While the classic text-book lesson on economic management calls for clarity and consistency in decision making, our economic managers seem to be masters at ambiguity and confusion. The recent saga on Pakistan-India trade liberalization has played out no differently. In the last quarter of 2013, the Pakistani public in general and the stakeholders in particular were advised that granting the MFN (most favored nation) status to India was in the interest of Pakistan and therefore would be announced shortly. As the reaction from different business quarters picked momentum, a political spin replaced economic fundamentals and soon the MFN was instead named as NDMA (non discriminatory market access) and later again re-named as NDMARB (non discriminatory market access on a reciprocal basis). Nothing we know in the economic world can be more damaging to a policy than the lack of conviction cum belief of the policymaker himself. The cabinet meeting scheduled on the last Friday of March 2014 to officially adopt the NDMARB never took place and the various announcements of the Commerce Minister, after his whirlwind Delhi Yatra, vis-à-vis fast-tracking functioning at the Wagah-Attari land route facility, cross border investments, reciprocal banking arrangements, etc are also yet to materialize.

So why is the government having cold feet? The easy answer (whenever and wherever India is involved), is to blame the army/security forces and this is exactly the impression being conveyed now. Nothing could be further from the truth, as the army has kept its distance and maintained neutrality over the initiative. Anyway, regardless of where the fault lies on this inaction, the stalling of the process may have been a blessing in disguise. Elections have already been announced in India and once this is done the sitting government – for the sake of maintaining fairness and transparency in the election process - cannot enter into external arrangements without the consent of the Indian Election Commission (IEC) to ensure that an agreement does not affect the election’s outcome in any way. Ironically, the entire Indian elections are myriad with Pakistan bashing and India’s suffering Muslim population - A landmark trade development with Pakistan in such an environment is bound to carry weight. Further, even if the IEC does allow the Congress to ratify NDMARB, what is there to stop any party/organization from getting a stay order against this from the Supreme Court of India; similar to the one granted to stop the Indian media and the survey/polling firms from predicting the Indian Elections’ results. Imagine the embarrassment at home with Pakistan finally announcing the NDMARB and India refusing to accept it, at least till such a time that the next government takes office (by all accounts, Modi Sarkar). The ensuing public backlash in Pakistan of such a snub would have meant colossal loss of ground in the public opinion so tediously shaped to accept the NDMARB in the first place, and which once eroded could take years to re-build. In fact under the circumstances, any sensible government in Pakistan would instead be claiming credit for this delay by stating that it prefers to wait till the post election situation in India becomes clear and would like to assess the response of the new Indian government, before deciding to take this initiative any further.

Also, this delay allows the government with time to work out a strategy for retaining Pakistan’s manufacturing competitiveness vis-à-vis India, i.e. once the NDMARB is formally granted to India. So far the private-public team constituted by the government to overlook this initiative has failed to propose satisfactory solutions to this looming challenge. Their entire rationale somehow still rests on the basic school-level argument that trade per se and especially with a larger neighbor (emerging Indian market of one billion plus people) is good and is in our interest. No rocket science is required to reach this conclusion. What they instead need to be working on are elements beyond this elementary commerce principle. Someone needs to remind them that we theoretically got market access to India nearly 18 years ago (India granted MFN to Pakistan back in 1996) so why has the trade equation for us been worsening since?

What is under discussion today is not whether or not trade should be liberalized, but how it should be liberalized on a ‘sustainably fair’ basis? We need to chalk out a road map of trade management between Pakistan and India, so it turns out to be win-win for both countries and not just one. In doing so, some good areas to focus upon, as recommended by the Wilson International Centre, are the following: a) Establish new oversight institutions: A bilateral commission should be set up to oversee Pakistan-India economic relationship, with a focus on addressing non-tariff barriers; opening up more land routes for trade and promoting more cross-border travel. A regional trade forum (comprising members of the private sector, academia, and the media) should be formed to monitor this bilateral commission. To accommodate inevitable disagreements, a dispute resolution/grievance redressal mechanism should also be established. It should be operated not by the two governments, but by the private sector consortium incorporated by using the chambers of commerce and industry on both sides. Now we know that 3 key bilateral agreements in this regard already stand signed back in September 2012, but not much progress has been made on them. In all fairness, the text of these agreements is very comprehensive and all encompassing, and it only their practical implementation that needs to be expedited. b) Use bilateral normalization as a springboard for South Asia-wide trade normalization: Tighter Pakistan-India trade links – lubricated by more integrated and efficient transport networks and more open transit and visa arrangements - should have their eye set on the prospects of ultimately shoring up the trade for the entire South Asian region. c) Remain committed to the Composite Dialogue process: If this negotiating process is sidelined, critics of trade normalization would be emboldened, because they could argue that Pakistan’s principled position on political and territorial issues has been compromised for purely material gains. They will then have a valid argument in asserting that more trade does nothing to resolve these core issues. d) Ensure that security and political tensions are not allowed to derail trade diplomacy: To protect the integrity of both trade normalization and the broader peace process, India should not impose punitive trade measures or close its borders in the event of isolated terrorist attacks by arbitrarily blaming them on Pakistan. Both sides should take care not to allow new security or political tensions to spill into trade or economic relations.

And last but not least, e) Go about achieving this by empowering the private sector, keeping the media engaged for oversight and fair play, loosening restrictions on transit, albeit with clear reciprocity, and by enhancing the efficiency of trade routes. Swift and cost-efficient interstate (and intrastate) movement of goods will entail removing restrictions on the type and size of trucks and train cars; ameliorating the quality of the roads and railways used for trade in both countries; and improving infrastructure at border crossings. Despite recent upgrades at the Wagah/Attari border, the need for X-ray machines, better warehousing, and testing laboratories remains strong. It may come as a surprise to many that whereas, at present, Pakistan can officially unload/load 30-40 trucks at a time at Wagah, India can only manage two!

 The writer is an entrepreneur and economic analyst.

Email:kamal.monnoo@gmail.com