Ever since World Bank has released its report “A Glass Half Full: The Promise of Regional Trade in South Asia”, every journalist and media outlet seems to be touting the benefits of Pakistan India trade. The report shows that without trade barriers, the potential for trade could be $37 billion.
How much of $37 billion trade would comprise of imports from India versus exports? This is a question that the report does not answer. Currently Pakistan already has a trade deficit of $1.4 billion with India, since its exports comprises of $400 million whereas imports are $1.8 billion.
Furthermore, these statistics are limited to formal trade whereas the report estimates informal trade to be at around 91 percent. Nearly doubling formal trade indicates that Pakistan’s actual trade deficit with India is around $2.7 billion; roughly the same as Pakistan’s trade deficit with Saudi Arabia, a country Pakistan imports oil from. To put this in context, at nearly $3 billion India is among the top five trading partner with whom Pakistan has the highest bilateral deficit.
Though India may not be as big a global exporter as behemoth China, at $300 billion it still accounts for nearly 2 percent of global exports. Opening up to China led to a nearly $10 billion deficit with exports a paltry $1.7 billion. Keeping the unique circumstances of Afghanistan aside, Pakistan has a trade deficit with all its neighbours. Would it be wise to consider lowering trade deficit barriers now or in the future given that Pakistan is considering going for an IMF bailout again?
Pakistan is not the only SAARC country with the propensity to rely more on trade with the west than on the east for its exports. As the report highlights, the South Asian trade regimes all tend to discriminate against neighbours with India and Pakistan taking the lead.
Even in this, India’s trade restrictiveness is higher as evident from the 0.1 percent share of Pakistan’s exports in India’s total imports. India’s overall trade restrictive index for South Asia is at 4.59 as compared to 0.5 for the rest of the world. Whereas Pakistan’s index is at 3.0 for South Asia and 0.51 for non-South Asian countries.
Various businessmen have tried their hand at exporting to India, often routing from Dubai. Several accounts concur those products labeled “made in Pakistan” fare worse than their imported or local counterparts, regardless of superiority of quality. One trader in particular highlighted the better blade span of Pak fans as compared to the local popular brand of Ram Shyam. Yet local consumers still opted for the religiously named Indian brand as compared to one named after the neighbouring country.
The practicality of trade raises several questions too. Indian cricketer Sidhu was unable to hug Pakistan’s army chief without being labeled at best unpatriotic and at worst as a seditionist whose effigy was burnt. PM’s call for talks on the sidelines descended into a snarling match rendering the SAARC meet meaningless as its two biggest member countries refuse to play along. Such enmity does not endear one to lower trade barriers.
That is not to say that trade with India will not be beneficial, it could be. But for that it would require setting aside of prejudices and negotiation skills strong enough to wrangle more concessions out of India than offered. Given Pakistan’s history with trade agreements and negotiations, does anyone really expect that to happen?
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