Favour India, but favourably for Pakistan

Who wants to play favourite this time around? India and Pakistan it seems. Fourteen years after India granted the MFN status to Pakistan, it has again sought reciprocation to help increase bilateral trade between the two countries.
But why has Pakistan been averse to the idea of bringing India under the ambit of its favourites? Geo-political tension is one of the reasons, fears of dumping of cheap Indian products into the country is another.
Many erroneously believe that granting an MFN status means abolishing import duties altogether, or rendering them considerably low. However, an MFN status only implies that a country which has been bestowed with that status will not be treated discriminately or disadvantageously. The resistance shown on these grounds often overshadows many other benefits of extending trade with the eastern neighbour.
Already significant trade between India and Pakistan is carried out through informal channels, which increases the net price of the goods arriving because of higher transactional and transport costs involved in moving goods between countries. This includes both smuggling and quasi-legal trade (goods from India routed through other countries into Pakistan).
Informal trade routes through Dubai are the most popular with items such as cloth, footwear, spices, medicines, herbs and dry fruit being a few of the items exchanged along these courses.
According to research conducted by the Sustainable Development Policy Institute, over $0.5 billion of bilateral trade per annum is carried out through these informal channels, whereas official trade is close to $2 billion.
Advocates of a more liberalised trade relationship with India cite import substitution of some existing products with Indian products as a means of reducing costs not only through lower transport costs and cheaper Indian goods, but also through saving time spent in shipping such items..
A study by the SBP had estimated back in 2005 that extending the list of imports with India could help yield average savings between $400 million to $900 million for Pakistan. In an earlier interview, Ishrat Hussain, Dean and Director IBA, told BR Research, "Their machineries, coal, and iron ore can even reduce unit costs for our steel mill."
Strong trade ties between India and Pakistan can also help foster greater economic integration in the Saarc, and resultantly help Pakistan establish trade ties with other regional partners including East Asia and South-east Asia.
However, a major element thwarting trade between the two countries is the rough historical relationship between the two countries,.
"We have to develop strong economic ties with India because competitive advantage in the globalised world will be based on economic strength. For Pakistan, establishing trade with India will be key in achieving this, and coarse ties from the past will have to be put behind," said Malik Sohail, Vice-President, National Traders Alliance.
However, to benefit fully from liberalised trade with India and prevent one-way flow of solely Indian goods into the Pakistani market, Pakistan will have to raise the standards of its R&D and develop knowledge-based industries, as has India. IT in India accounted for 4 percent of its GDP, and some 100 MNCs had research centres in the country by 2007.
Simply opening up trade may not be enough for Pakistan - efforts have to be sowed to reap the juicy fruits, for without preparation, the bilateral trade might appear like a bout between a feather weight and a heavy weight boxer.