Long-standing trading relationships may fail to result in balanced growth for trading partners if the interests of both are not addressed adequately. Such had been the case under the Afghan Pakistan Transit Trade Agreement (APTTA).
For decades, Pakistan had allowed its territory to be used as a thoroughfare for goods to be consumed in the land-locked Afghanistan on a duty-free basis.
In return, Pakistan has long demanded access to the Central Asian markets through the Afghan territory.
Credit must be accorded to the negotiators in the Ministry of Commerce for extracting this concession in the most recent iteration of negotiations for the renewal of the trade agreement.
"Central Asian markets offer a great opportunity for the Pakistani business community," remarked Rasheedudin Rashid, Vice-Chairman KCCI. He said the textile sector and the leather industry would be among the potential benefactors.
At the same time, the region is heavily endowed with energy resources that may find a route to the world through the ports of Pakistan. Presently, most energy exports from Central Asia are channelled through Iran. The Pakistani route is 1,100 kilometers shorter and hence quite attractive.
Afghanistan will also be allowed to transport its exports to India through the eastern land border at Wahgah. But Indian goods will not have access to Afghanistan through the same route.
A quick review of trade between Afghanistan and Pakistan suggests that the trade balance is heavily skewed in Pakistans favour. Imports from Afghanistan have averaged $13 million from a quantum of $848 million for the past seven years. Afghan exports include mainly fresh and dried fruits.
Control mechanisms for trade in the region, restricting transportation of goods on the negative list, arms and drugs must be checked by customs authorities in Pakistan. Also, it must be ensured that illegal Indian goods don make their way through the 600-kilometer land route to Pakistani and Afghan markets.
PM Gilani has directed the FBR to work on tariff harmonisation between Afghanistan, a recommendation which BR Research had made in these very columns. Such measures are likely to reduce the flow back of duty-free goods destined for Afghanistan into the Pakistani markets.
Additionally, arrangements may be made to charge duty on goods once they land in Karachi to be refunded once trucks cross the Torkham border in Afghanistan. It would increase the cost of illegally dumping goods into Pakistani markets.
Trade talks invariably involve complex bargains. The devil always lies in the details. Negotiators from Pakistan must make the most of its strong negotiating position to look after the best interests of the countrys economy.
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