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Trade and Trust | Dr Kamal Monnoo

Trade and Trust | Dr Kamal Monnoo

One of Nawaz administration’s underrated virtues is its keenness to enhance Pakistan’s trade. Yes, there are of course, critics who sometimes see deception and sinister ulterior motives when it comes to trade with India, but they are just projecting. The truth is that, in the trade policy areas I follow, the PML-N has been remarkably clear and straightforward about what it is they want and why, when it comes to enhancing economic linkages in the neighbourhood. Now whether or not you agree with them or with their approach is altogether a different story.

Still, I don’t know why this leadership has chosen to liberalise trade and economic linkages with India on such a priority basis and that too without doing proper homework on the subject; the last trip to Delhi earlier this year by the Commerce Minister to move post-haste with the NDMA (Non Discriminatory Market Access), later with the added acronym RB (on a Reciprocal Basis), was rather premature and quite ill timed, to say the least. Still, there is an argument to be made for fast-track Indo-Pak trade liberalization deal, and some reasonable, well-intentioned people are supporting the initiative. But other skeptic yet well-intentioned people have serious questions about the government’s approach in this case. And I would have expected an answer made in good faith to those questions. Unfortunately, that’s not at all what has been happening. Instead, the selling of the trade liberalization and explaining the pros of enhancing economic linkages with India has the feel of a snow job. Officials have evaded the main concerns of the industry and farmers about the content of granting NDMA to India; they have belittled and dismissed the critics; and supported by some international lobbies and lending institutions they are freely making blithe assurances that are likely to turn out to be untrue. Strangely, the government’s main analytical defense of such a trade endeavor does not actually analyze the gains and losses resulting from further liberalization of bilateral trade between Pakistan and India, but it instead simply focuses on virtues and benefits of free trade, which by the way in our particular case may be irrelevant in prevailing economic scenario in many sectors.

The reality is that not just in the context of Pakistan and India but even from a SAARC perspective, initiatives on further freeing up trade in South Asia or between specific SAARC countries to promote overall intra-regional trade – say between Pakistan and India or Bangladesh and Pakistan or India and Bangladesh, etc – without first entering into comprehensive agreements on regional (SAARC) trade as a whole, will just not help. In fact, a push without first creating a comprehensive mechanism to ensure equitable trade will just be counter productive. India already enjoys favourable trading accounts with all SAARC countries and unless this is checked collectively, India on its own has little or no interest to adjust the current regional trade equation in a way that makes trade within SAARC more fair – and the case of bilateral Indo-Pak trade is no different. The trust deficit does not end here. There is a large number of Pakistani experts on security, defense and foreign affairs who genuinely believe that the trade between Pakistan and India cannot be left on auto-pilot.

They feel that unless the proposed NDMA status and the liberalised trade arising from it are managed very closely the negatives for Pakistan will far outweigh the positives. In their opinion, aside from the concerns on an absence of or a rather compromised Pakistan’s internal defense mechanism in the spheres of health, seed development, yields and export competitiveness, there prevails a sense of skepticism over the Indian double game. They argue that while we hear about the underlying potential of the flow of goods across the borders, not a word is said by India about the necessity of creating long term important linkages such as technology transfer, joint resource management mechanism, cross border investments, financial connectivity, regional anti-trust treaties, equal opportunity on the regional platform, and on devising joint regional legislations for rules of doing business – Mr. Modi’s recent minus one formula in SAARC workings lends further credence to such Pakistani concerns. More importantly, there are also some valid concerns on the very efficacy of further enhancing the trade quantum between Pakistan and India and perhaps some valid ones too! First, whatever you may say about the benefits of free trade, most of those benefits have already been realised and further liberalisation in its current form can only help India and not Pakistan. And second, as I see it, the big problem here is one of trust. International economic agreements (including bilateral or regional) are, inevitably, complex, and you don’t want to find out afterwards that a lot of negative points had been incorporated into the text. India, as we know has a history of either being clever with the ‘finer print’ or simply reneging on its promises made at the time of signing agreements; a recent report by CUTS International and India’s behaviour in WTO Geneva meeting in 2014 bear testimony to this. So given this Indian past, you naturally want reassurance that the people negotiating the deal are, a) competent and b) listening to valid concerns of the real stakeholders. Regrettably, the present governmental team responsible for negotiating international trade deals falls short on both these counts.

Now this in no way implies that trade between Pakistan and India should not be encouraged. What it means is that there is a fine line between laudable perseverance and a stubborn refusal to admit that change is needed. A change in the way trade is conducted between these two countries and more importantly a change when devising the way going forward. While in theory it may be very well to promote overall deal-making on all trade, but the reality is that attempts to liberalise trade that covers everything have failed. It is now time to consider concentrating only on those specific areas that can provide a win-win for all stakeholders in the selected sector(s). Meaning the all-encompassing endeavours at expanding Pak-India trade in general should be ditched for the time being to instead pursue a number of modest initiatives covering only specific industries/sectors. This would also cut the possibility of gamesmanship in the Indo-Pak trade talks – of the sort Mr. Modi displayed at the WTO forum in Geneva. Significantly, it will be a departure from the way these countries have conducted trade negotiations thus far; in essence, a departure from ‘grandiose’, signaling a prudent message: ‘To not let the bulk be the enemy of smaller good’, because it is better to have some trade expansion on a sustainable basis than none at all.

Trade and Trust | Dr Kamal Monnoo

Source: http://nation.com.pk/columns/08-Jul-2015/trade-and-trust

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