It has been in the making, or rather remaking, for years. But this year, the often estranged neighbours will give each other the present of formalised trade once again as the transit trade agreement between Pakistan and Afghanistan takes effect.
Public discourse, ministerial deliberations and summits from the leaders of both countries have resulted in the ironing of many thorny discussion points on the agenda as far as APTTA goes. The pressure and persuasion from Uncle Sam have been ever present through the process.
Despite having a reputation from nursing their wounds post negotiations, this time around Pakistani trade diplomats have been successful in gaining ground on more issues than many observers had expected of them at the outset. Credit must be given where it is due.
First off, the credit lines that finance the trading will now originate in financial institutions in the destination country for transit trade goods. The long standing practice of using LCs from Pakistan was often cited a major facilitator for financing terrorism in the ongoing war on terror. US authorities will be better able to monitor the flow of trade funds.
A higher rate of examination of containers being transported from Pakistani ports will be possible. Custom officials will be able to examine up to a 100 percent of all non-sealed container traffic. Dumping activities related to Afghan transit trade result in losses of more than $2 billion annually to the national exchequer.
Where a breakthrough could not be achieved was the issue of collecting customs duties in Pakistan, only to be released once the goods had been received on the correct side of the border. Afghan diplomats rejected the demand in a recent round of debate.
The most challenging point on the agenda, which remains unresolved at the time of writing this note, is the need for harmonisation of tariffs in both jurisdictions. Transit trade goods are duty free while those meant for consumption within Pakistan involve significant tariffs.
BR Research has previously documented that back of the envelope calculations reveal a differential of about 20 percent due to different tariffs on either side of the border, too mouth watering an opportunity for Pakistani traders to pass up.
Execution capabilities will be the real challenge for the trade authorities in both countries. It is all well and good to make progress on paper, but if the same cannot be translated into concrete actions, the whole exercise is a waste of important resources.
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