In an International Chamber of Commerce report, both Pakistan and India have been clubbed together in "below average openness" section with regard to trade openness. In the ICC report, India is ranked 64 with trade openness score of 2.5 which puts it in "Below Average Openness". Pakistan is not too far and placed at 69 position with an aggregate score of 2.1.
The only difference between the two countries is that Indian government, over the period of time, has built adequate protection mechanism by employing range of tariff and non tariff barriers. With the result that now every sensitive sector in India like automotive, agriculture, textiles and pharmaceuticals are now adequately protected by means of WTO compliant tariff and non tariff barriers.
On the other hand, Pakistan Government has not done enough so far to protect its critical sectors and as a result they remain highly exposed in case Ministry of Commerce decides to open trade with India. The ICC grades nations in four broad categories: trade openness, trade policy regime, openness to foreign direct investment (FDI), and infrastructure open for trade.
According to stakeholders, it makes it a very interesting study for someone in our commerce ministry as to how India is protecting its local auto industry. Importer needs to acquire certain permissions from Indian government for importing CBU vehicles into India which requires that the incumbent has to go through a long bureaucratic process whereas in Pakistan anyone can import any vehicle new or used.
The basic import duty for importing a vehicle into India is 60 percent, additionally there are various Para-tariffs/state taxes taking the cumulative duty up to 100 percent. This does not include the registrations stage taxes which increase the total cost of ownership further. Whereas in Pakistan the CBU duty starts from 50 percent only up to 75 percent maximum.
In addition to Para-tariff, all imported vehicles need to go through strict homologation process which tests the vehicle against various standards set by Indian government. The standards pertain to vehicle safety specifications/rating, emission standards, vehicle noise standards, fuel consumption standards etc. On the contrary, Pakistan doesn't have any such vehicle checking procedure or standards making it easier for importer to import any make of vehicle without any checks. Similarly, auto parts also required to go through extensive testing procedures making it almost impossible for any importer to penetrate into Indian auto parts market. At times, the standards for locally manufactured parts and imported parts are different which clearly implies protection for local manufacturers.
Moreover, everything from tyres, steering and headlamps to engine brakes and suspension is to be checked by Indian agencies which take ages to be completed as there are only three agencies; Automotive Research Association of India (Pune), Vehicle Research & Development Establishment, Ahmad Nagar, and Central Farm Machinery Testing & Training Institute , Budni. None of them is located close to the entry points.
India also restricts import of CBUs from only two ports of entry which essentially is a process related barrier. By doing so, India makes it expensive/difficult for importer to access main markets where there is more demand. The other big reason for Pakistan's auto sector being unable to export products to India is the strictly adhered emission standards. India follows Bharat IV, while Pakistan has moved to Euro II standards. To be able to produce level IV cars the Pakistani companies will have to disassociate from the global trends, which is not viable for Pakistan at the moment.
It is worth mentioning here that Bharat IV emission is considered technical barrier to trade by other competitive industries in the world because of its uniqueness for it requires vehicles to be produced specifically for Indian market. Another national trade barrier (NTB), which is still not addressed, is the restricted entry to Pakistani nationals which is something Indians have always trumpeted to be relaxed but no major development has been seen in this regard. Pakistanis have only three entry points into India: Mumbai/Delhi/Chennai (By Air), Attari / Munabao (By Train) and Attari (By Bus).
Interestingly while the points of entry for individual and cars are restricted the checking authorities are situated in entirely different cities which becomes difficult for foreign companies to pursue their products case. These smartly and intelligently placed NTBs are not only difficult to deal with but also impossible to match also. Our exports have, therefore, seen negligible increase in the last 16 years.
Stakeholders said cement industry can serve as an eye opening example, where exports, despite having good reputation and high demand in Indian market, have been failing to gather pace and witnessing a continuous contraction due to non-resolution of NTBs which stand in the way of increase. According to All Pakistan Cement Manufacturers Association (APCMA) statistics, cement exports to India stood at 786,672 tons in 2007 to 08, a number which witnessed steady decline to reach 722,968 tons in 2009 to 10. In 2010 to 2011, cement exports to India further decreased to 590,104 tons despite talks on removing the negative trade list between the two countries. However, exports recorded a slight increase in 2011 to 2012, reaching to 605,453 tons. FY 2012-2013 ended with lowest exports figure of 482,215 tons, showing negative growth in cement exports by 20.35 percent.
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