Prospects bleak for economic issues at summit

By Sushma Ramachandran

NEW DELHI, JULY 9. Even as the rhetoric on Kashmir accelerates in the run-up to the Indo-Pakistan summit, the fate of talks on critical economic issues hangs in the balance. With their Commerce Minister's presence at the meeting uncertain, the prospects of Pakistan giving MFN status to India are receding and the existing minimal bilateral trade and investment is set to reach a plateau.

The only economic issue about which Pakistan appears to be enthusiastic is the multi-million dollar Indo-Iran gas pipeline project. Reports from Islamabad indicate that the project may be put on the agenda even though India earlier had reservations about the security considerations involved in an onland pipeline. India has now agreed to a feasibility study, giving hope that the project may ultimately become a reality.

As for trade and investment, the first step has to be taken by Pakistan as India has already given MFN status as per guidelines of the World Trade Organisation. Successive Indian Commerce Ministers have threatened to launch complaints with the dispute settlement mechanisum of the WTO against Pakistan defying the basic norms of this multilateral trade body. But it is much clear that the grant of MFN status is tied to improved political relations between the two countries and any resolution through the DSM is not likely to have much impact on Pakistan. Thus, India has so far not tried to open another front at the WTO and is instead relying on bilateral negotiations to resolve this nagging problem.

Industry sources said bilateral trade has been bogged down for decades by the fact that Pakistan has fixed a list of only 573 items for import from India. This was raised marginally to 600 in the second round of SAPTA negotiations. The decision to limit trade to a restricted list of imports has hampered bilateral trade through the official route. In contrast, as is well known, Pakistan imports every year as much as one billion dollars roughly of Indian goods via West Asia. This is as much as five times the official trade of about 200 million dollars annually.

Industry representatives note that by limiting trade in this manner, Pakistan has lost a huge amount of revenue which could have been mobilised by leving tariffs on direct imports from India. Even Pakistan industry is aware of the benefits that could flow by enhancing trade ties with its larger neighbour. In fact, a study on freer trade in India prepared by the Karachi Chamber of Commerce and Industry in 1997 says that extending MFN status to India will be highly beneficial to Pakistan's economy. Imports of iron ore, machinery and steel products, chemicals and dyes will meet Pakistan Industries' requirements for capital goods, raw materails and other manufacturing inputs at lowest possible resource cost. It will also benefit from import of wheat, spices, tea and other agricultural products at competitive prices. Besides, it can export products like cotton yarn and textiles, leather products, surgical instruments, electrical fans, water coolers, paper, vegetables and fruits.

Apart from the fact that a large number of products can be mutually traded, the opening up of the economy to India would help Pakistan's industries modernise and meet the challenge posed by rapid globalisation. Instead of facing the pressures of competition from multinationals, industry could streamline operations with assistance from Indian companies.

None of this is possible, however, without Pakistan taking the basic step of extending the MFN status to India or discussing prospects to increase bilateral trade even in a gradual manner. With the focus being exclusively on Kashmir, it looks as if these important economic questions may be raised only peripherally though these should be the basic areas for discussion among the countries in the subcontinent. Analysts have for long been arguing that India and Pakistan should take a tip from France and Germany who buried their animosity by entering into a coal and steel economic agreement which metamorphosed into the European Economic Community (EEC) and then the European Union (EU).

The coming summit had initially raised hopes that some steps might begin in this direction. But reports reaching here now indicate that tunnel vision is prevailing and Kashmir may be the only area clearly visible at the talks.

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Section  : National
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