The Pulse

India and Pakistan Reduce Barriers To Cross-Border Trade

Preliminary talks between India and Pakistan on trade have produced promising results.

India and Pakistan Reduce Barriers To Cross-Border Trade
Credit: Wikimedia Commons

Trade talks between India and Pakistan produced results over the weekend when the two South Asian neighbors agreed to allow the free passage of trucks and containers across their sole land border crossing at Wagah. In addition to the relaxation of trade regulations for the Wagah border, the two countries approved a significantly more liberal visa regime to allow the transit of business people between them, Reuters reports.

As The Diplomat reported last week, the trade talks between India and Pakistan were limited in nature, mostly intended to maintain the momentum of progress on bilateral trade which was generally inhibited in 2013 when bilateral relations were plagued by frequent skirmishes at the disputed Kashmir border. The agreement to allow cross-border trade at Wagah is thus a sign that relations have begun to thaw substantially from their 2013 trough.

The negotiations occurred in New Delhi at the ministerial level between Pakistan’s Minister of State for Commerce and Textiles Khurram Dastgir Khan and his Indian counterpart Anand Sharma. Khan told Indian sources that Pakistan’s objectives vis-a-vis trade relations with India in the short-term focus on increasing market access, easing non-tariff trade barriers, and improving the free flow of investment and goods between India and Pakistan. The agreement reached over the weekend addresses the final point directly. Additionally, Reuters reports that Pakistan has agreed to give Indian firms non-discriminatory access to its domestic market.

Although the goal of passing a $6 billion benchmark in bilateral trade by 2014–agreed upon by India and Pakistan back in 2012–looks rather unlikely, the changes at Wagah and the liberalized visa policy will produce a marked change in commercial activity between India and Pakistan. Wagah is a highly controlled border that opens every morning and closes every night–the new rules will allow for transit around the clock. Wagah was incidentally the site of a rare meeting between India and Pakistan’s Director Generals of Military Operations in late December.

The impact of this agreement will also affect Afghanistan, which has been keen on seeing India and Pakistan work out their differences on trade issues. Afghanistan has specifically urged Islamabad to cooperate with India to permit trade via the Wagah land border. The new agreement could see Afghan goods travel to India via Pakistan, boosting the economies of all three South Asian countries in the process. Currently, trade between India and Afghanistan is routed via the sea–usually through Iran. In 2012, Pakistan quietly allowed India to deliver wheat to Afghanistan using the Karachi port.

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A major outstanding issue in trade talks between the two neighbors is Pakistan’s long-postponed plan to grant most-favored nation (MFN) status to India. Pakistan was supposed to grant India MFN status in late 2012 but postponed the decision due to political factors. The actual term “Most Favored Nation” appears to have been politically infeasible for Pakistan. Dastgir told the Business Standard: “We’re now officially calling it Non-Discriminatory Market Access, or NDMA.”