Trade eases India-Pakistan tension

Trade eases India-Pakistan tension

Tired of waiting for their politicians to get along, South
Asian countries are forging ahead with trade links. Kunda Dixit
of Inter Press Service reports.

NEW DELHI (IPS): Among the cricket balls being used by players
from 12 participating teams during the World Cup Cricket
Tournament in South Asia will be ones made in Pakistan by Grays
of Cambridge.

The balls are regarded as the best in the world, but are not
officially exported to India. Even after the South Asian
Preferential Trade Agreement (SAPTA) went into effect on Dec. 7,
the Pakistan-made balls will not be competitive because sports
goods are not on the list of items for which tariffs have been
reduced.

South Asian countries are trying to use SAPTA to overcome
years of protectionism -- and in the case of India and Pakistan
outright hostility -- to forge closer regional trade ties. But as
with the cricket balls, there is long way to go.

"Our cricket balls are the best in the world, and if
everything was normal, it should have been selling in India,"
said Mohammad Aslam Manda, chairman of the Pakistan Sports Goods
Manufacturers and Exporters Association.

Manda was among hundreds of businessmen from Pakistan and
other South Asian countries who came to India to take part in the
first ever trade fair of South Asian Association for Regional
Cooperation (SAARC) this month.

SAARC groups Bangladesh, Bhutan, India, Maldives, Nepal,
Pakistan and Sri Lanka, Together, the South Asian countries have
a population of 1.4 billion -- one-fifth of the world total. But
they make up only 1.3 percent of global output and less than one
percent of international merchandise trade.

Increasingly worried by the globalization of the world economy
and the marginalization of their region by trading blocs in their
neighborhood, SAARC countries have been trying to get over
political problems to streamline intra-regional trade.

Commerce ministers from the seven member countries agreed in
New Delhi this month to bring forward the timetable for trade
liberalization to establish a South Asian Free Trade Area by the
year 2000.

The newly-formed SAARC Chamber of Commerce and Industry
organized the trade fair so that countries in the region can
start taking advantage of the new SAPTA rules.

But critics point out the list of tariff-free items announced
by SAARC countries show even more glaringly that they are trying
to protect domestic industries from competition. Between them,
SAARC countries have announced tariff cuts on less than 230 items
-- mostly low-volume goods from smaller SAARC countries.

For instance, Bangladesh will reduce by 10 percent duty
concession on items like dental cement, glands for organotherapy
and fresh grapes. Pakistan will cut import duties on ornamental
fish, bamboo and lamb skin. Nepal will reduce duty on only 14
items including chewing gum, fruits and canned fish.

Many of these cuts do not apply to Indian exports, only to
products from smaller SAARC countries. But befitting its size,
India's concessions are the largest with tariff cuts in 106 items
like paper and fertilizer.

Says SAARC Chamber vice-president from Nepal, Padma Jyoti: "We
have to start somewhere and I think the trade fair is a start. It
was not just a symbolic exercise, it opened up channels for trade
by building contacts."

Most regional experts agree that intra-regional SAARC trade
will not get anywhere unless the two South Asian heavyweights,
India and Pakistan, patch up their political differences. And
there is now a growing realization in the bureaucracies of both
Islamabad and New Delhi that freer trade will be mutually
beneficial. In fact, trade could be the balm that may ultimately
soothe political tensions.

"Politics used to come first and trade followed. But with
India and Pakistan, if trade leads politics will follow,"
Pakistan's commerce minister Ahmad Mukhtar said at a conference
that coincided with the SAARC Trade Fair.

Proof of this was the fact that Pakistani products destined
for the trade fair -- including a gleaming metallic green Honda
Civic assembled in Pakistan -- traveled overland from Pakistan to
India across the tense frontier. And Indian officials went out of
their way to allow Pakistani businessmen to visit the Taj Mahal
even though their visas were valid only for New Delhi.

Still politics gets tangled up with sports and trade. An
Indian hockey team could not get visas in time for a tournament
in Pakistan. And sometimes it is the sheer weight of bureaucracy
that prevents links: some Bangladeshi exhibits never made it to
the SAARC Trade Fair because they were held up by customs at the
Indian border.

Under new World Trade Organization (WTO) rules, India
automatically granted Pakistan most-favored nation (MFN) status
on Jan. 1. As WTO member, Pakistan is supposed to do the same but
sensitivity to domestic opinion has made Islamabad cautious.

Still, Pakistan's Friday Times newspaper said: "Let us not be
paranoid. There is no danger that India will swamp Pakistan. The
bureaucrats in Islamabad trying to negotiate better terms are not
about to abandon our national security interests."

On this side, The Times of India was equally accommodating:
"Political and military tensions have been allowed to cast an
unhealthy shadow over economic relations right from 1947. The
people of the subcontinent have been the main losers ... it is
tragic that greater economic cohesiveness in South Asia has been
stymied by political grandstanding on all sides."

Two-way trade between the two countries is officially only
worth US$100 million annually. But estimates show smuggling and
indirect trade through third countries amounts to US$ 2 billion a
year.

Indian and Pakistani businessmen say regularization of this
trade would benefit both governments, help normalize political
ties and spread the free trade mantra in the rest of South Asia.