Real talk: Perceptions of India-Pakistan trade

Recent months have seen unprecedented progress on trade relations between India and Pakistan. Last November, Pakistan granted India “most favored nation” (MFN) status, fifteen years after India added Pakistan to its MFN list. On April 13, India announced that it would allow foreign direct investment (FDI) from Pakistan. And on the same day, a historic integrated checkpoint opened at the Attari-Wagah border crossing, which will allow commercial traffic and trade to flow between the two countries.

Additionally, Pakistan has replaced its positive list allowing only 2,000 different items to be imported from India with a negative list that bans just 1,209 goods, but allows all others. Currently, this list prohibits trade of items in industries such as agriculture, chemicals, and ceramics, but the Pakistani government pledged to phase out the negative list by the end of this year, thus allowing all Indian goods into Pakistan.

Some in Pakistan welcome the normalization of trade relations between India and Pakistan, while others are skeptical of how it may pan out.

Chaudhry Azhar’s family has been a wholesaler of bananas and mangoes for over 30 years, a tradition Azhar continues today at Lahore’s largest vegetable and fruit market, Badami Bagh Mandi. “This trade agreement will affect us a lot,” he says. “India is giving subsidies to all items, such as free electricity.  Our farmers will be at a loss and India will benefit from us. We cannot compete with their subsidies.”

Opening the border to Indian crops that are supported by large subsidies might put Pakistani farmers at a disadvantage, but some traders are grateful for the option of importing a better product from their neighbors. Among the bustling sounds of vendors hawking their wares, one of Azhar’s employees, Haji Mohammad Akram, proudly shows the bananas that have come from India, and compares them to the ones from Pakistan that have rotted due to bad weather. Increasing the ease with which the two countries can trade will allow vendors to be more selective with their products.

Most business owners agree that bilateral trade will only be effective if Pakistan imports goods that they don’t have, though. Saleem Khan brings oranges, apples, and grapes from Balochistan to sell in Lahore. But he says, “We imported oranges from Iran even when Pakistan had supplies of it. The Government benefits the exporters of other countries and hurts the local farmers.”

Wholesalers worry that India’s larger, more powerful economy will allow it to export goods that Pakistan already produces, such as bananas and oranges. But there appears to be an understanding that India might be able to provide goods and services that are sorely lacking in Pakistan. Nadeem Kambo, a broker at the market who favors the trade between India and Pakistan, suggests getting electricity from India. He says, “If we do not get items that we need from other countries, then what do we have here?”

Similarly, the President of Lahore Chamber of Commerce, Irfan Qaiser Sheikh, supports trade between regional and bordering countries but understands the reservations and concerns brought by local business owners. “We are not in favor of opening trade at the cost of our industries,” says Sheikh.

The biggest impact of some of the potential trade policies will be on the farmers that grow the crop and sell it to the wholesalers. Mohammad Qasim, a wholesaler of onions and potatoes says, “This will affect our farmers a lot. If we look at it from a trading perspective, we will get something in return of giving something. We should get the things that the farmers need in return for what we give them.”

At the Lahore Chamber of Commerce, Sheikh says they have done their homework on the matter, but he also understands that the Government needs to address the key concerns and take an active role in the normalization of trade relations in order to move forward on an even playing field with India. “We really need to address all core issues once and for all to achieve the desired results.”

Mian Anjum Nisar, a local manufacturer, believes some Pakistani industries, such as home textiles and certain raw materials that are not available in India, would benefit from expanding trade relations. Faisalabad is known for its competitive producers of cotton and textiles, which would undoubtedly find eager markets for their products in India. However, Nisar worries that Pakistan as a whole may not be able to benefit in the long run. “India’s scale of economy is far bigger than ours.” Nisar says.

He also says that the difference in the tariffs levied by India and those levied by Pakistan will also play a big role. Currently, India’s peak tariff on Pakistani goods stands at 8%, while Pakistan has placed 25% tariff fee on Indian goods. Under the Trade Liberalization Plan (TLP) of the South Asian Free Trade Agreement (SAFTA), India and Pakistan must bring tariffs down to between zero and five percent this year. In order for Pakistan to meet that deadline, the 25% tariff would need to be cut quickly and dramatically, which would likely come as a dangerous shock to the domestic manufacturing industry.

Tariffs are not the only challenge, though. India’s non-tariff barriers are widely recognized as significant impediments to efficient, cost-effective trade. Sheikh sees this as a major concern in moving ahead with bilateral trade. He says, “India has got to remove the non-tariff barriers that they have imposed on Pakistan.” Non-tariff barriers are non-monetary policies that raise the risk or cost of exporting goods to a country. India has, for example, certain standard approval laboratories where certificates must be issued to goods before they can clear the border. This procedure is lengthy, and the rejection of just one product can endanger an entire consignment.

Haris Naseer, the Director of Marketing at Infotech, an IT company based in Pakistan, considers logistics and visa requirements to be his main concerns, while having more items available for import from India will be beneficial. “In the technology industry, since there is not as much of a physical movement of goods, and due to the new visa requirements, it will be easier to move resources from one country to another.” Under the revised visa requirements, businesspersons can be granted multiple-entry visas, and permission to visit up to five different cities. Previous business visas for citizens of India and Pakistan required extensive paperwork, and only allowed visa-holders to visit three cities.

The traders in Lahore are not very optimistic about the prospects of normalizing trade relations with India, though many acknowledged the potential benefits of such a development if it is done the right way. Pakistani authorities will need to address this apprehension in order to get the critical support of small businesses in their effort to reopen economic borders with their neighbors.

Aisha Chowdhry is a freelance journalist, born and raised in Lahore, Pakistan. She has covered stories from Afghanistan and Pakistan for USA Today, Radio Free Europe/Radio Liberty and The New York Times among other publications. You can follow her on Twitter @ aishach