India and Pakistan under the dialogue process which started in 2004. To take forward the decisions taken during the 5th round of talks in April 2011, many bilateral Groups/Sub-groups were set up. Almost all of these Groups/Sub-groups have met and worked on their specific designated tasks. Both sides agreed that the momentum of work and the determination to move forward had transmitted positive signals about advancing the bilateral trade agenda. In this context, India welcomed the decision taken by Pakistan to completely normalize the trade relations with India.
- Indian Commerce Minister’s Visit to Pakistan
On an invitation by Mr. Makhdoom M. Amin Fahim, Federal Commerce Minister for Commerce, Mr. Anand Sharma, Indian Commerce Minister along with strong business delegation visited Pakistan from February, 13-16, 2012. During the visit, the two sides initialed three agreements i.e. Cooperation and Mutual Assistance in Customs Matters Agreement, Bilateral Cooperation Agreement on Mutual Recognition between PSQCA and BIS and Agreement on Redressal of Trade Grievances to address issues related to NTBs.
· Life Style Exhibition and Commerce Minister’s visit to India
Trade Development Authority of Pakistan (TDAP) organized a Life Style Exhibition in Delhi from 12-15 April, 2012 to show case Pakistani products in India on a mega scale. The Commerce Minister of Pakistan also participated in the exhibition. The Commerce Ministers of the two countries also held bilateral trade talks on 13th April 2012 to take further the process of trade normalization.
- 7th round of Pakistan-India Talks on Commercial and Economic Cooperation
The 7th round of Pakistan-India talks on Commercial and Economic Cooperation was held during September 20-21, 2012 at Islamabad between the Commerce Secretaries of Pakistan and India. Both sides expressed satisfaction with the progress made in the bilateral trade relationship, since last round of talks in New Delhi. Commerce Secretaries appreciated that better trading opportunities provided through land route would enhance mutual prosperity of the business communities and consumers of both sides of the border. The Commerce Secretaries resolved to further build upon the foundations laid by their predecessors to consolidate and enhance economic engagement. Pakistan and India formally signed the three agreements which were initialed during Indian Commerce Minister’s visit to Pakistan in February 2012.
TRADE NORMALIZATION PROCESS
The trade normalization process with India is mainly focused in the following four areas:
- Negative List of Items for Trade With India
The Cabinet in its decision of November 2, 2011 mandated the Ministry of Commerce to fully normalize trade relations with India. In its subsequent meeting held on 29th February, 2012 the Cabinet gave in principle approval of Negative List subject to further negotiations with India. A Negative List of 1209 items for trade with India has been notified vide Commerce Ministry’s SRO NO. 280 dated 20th March, 2012. The Negative List will be part of Import Policy Order as Appendix ‘G’ replacing the previous Positive List of items for India. Indian goods specified in the Appendix ‘G’ (Negative List) will not be importable from India. This Negative List will be phased out after approval by the Cabinet.
- Removal of Non-Tariff Barriers
In the Sixth Round of Commerce Secretary Level Talks held from November 14 to 15, 2011 at New Delhi, both sides discussed the process of trade normalization further. In order to address the issue of Non Tariff Barriers and to allay the concerns of the businessmen, the two sides agreed to conclude three agreements i.e. Cooperation and Mutual Assistance in Customs Matters Agreement, Bilateral Cooperation Agreement on Mutual Recognition between PSQCA and BIS and Agreement on Redressal of Trade Grievances. The said three agreements were signed during the 7th round of Pakistan-India Talks on Commercial and Economic Cooperation held on September 20-21, 2012 at Islamabad.
- Trade with India through Wagah-Attari Road Link
The President of Pakistan and Prime Minister of India at New York on September 24, 2008 took the decision to open Wagah-Attari Road Link for all permissible items of trade. Economic Coordination Committee (ECC) of the Cabinet in its meeting held on 19-03-2009 decided that trade through Wagah-Attari for permissible items of trade will be fully operationalized after necessary infrastructure is developed on both side of the border.
As a result work on infrastructure development started on both sides. During the 5th Round of Secretary Commerce Level Talks held on 27-28 April, 2011 at Islamabad both sides appreciated the significant progress made in developing physical infrastructure for trade through the Wagah-Attari land route. It was discussed that closer coordination needed to be ensured to open the second gate and new dedicated roads for passenger and freight traffic. To facilitate the coordinated effort of both sides, it was agreed that the Joint Technical Group for promotion of trade and travel would hold a meeting every month to meet timelines on both sides.
The Joint Technical Committee on Wagha /Attari land route has held six meetings so far to monitor development infrastructure at Wagah/Attari border. The development work at Wagha / Atari is expected to be completed soon. The Indian side inaugurated the Integrated Check Post (ICP) on April 13, 2012. As per Appendix ‘G’-1 of SRO NO. 280 dated 20thMarch, 2012, 137 items are allowed to be imported from India through land route of Wagha. Decision to open the route for trade in all permissible items will be taken by the Cabinet.
- Preferential Arrangements under SAFTA
Pakistan and India are members of the Agreement on South Asian Free Trade Area (SAFTA). By January 2013, the applicable tariff under SAFTA for all the items except those included in the SAFTA Sensitive List will be reduced to 0-5% by both India and Pakistan. However, whereas Pakistan has only one Sensitive List, India has separate lists for LDC including Afghanistan, Bangladesh, Bhutan, Maldives and Nepal and NLDC including Pakistan and Sri Lanka. Recently it has reduced its Sensitive List for LDC substantially maintaining only 25 tariff lines. It also has bilateral preferential arrangements with Sri Lanka whereby majority of tariff lines in India’s Sensitive List are covered under the India-Sri Lanka FTA, thus attracting concessional tariff rather than the MFN tariff. Through these arrangements Pakistan is discriminated against all the other countries in the region and a level playing field is denied through higher tariffs imposed on imports from Pakistan by India.
On August 18, 2012, Indian Cabinet has accorded approval for 30% reduction in SAFTA sensitive list. 264 tariff lines were accordingly reduced from 878 tariff lines, leaving just 614 lines. Out of 264 lines which were reduced, 155 lines pertained to agricultural commodities, 106 were textile related lines and 3 lines were of Petroleum products. Pakistan’s export interests in areas of textiles and agriculture are expected to be met.
INDIAN INVESTMENT POLICY TOWARDS PAKISTAN
As per paragraph 3.1.1 of the Circular 1 of 2012-Cosolidted FDI Policy of India, effective from April 10, 2012, investment from a citizen of Pakistan or an entity incorporated in Pakistan was not permitted.
The Government of India had reviewed the policy, as contained in Paragraph 3.1.1 of the circular ibid and decided to permit a citizen of Pakistan or an entity incorporated in Pakistan to make investment in India, under the Government route, in sectors/activities other than defense, space and atomic energy.
Accordingly, Paragraph 3.1.1 of Circular of 1 of 2012- Consolidated FDI Policy; effective from 10.4.2012, is amended to read as below;
“3.1.1 A non-resident entity can invest in India, subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. A citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other then defense, space and atomic energy.”
It is pertinent to mention here that no investment has ever been made by Indians in Pakistan as circular No. 11/2012-13 dated 02-07-2012 of the Reserve Bank of India on Foreign Direct Investment does not allow Indian investors invest in Pakistan under Automatic route.
Pakistan’s investment policy, right from its inception, does not impose any restriction on Indian nationals to invest in Pakistan.
PAKISTAN-INDIA JOINT BUSINESS COUNCIL (PIJBC)
Commerce Minister of Pakistan visited India from April 12 to 14, 2012 at the invitation of his Indian counterpart where they jointly inaugurated “Lifestyle Pakistan” exhibition organized by Trade Development Authority of Pakistan (TDAP) on April 12, 2012 at New Delhi. The Ministers along with their official delegations held a bilateral meeting on April 13, 2012. During the meeting, the Ministers appreciating the enthusiasm of business communities of the two countries for deepening bilateral economic engagements, decided to constitute a Joint Business Council (JBC) of prominent business persons to be nominated by each country. In line with the decision taken by the two Commerce Ministers, the Indian side notified fifteen (15) members of JBC Accordingly Pakistan side notified its members of JBC. Pakistan – India Joint Business Council (PIJBC) will execute the following functions as the Joint Statement of Commerce Ministers’ meeting;
- To provide an additional institutional framework for regular and sustained dialogue between the business communities
- To recommend steps to improve bilateral economic relations
- Recommendations would be sent to the respective Commerce Ministries of both countries
- The respective Commerce Ministries will use these valuable inputs for taking forward the ongoing trade dialogue
- PIJBC will also strategize and implement mechanisms for deepening trade and commerce relations between both countries
- PIJBC will meet at least once in every six months
The first meeting of Pakistan-India Joint business Council (PIJBC), now renamed as Pakistan India Joint Business Forum (PIJBF) was held on June 29, 2013 at Islamabad.
TRADE BETWEEN PAKISTAN AND INDIA
Pakistan’s major imports from India comprise intermediate goods that being cheaper than alternate sources of imports enhance the competitiveness of our industry. The following table shows the year wise figures of bilateral trade between India and Pakistan.
Million US$
|
Years
|
Exports
|
Imports
|
Total Trade
|
Balance
|
|
2003-04
|
93.680
|
382.367
|
476.05
|
(-) 288.69
|
|
2004-05
|
288.134
|
547.458
|
835.60
|
(-) 259.33
|
|
2005-06
|
293.31
|
802.002
|
1095.32
|
(-) 508.70
|
|
2006-07
|
342.918
|
1235.889
|
1578.81
|
(-) 892.98
|
|
2007-08
|
254.858
|
1701.445
|
1956.303
|
(-) 1446.587
|
|
2008-09
|
319.619
|
1194.605
|
1514.224
|
(-) 874.986
|
|
2009-2010
|
268.332
|
1225.567
|
1493.899
|
(-) 957.235
|
|
2010-2011
|
264.3
|
1743.2
|
2007.5
|
(-) 1478.9
|
|
2011-2012
|
338.517
|
1507.328
|
1845.845
|
(-) 1168.811
|
|
2012-2013 (July-April)
|
271.089
|
1568.750
|
1839.839
|
(-) 1297.661
|
(Detailed Trade Figures are attached) Source: Pakistan Bureau of Statistics
There is substantial increase in trade volumes between Pakistan and India given the complementarities of the two economies. The two neighbors have a responsibility to take the lead for transforming the region into an economic block worthy of its physical and human potential. Given the political will and active support of the private sector, this expectation can soon be realized. The structural restrictions to trade and investment could be overcome if Pakistan grants Most Favored Nation (MFN) status to India. This status would give fillip to free flow of goods and capital, as in the case of other countries under the World Trade Organization (WTO) regime.
