Negative trade balance is not a deterrent for bilateral trade, says a reply of Federation of Indian Chamber of Commerce and Industry on India-Pakistan economic relations issued in May 2005. The report notes that in Pakistan's trade with top trading partners, including Germany, Japan and Dubai, over the years there has been a negative trade balance. Yet they continue to remain among top trading partners.
This is because the increased imports from some countries may add to the export capability with other countries and provide inputs at competitive rates to enhance productivity of the local manufacturers.
Hence, in the overall scenario a country's economical conditions may get better off by trading with countries even though it may have a trade deficit with them.
Similarly, India has a negative trade balance with three out of its four top trading countries including USA, UK, Belgium and Germany.
USA runs a deficit with most trading partners, which does not discourage it from engaging with them. China has a trade surplus against the US.
This doesn't indicate economic subjugation. On the contrary it indicates vibrancy and a leashed domestic demand waiting to be harnessed and catered to.
The report says that trade is beneficial for both developed and developing countries. It is through trade that countries can chart a path to sustainable development and a higher standard of living.
Globalisation has brought in new opportunities for developing countries. Greater access to developed country markets and technology transfer hold promise of improved productivity and higher living standard. During the last fifty years, the volume of world trade exports has risen twenty-fold and the volume of world manufactured exports almost forty-fold. In the last three decades, merchandise exports of developing countries have grown at an average rate of 12 percent per annum.
Manufactured exports accounted for 70 percent of developing countries exports at the end of 1990's and 30 percent of world manufactured exports.
The global markets therefore present an excellent avenue for developing countries to participate in the benefits of buoyant trading environment. The report says that bilateral trade and investment would be a win-win situation for both India and Pakistan. Two principal groups, consumers (lower prices) and the government (greater customs duty revenue from legalising illicit border trade), will benefit from this liberalisation.
Important segments of producers will also benefit because of increased competitiveness and market access to the much larger Indian economy. Inefficient producers will need to restructure and increase competitiveness to stay in the market. This readjustments is happening world-wide and is a natural consequence of liberalisation.
Pakistan can act as a bridgehead for India's contact with West Asia, Afghanistan and India as a corridor for Pakistan's contact with South Asia. Pakistan can resume its traditional role of a bridgehead between India and Central and West Asia. By this Pakistan can leverage its strategic advantage just as India can provide a contact to Pakistan with the South East Asia.
The private sectors of both India and Pakistan can join hands to leverage business opportunities in West Asia, Central Asia, as well as the South East Asia.
The report says that the biggest benefit of all this is that improved trade relations will create constituencies of peace in the two countries. As the economics become interdependent and integrated with benefits accruing to industry and consumers, the bilateral relations shall be guided more be commerce than politics.
If France, British and Germany can forget the animosities of the world wars, there is no reason why India and Pakistan should not treat their past as history and move forward to belong to the new world where economic synergies are eliminating hostilities and borders, turning the world into a global marketplace.
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