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TRADE WITH' INDIA

AMD PftK

AMD

AT the time when Pakistan is passing through severe economic crisis, and corrective
measures are being set in motion, the question of opening of trade with India has cropped
up and receiving a great deal of attention of government, businessmen as well as national
media. There has been two major developments in recent months which has driven us to
focus our attention on this vital issue. The establishment of World Trade Organisation, a
global trade body to oversee the world's trade and economy and serve larger interest of all
member countries by implementing GATT principles of free trade. There has been
distinct change in the operation of GATT and WTO. The WTO charter empowers the new
organisation not only to regulate trade but also to promote stronger integration of trade by
assisting in interdependence in trade between developed and developing countries of all
regions and continents and make positive contribution to the globalisation of world
economy.

The second development is confined to SAARC region by way of ratification of SAPTA

(South Asia Preferential Trade Agreement) by all member countries of SAARC (South
Asia Agreement on Regional Co-operation).

Pakistan's role as member of both WTO and SAARC has to be positive and result-
oriented in terms of achieving growth in economy as well as; lo.ng-term export. The
adherence to the rules and discipline of WTO is pre-rcquisite to avail all the benefits for
accelerating global trade and economic stability as WTO is actively supported by the
World Bank (WB) and the International Monetary Fund (IMF) for fulfilling its character.
Deviation from WTO Rules will create obstruction in development of global trade.

Viability of the WTO lies in its implementation of principles

6f development of international trade without any restraints, trade in services, promotion
of investment under framework of international rules, safeguard of intellectual property
and the most important' aspect being to protect and preserve environments. To achieve-
khese objcctiv^siflot only member states have been alerted308

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to fix time-table for implementing the rules but non-member states like China, Russia and
Eastern Europe countries have been persuaded to join WTO for enlarged cope of
international agreement on vital issues affecting global trade and environment. "No
reservations may be made in respect of any provision of this agreement." countries not
complying with the rules of the game can only withdraw from the WTO after giving six
months' notice.

There is, however, a safeguard available for Pakistan under the G/.TT rules, if India of
Pakistan so desire to abstain from implementing all provision of the new World Trade
Order. 38 Articles of GATT 1947 have been integrated into GATT 1993 without change.
WTO has been set up to implement the provisions of the GATT 1994, which include
these 38 Articles and adopted by WTO without change. Article 24, paragraph eleven
deals with this special arrangement of trade between Pakistan and India with read . as
under:

"Taking into account the exceptional circumstances arising out of the establishment of
India and Pakistan as independent states and recognising the fact that they have long
constituted on economic unit, the contracting parties agree that the provision of this
Agreement (i.e., GATT) shall not prevent the two arrangement with respect to the trade
between them, pending the establishment of their mutual trade relations on a definitive
basis."

Should Pakistan invoke Article 24 and take shelter behind special provision incorporated
in GATT 1947 and 1994?

Since independence of the Subcontinent, Pakistan and India have been locked into
confrontation on Kashmir issue. None of the country has shown flexibility in its stand on
Kashmir which brought catastrophe to one billion people of the Subcontinent and almost
half the population in both the countries still live below poverty line after
48 yeas of independence, facing three wars and major portion of their revenue eaten-up
by expenditure on armaments. Politicians on both sides of the border thrive on arousing
public feelings and playing with emotions of the people so as to retain their seats of
power.

India has well organised self-sufficient industrial sector and produces abundant industrial
products, engineering goods, electronics from indigenous raw materials. Labour wages
and electricity tariffs are lower and cost of *vc!l knit transportation and services are
competitive. The proximity of Pakistan border gives additional advantage both in cost of
transportation and shorter delivery schedule reducing financial burden on interest rates. In

short, India has great depth in its economy and provide competitive base for quality
products to meet Pakistan's requirements of various in-puts for re-export.

Pakistan's economy is import-oriented and depends heavily on sizeable imports from

world-wide sources. With the fever of competitiveness catching momentum. Pakistan
exports will be coming under increased pressure for reducing costs. For an
importoriented country like Pakistan, devaluation will never provide remedy to our
economic ills as its results in increased cost of inputs and inflation. The best course for
Pakistan lies in achieving higher degree of efficiency, quality control and cost
consciousness, Imports from India meet some of these criteria and Pakistan should take
full advantage of open trade with India and step up productivity for reducing cost of
production.

There are apprehensions that with influx of imports, Pakistan's industries will face
competition and some of our industries will close down if we continue to rely on this
theory, Indian exports to other Far Easter, African and Middle East countries will equally
pose a similar problem to Pakistan's export base,

For past forty years or so, our industries thrive on protection and little has been achieved
by our industries in maintaining competitive edge by adopting measures to control cost,
quality and efficiency. Our industries has not bothered to provide vocational training to
improve skill and productivity as their sole objective of high profitability was met by
protection. In the New World Trade Order, they have to use a!! their business acumen for
survival to achieve higher productivity at lesser cost, Vietnam, Laos, Cambodia, Eastern
Europe and Latin American countries are in the struggle to seize South Asia trade and
once, our grip is loosened, it will take years to re-establish our markets.

Our industrialists and exporters should not lose sight of the fact that India offers market
of 910 million consumers and we have equal opportunities to penetrate deep into Indian
markets by concerted efforts and building additional capacity to enhance productivity.

Even if our government delays decision for trade with India, unofficial trade continue to
prosper. Industries are already target of Indian goods through smuggling. Official trade
will provide additional revenue and also awaken our agriculture and EndustriaS soctoss
to challenges from India and evolve strategy to cope up with

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the situation. The crisis will soon be overcome as we arc .bound to turn balance of trade
in Pakistan's favour.

Pakistan's Spinning Industry has been lagging behind in production of fine counts yarn
and plants are not tuned to production of fine counts with the result that domestic and
export markets are not built up for that specific requirements. Gradual imports of fine
counts from India at very competitive prices will pave the way for our ancillary industries
to enter world market with diversified value-added cotton made-up and garments. Our
Spinning Mills can pick up when domestic demand for local consumption as well as
export justify their switching over some of their spindles to fine counts.
Textile processing is getting more and more uneconomic. Imports of dyes and industrial
chemicals from India at aimost 40 per cent less cost will bring them back to rated
capacity production.

Short fall in our food grains is placing increased burden on our foreign exchange because
of withdrawal of subsidies under WTO. Indian prices require to be studied in the light of
our traditional source of supply and whenever we could save on cost and transportation,
our government must finalise deal with India to save foreign exchange as well as
expediency in supply.

SAARC is the beginning of the regional co-operation of countries of South Asia. But
greater collaboration is in the offing in the form of Indian Ocean countries economic
plan. At the Indian Ocean Businessmen Rim Conference held in New Delhi on 12-13th
December, 1995, the delegates were of the opinion that formal shape of the trade bloc of
Indian ocean countries should be givers by 2002.

The countries of South Asia, Africa and Indian Ocean Rim are seeking greater integration
of their trade beyond their geographical boundaries to achieve economic stability, higher
percentage of employment and environmental p otection.

Pakistan has still to play greater role in freeing trade with all countries including India,
and must adopt a more pragmatic approach for long-term benefit and welfare of its
people, rather than guard interest of small vested interest.