Prioritising trade with Iran

Target killings and political mudslinging overshadowed the visit of the Iranian Commerce Minister to Pakistan last week. In the 6th meeting of Pak-Iran Joint Trade Committee, the sanction-torn next door neighbour expressed its desire to enhance trade with Pakistan for the purpose of which, setting up a Joint Working Group was agreed upon.
The idea is to achieve a 25 percent increase in bilateral trade on an annual basis, improvement of infrastructure, deepening the Preferential Trade Agreement by including more items on the list, exploring the possibility of a Free Trade Agreement and having direct flights between the two countries amongst other trade boosting measures.
While generally such trade talks and working committees mostly result in setting unrealistic targets which look good on paper and hardly ever materialise, the target of a 25 percent increment in bilateral trade or tripling it in five years seems very reasonable and achievable. That is because history suggest so, as the bilateral trade has more than doubled in just two years from FY08-FY10.
What is often ignored is the quality of trade, which in the Pak-Iran case, like many others, is not tilted in Pakistans favour. What is worrying is the fact that trade deficit has indeed worsened with time and if it continues with the same pace, it will likely cross the billion dollar mark soon. The trade deficit of $800 million recorded in FY10 is a massive jump from the FY08 level of just $278 million.
And so, before dwelling into FTA talks the commerce and trade ministry should look into the matter, as historically, having FTAs with countries with which Pakistan has a visible deficit, has resulted in even a wider deficit.
Unless, Pakistan makes tremendous efforts to increase the export market for which a lot needs to be in order at home, the FTA should not be considered when the committee meets next in a few months.
Deepening the PTA list though is a good idea; efforts should be made to gain concessions on items which lie on top of the export list instead of petty items, which yield little results.
It would be daydreaming to reverse the trade balance in Pakistans favour anytime soon. But what Pakistan can do instead is to improve the quality of imports. And that certainly cannot come with crude oil being the major import commodity.
Pakistan would be better off importing natural gas for which Iran seems to have completed the ground work. It is a pity that the fate of the IP deal is not decided in Islamabad or Tehran, but in Washington.
Till the time the IP idea remains under clouds, Pakistan should seek to import electricity from Iran instead of looking to Tajikistan, when Iran is ready to export 2000MW.
It is time that the trade and commerce bodies set the priorities straight before the Pak-Iran trade turns merely into a symbolic trade body.