ARIF AYUB The Afghan Transit Trade Agreement (ATTA) has completed 45 years and a new draft agreement is under negotiation. The basic factor which needs to be highlighted while reviewing the working of ATTA is that it was essentially a political document. Having a hostile neighbour in the east, President Ayub felt it essential to avoid having a hostile neighbour in the West. This was not that easy as it sounds, since the Afghans in those days, particularly under Prince Daud, were intent on exacerbating the Pashtunistan issue. ATTA was, therefore, used as a political tool and concessions were provided to the Afghans in excess of our commitments under the international conventions on the rights of land locked states. At the same time, whenever political pressure by the Afghans on Pashtunistan became unbearable, transit trade was always a casualty, at times even being suspended, to ensure responsible and reasonable behaviour by the Afghan government. This strategy worked quite well as President Ayub developed a rapport with King Zahir Shah and managed to convince him of the costs following Prince Daud's extremist policies. The result was a quiet western border during our wars with India. Prime Minister Bhutto also used to personally calibrate the workings of ATTA as one of the levers for controlling President Daud's excesses. Furthermore, ATTA also had a considerable effect on FATA. While the focus was on Pak-Afghan relations it was obvious during the negotiations that most of the items the Afghans imported duty free would ultimately be smuggled back into Pakistan. This was considered an acceptable price to pay, particularly since the major beneficiaries of this practice would be the tribes of FATA who were the target of Afghan irredentism. ATTA was, therefore, used as a tool to win over the pro-Afghan Maliks and strengthen the pro-Pakistan Maliks, and again this strategy worked reasonable well. In practice our customs FC and PA's also took their share of the largesse which inadvertently also helped in oiling the wheels of the administration in the region and building up ties with the tribes. Until recently this policy worked quite well in maintaining relations with Afghanistan on an even keel and as a means of supplementing the incomes of the impoverished tribesmen. However, as the new century dawned, this political focus was lost and ATTA became a victim of competing bureaucracies, each of whom had valid economic arguments but were limited by their tunnel vision based on their areas of individual expertise. Consequently, they failed to view the agreement through the entire spectrum of bilateral relations with Afghanistan and FATA. This is something which comes naturally in the Foreign Office, as it is the only agency of the government tasked with providing a worldview. The diminution of Foreign Office responsibilities by the end of President Zia's rule also spelled the end of this worldview as applied to ATTA. The first step in this direction was taken by CBR when it unilaterally decided, contrary to the provisions of ATTA and the international conventions, that 24 items being smuggled back into Pakistan should be put on a negative list and excluded altogether from the import facility. The Afghan traders went to court and obtained a Supreme Court judgement in their favour, which left CBR completely indifferent; an example of the extent of the powers of the various tiers of the administration. Hopefully, this has changed now with a revitalised Supreme Court. Moreover, one has to take a wider view of the issue. The question should not be whether the particular item (tea, tyres, electrical items and cigarettes make up 75 percent of the smuggled items) should be banned in order to safeguard the interests of the local industry. The central issue to be addressed is whether there is need for that particular industry, given our endowments of factors of production and our international competitiveness. The infant industry argument while valid in a number of cases can only be used for a couple of decades not for six decades as our industry is trying. For example, the most obvious sight when crossing the Chaman and Torkham border posts are the hundreds of vehicles parked waiting for their turn to cross over illegally. This has to be viewed in the context of the recent report of the Competition Commission of Pakistan categorising our auto industry as, "facing the problem of under utilisation of capacity, high prices, late delivery, premium and slow transfer of technology." The high taxes and duties on autos is not the problem, since the negative social externalities of the industry justify such taxes. The problem arises when the benefit of the high prices are shared by the local and foreign industrialists without any benefit to the consumer and as a result our car prices are double of those in India and Afghanistan. Even worse, in our case, there was hardly any diminution in the imports of these items by the Afghans, who merely transferred their transit trade to Iran. The Governor of Nangrahar, Haji Qadeer, was motivated by the ban to start his own airline (Khyber Airlines) from Dubai to Jalalabad and told us that it was cheaper than the land route to Pakistan for the lighter items. The heavier items were brought via Iran, which was 20 percent more expensive, but the Iranians conveniently provided an equivalent subsidy to equalise the prices. With the opening up of Central Asia one now has to also include the question of reciprocity by the Afghans for our transit trade which has to be included as an additional factor in the equation during the negotiations. ATTA shows a clear example of how important it is to maintain a worldview while finalising the new agreement. The final decision on controversies should, therefore, lie with the Foreign Office and not agencies responsive to vested interests. The writer is a former ambassador.