India, Pakistan To Open New Trade Check-Post
By Tom Wright for The Wall Street Journal
While India and Pakistan trade barbs over terrorism, the country’s trade officials are making small but notable steps toward opening up their economies to one another.
In October, authorities plan to open a second trade check-post at the Wagah border in Punjab state, the only land-crossing between the two hostile neighbors, in an attempt to boost trade volumes. The commerce ministers of both countries are expected to formally announce the new check-post at a meeting in New Delhi later this month.
It might look like a baby step in normalizing frozen trade relations. But with so much else going wrong in India-Pakistan ties, it’s a welcome bit of positive news and one that is energizing Indian businessmen who work close to the border.
Currently, trucks that carry the meager flow of trade between India and Pakistan have to stop unloading at 3 p.m. because that’s when tourists from both sides start arriving at the Wagah border for the evening “Beating Retreat” ceremony – a display of nationalistic bravado that precedes the formal closing of the gates between the countries each evening.
The new terminal will allow trade to continue until 7 p.m. and hopefully increase volumes passing through the check-post.
Some business groups in Amritsar, a city near the Indian side of the border, are betting on an expansion of trade. Suneet Kochhar, director of a paper company based in Amritsar, is involved with a group of investors who have accumulated land to develop a freight terminal near the second trade check-post.
“Once it’s operational, things will change,” Mr. Kocchar says. Land near the border has doubled in value in the past two years, he adds.
To be sure, Pakistan and India have looked like moving ahead on trade in the past but things have gotten nowhere. Another attack like the one carried out by Pakistani militants on Mumbai in 2008, killing over 160 people, could easily nip the current optimism in the bud.
Two-way India-Pakistan trade was a paltry $1.8 billion in the year ended March 31, 2010, basically unchanged over the past five years, while India’s trade with China has skyrocketed to $60 billion.
Indian Prime Minister Manmohan Singh has said that India won’t be able to fulfill its economic potential unless it normalizes relations with Pakistan, which is a gateway to the Central Asian republics and beyond. For Pakistan, India is a huge potential market of 1.2 billion people. For now, businesses that want to get around restrictions have to ship goods at extra cost via ports like Dubai.
The new check-post is a good start. Indian officials estimate two-way trade could easily jump to $2.7 billion in the short term. But there won’t be a seismic shift in trade volumes until both countries make serious efforts to expand the list of products that they can trade with one another. The current list encompasses just over 1,000 items.
That has frustrated some business people. Sunil Behal, director at Poplon Chemie, an Amritsar-based company that makes chemicals to treat leather, says some of its key products are not on the list. The company currently exports only $7,000 worth of products to Pakistan each month out of its total global exports of over $180,000 in the same period, he says.
But like many businesspeople in the area, he’s hopeful that politicians really mean to make progress this time. The check-post, he say, “will definitely boost business.”
There are tentative signs of seriousness. Ahead of the commerce ministers’ meeting later this month, officials from both sides met in New Delhi and thrashed out their differences. The minutes of the meeting are here.
The officials were candid about the challenges. The new check-post, they agreed, will only be effective if both sides take other measures like simplifying customs procedures.
Pakistan officials complained they were not even aware of the customs rules followed by India, and faced a number of non-tariff barriers to trade such as cumbersome testing of products by Indian authorities that can take weeks, according to the minutes.
India lamented that Pakistan continues to put blocks in the way of trade, including proscribing a number of goods that aren’t allowed to enter Pakistan by road but instead have to come by rail. Mr. Kochhar, the paper company director, says he would export newsprint to Pakistan, but it’s uneconomical at the moment to ship via rail.
Both sides complain about the difficulty of getting business visas and have promised to remove bureaucratic obstacles.
The key, though, might be plans that India and Pakistan have to allow trade in most products, only protecting weak and strategic industries. The two countries are currently drawing up a list of these industries – known as a negative list – to submit to the other side.
Don’t expect these issues to be ironed out overnight. Still, there’s movement which both nations are trying to build on.