A major deterrent in global trade has been the imposition of non-tariff trade barriers apparently to protect domestic industry, especially the low end product. Apart from industrial products or raw material, the NTBs are also biased in favour of the country's agriculture sector. At the same time, NTBs shield inefficiency as well as providing indirect incentives to these products.
There is one school of thought that maintains that even though NTBs are meant to protect local sectors, the fact is that indirectly they affect the cost of production as foreign inputs get front-loaded and become expensive. The facility of high protection to inefficient domestic producers also enables them to earn higher profits and thus investment in essential exporting sectors is diverted to the protected sectors.
Once again, the example of cement can be mentioned here. There is a formidable demand for Pakistani cement in India as Pakistani cement is of superior quality and meets the various rigorous quality specifications and requirements. Moreover, this enables the Indian customers to use less cement than the Indian cement. There is a potential demand for at least six million tons of cement from Pakistan every year. Unfortunately, Pakistani cement mills have never been able to supply even 800,000 tons in any given year. One prime reason is that Bureau of Indian Standards issues licenses to Pakistani cement exporters after its officials come to Pakistan to inspect plants and then certifying that cement being produced conforms to BIS quality standards. The licenses are issued for one or two years and then renewal takes place after another mandatory inspection of the factory premises by BIS representatives. This is a tedious and long process and it impacts negatively on the production plans of the cement mills.
It is proposed that the BIS license should have a validity of five years and the conditionality of visiting the mills to ascertain whether the mills is functioning or not must be removed. BIS can also use the services of international inspection and certification companies to take on this responsibility. In fact, Pakistani commercial exporters should also be allowed to export cement to the buyers in India under their own brand name with the stipulation that the name of the manufacturing cement mills must be mentioned on the packing.
The Saarc countries have to make a paradigm shift if there has to be substantial enhancement in intra-Saarc trade. The lead will have to be provided by India followed by Pakistan. NTBs would thwart even long-term investment within Saarc countries, as the investors would face an uphill task exporting to even their country of origin.
Infrastructure collaboration
Electricity, gas, and water are essential utilities for any country to prosper. Today, SAARC countries are suffering from endemic shortage of these utilities. It is time that Saarc nations plan out a comprehensive arrangement of becoming self-sufficient in these utilities. A commonality of views and realistic decision making would enable them to channelize resources towards this objective. India and Pakistan should spearhead this process. Indian investment in Thar coal, for example, could be attracted. At the same time, India must rejoin Pakistan and Iran so that the gas pipeline from Iran becomes a tripartite reality soon.
India is strategically placed to cater to Pakistan's petroleum needs and it could supply these from the refineries based near Pakistan. Of course, once a pipeline from Bhatinda Refinery all the way through Wagah is laid between the two countries, Pakistan would save fabulous amount of foreign exchange in transportation costs alone. There may be an argument in opposition to this deal that it would substantially increase the balance of trade in favour of India, but the plain reality is that Pakistan would correspondingly procure less from the present suppliers in the Middle East.
Cooperation galore
The feel-good factor present between the businessmen of both the countries could be the stimulus for further co-operation in other critical sectors too. Information Technology, especially software development and call centers, can be a solid start with Indian entrepreneurs and technical wizards taking advantage of the pool of excellent graduates in Pakistan. Agriculture, livestock, dairy farming, and induction of new processes, better seed development, enhancing yield per acre, and agri-based industries are another sector that could make this sub-continent the world's bread basket.
One area of very close co-operation between India and Pakistan should be at international arena. At times, some countries or some trading blocs change the rules and regulation, or withdraw incentives, such as GSP+, or bracket certain countries together and discriminate against their products or goods. In times like these, it is imperative that both countries should have a joint strategy to counter these moves. If other Saarc members are affected or could face the same situation, then these countries should also be part of the joint strategy.
In 2014, European Union would decide on the new GSP+ policy. It is proposed that Saarc countries must institute a joint strategy so that no Saarc nation is discriminated vis-à-vis another Saarc nation. Pakistani people must understand that trade between the two nations would not dilute Pakistan's influence nor make it dependent on its big neighbour. On the contrary, Pakistan can rightly benefit from its proximity to India. Pakistan is one of the world's largest consumers of tea while India is one of the largest growers of tea. Pakistan needs industrial machinery especially to develop its small and medium enterprises and India has tried and tested machinery and equipment that bring about a mini renaissance in SME sector. Pakistan's rice industry can go value-added once it gets out of the mindset of exporting just the basic staple instead of enhancing value through various processes. Pakistan's textile industry can remarkably benefit from procurement of raw cotton, from textile machinery, from textile dyes and chemicals, and from designs and technical collaboration in apparel and made-ups.
To enhance trade, it has been decided to allow designated banks to open branches in each other's country. This should be further liberalised so that Pakistani private banks can open branches in some of the major business-oriented cities of India.
Liberalized environment
It is high time both India and Pakistan liberalise their strict visa policy so that there is a favourable people-to-people relationship through unshackled movement from one country to another. In the first instance, multiple, one-year visas for genuine businessmen should be issued in a faster mode and restrictions on visiting more cities must be removed. Furthermore, the limit on issuance of Saarc visas be liberalised and each country should allow up to 500 such visas every year.
Cross-border trade is ideal if there is uninhibited movement of people, goods, and investments. Too much security paraphernalia or even security phobia would retard cross-border trade and would discourage businessmen. Interrogation and undue harassment of genuine businessmen visiting each other's high commissions should also be discouraged and relaxed.
If and when Pakistan allows transit trade for Indian goods to Afghanistan, the prudent method would be adequate security and safeguards so that goods destined for Afghanistan do not detour to warehouses in Pakistan.
It is incumbent upon both India and Pakistan to discourage and tackle undocumented or informal trade with a heavy stick. At this moment in time, Pakistan is open market for over $2 to 3 billion worth of Indian goods through non-reportable channels. This is a serious blow to Pakistan's domestic industry, such as value-added suiting and shirting fabrics that come through Dubai. A voluminous amount of consumer goods, such as soap, cosmetics, medicines, tobacco and different concoctions of betel nuts and mixtures also make their way into Pakistan. Some of these are health hazards and people have become addicted to these products.
There is a need to decide on a negative list of imports from one another rather than beefing up the positive list. Both the countries must ensure that a pragmatic list be agreed upon, one that would not seriously affect the viability of an existing industry in any of the two countries. It is proposed that the automotive vending industry, the polyester filament industry, the pharmaceutical industry, the PET industry, etc must have a level playing field since these sectors have a massive investment structure and viability must be maintained for a certain number of years. Most of Pakistan's industries do not enjoy economies of scale compared to Indian counterparts and the prime reason being the huge market in India than in Pakistan.
India has accorded the Most Favoured Nation status to Pakistan over fifteen years ago while Pakistan has been hesitant in responding positively to the Indian demand to reciprocate. Pakistan has successfully countered this by insisting upon India to ease up on NTBs. However, one paramount confidence building measure announced by Pakistan has been an indication that the MFN status would be accorded to India probably in November 2011. The high-profile Foreign Ministers meeting in India recently, which was a debut for Pakistan's youthful lady Foreign Minister also paved the way for this status to become a reality.
Optimism and hope
After over six decades of intense hostility, of wars and incursions, of lack of trust and orchestrated hype of jingoism, of accusations and point-scoring at international forums, of brandishing nuclear superiority and neglecting social responsibilities, and unduly restricting people-to-people contacts, hindering families to be with one another, and holding trade and investment as a pawn in the chess game of brinkmanship, the new thinking is that it is time that the needs and aspirations of the millions who call the Indian sub-continent their home are held paramount and scarce resources are channelized to make life better for them.
It is primarily through trade and investment that the objectives can be achieved. It is for sure that only through a progressive economy that both the countries can bring about peace and prosperity in the whole region. It is definitely a fact that the Pakistani and the Indian businessmen, industrialists, technologists, service providers, and entrepreneurs can and will make the difference. This is the optimism. This is the hope. This is the prayer.
Fasilah-e-shehr mein paida kiye sub darr mein ne
Kisi bhi bab-e-riyaat se mein nahin aya
(Concluded)
(The writer is former President Karachi Chamber of Commerce and Industry)
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