Pakistan must weigh the risks and benefits of opening trade with India. This was upshot of the speeches delivered at a seminar on “The Pros and Cons of Trade Relations with India”, jointly organized by the Institute for Policy Reforms and the Lahore Chamber of Commerce & Industry here at the LCCI on Tuesday.

Chairman the Institute for Policy Reforms (IPR) and former Federal Commerce Minister Humayun Akhtar Khan, LCCI President Ijaz A. Mumtaz, Adviser IPR Dr. Manzoor Ahmad and Convener LCCI Standing Committee on Pak-India Trade Aftab Ahmad Vohra were prominent among the others.

Humayun Akhter Khan said that normal trade with India has been under discussion for many years. Rigorous assessment of cost and benefits is the only way to take a decision and to move this matter to closure, one way, or another. He said that this approach would also bring all stakeholders on common ground. He said that the fits and starts nature of the relationship finds reflection in conflicting trends.

He said that on the one hand, Pakistan does not have normal trade relations with India. On the other hand, Pakistan and India are members of the South Asian FreeTrade Area (SAFTA). This apparent incongruity reflects the reality of our bilateral relations. Decision on trade with India, therefore, must harmonize among security, economic, and trade interests. Recently, IPR examined overall developments in South and Central Asia and recognized that there are risks to our security. He advised policy makers to consider an incremental approach and distinguish among normal trade, and opening of land and transit routes. He said that this IPR-LCCI event would examine economic and trade benefits and risks. IPR expected that such discussion would help policymakers take a decision.

The LCCI President Ijaz A. Mumtaz said that trade normalization between India and Pakistan is not as simple as it seems to be. He said that there are a number of factors that determine these bilateral trade relations.

“We are in favor of it but it has to be done very carefully. We do not fear to compete with India in a free trade regime but before opening borders, we must have a well thought out plan which is to be finalized in consultation with private sector” LCCI President said.

Ijaz A. Mumtaz said that the Lahore Chamber has especially partnered with Institute for Policy Reforms with a view to hold a debate to see the possibilities of increasing direct trade between two countries.

He said that indirect trade is taking place between Pakistan and India via third destination which not only adds to shipment cost but also stretches lead time. He said that we have to find ways to mitigate the adverse effects of tariff and non tariff barriers.

Dr. Manzoor spoke largely in support of open trade. He listed the specific risks and benefits of trade with India. He said that developing economies that are globally integrated experience sustained growth. Over 60% of global trade takes place via the supply chains of MNCs who make their buying decisions in all parts of the world. He said that Pakistan’s trade policy results in loss in prosperity. Pakistan risked further growth loss if it was left out from recent moves towards South Asian integration. In his view, Pakistan must find ways to build on South Asia’s dynamism. Past studies on Pakistan India trade overwhelmingly showed significant economic benefits for our economy, he said. He wondered why Pakistan delayed normal trade relations as GOP’s negative listof tariff lines, since 2012, meant that substantial trade is open to begin with. Among those items still restricted and likely to face stiff competition from India, such as pharmaceuticals and auto parts, sufficient legal remedies are available to protect them. He said that some agriculture products face unfair competition from India, but those tariff lines are already open for import. Again, Pakistan has and must exercise measures to protect its farmers. He said that possible synergies from linkages with Indian industry far exceed the risks to some of our industry. Suzuki would not have closed its manufacturing of Alto vehicles in Pakistan, if it could access low cost Indian parts supply. Our pharmaceutical companies could become major exporters if they were to find linkages with Indian companies. He said there are many more such examples. Fears of increase in trade deficit too were misplaced. Mostly those Indian exports that are presently routed through UAE would divert to Pakistan. Some other countries that export to Pakistan may see diversion of their products to India. This will happen because of low prices, and low transport and transaction costs. This is for our benefit. There are enough ways to prevent diversion from Pakistani businesses.

Aftab Vohra Head of LCCI’s Pakistan India Trade Committee relied on extensive personal experience of trading on Pakistan’s land border with India. He said that Pakistan businesses and consumers would benefit greatly by opening trade route. It would help both exports from Pakistan and imports from India. He dwelled on the need for improved trade facilitation and logistics to facilitate traders. Specifically, he called on a single point customs check by customs authorities of both countries. New security restrictions on accessing the Wagah post are a great inconvenience for passengers and traders. He said that political differences must not impede trade interests and cited many examples of regional economic growth through trade across borders.