Bilateral trade between India and Pakistan

India & Its Neighborhood

Source: The Economic Times 

Context:

The author talks about the need for India & Pakistan bilateral trade.

Editorial Insights:

• The recent partial opening of land borders between India & Pakistan signals a thaw in between their troubled relations.
• It is the right time for both sides to capitalize on the moment & normalize their imperiled trade relations.
• After the Pulwama terror attack, bilateral trade between both countries plummeted from $2 billion in 2017-18 to a paltry $280 million in 2020-21.
• From the Indian side, a continuing freeze in relations with Pakistan will enhance India’s external vulnerability to other actors like China.
• Since India-Pak relations will remain adversarial for the foreseeable future, its effective management should be the main objective of fostering economic & trade relations.

Though India is not averse to having normal trade relations with Pakistan, however, the normalization of trade relations would require the following steps:

• Primarily, Pakistan needs to revoke the unilateral suspension of trade with India undertaken in August 2019 due to India’s decision to dilute Article 370, because this trade suspension by Pakistan is inconsistent with the GATT & SAFTA agreement on the ground that a member country disapproves of another member country's domestic law.
• Pakistan also needs to reverse its practice of not according the MFN status to India.
• Most Favoured Nation is a principle of non-discrimination in trade given in Article 1 of GATT.
• Since the formation of WTO, Pak is in breach of Article 1 of GATT towards India.
• At the same time, India should restore Pak’s MFN status that it revoked after the Pulwama attack by hiking the tariff rates on all Pak imports to an unfeasible rate of 200%.
• India needs to use the International legal arena to make Pak reciprocate to restore trade ties to normal.
• Finally, both nations should dust off the GATT rule book & read Article XXIV.
• This allows both India & Pak to enter into any special trading arrangements without fully complying with GATT conditions that typically apply FTAs.
• This merciful rule that only India & Pak enjoy was incorporated in GATT to enable both sides to overcome the economic hardships caused by Partition.

Concluding Remarks:

The need of the hour is for strengthening bilateral trade that can be an important lever towards establishing a working relationship with Pakistan.