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Trade between India and Pakistan: Potential Items and the MFN Status
Abstract
During the last several years, opening up of trade between India and Pakistan has become the most sought after question at many policy forums and among concerned groups. The issue has gained particular importance after India granted the Most Favored Nation (MFN) status to Pakistan, to comply with the principles of World Trade Organization (WTO) regime in 1995, and Pakistan's reluctance in reciprocating so far. It is believed that increased trade relationship can play a vital role in normalizing the political relationship between the two countries. This will, therefore, benefit millions of people living in both countries as the resources would be diverted from less desirable areas, such as defense spending, to poverty alleviation initiatives. Given the likely impact of trade liberalization between the two countries, the unavailability of any established estimate of potential trade and the items likely to be traded is unfortunate. With a view to come up with some estimates based on some methodology, however simple it is, this note attempts to find the potential of trade between the two countries by identifying the potential items. It estimates the scope for exports and savings by substituting our imports from the rest of the world with those from India. It also identifies the potential items with their potential size. Further, the note gives an argumentative discussion on the granting of MFN status to India. The results show that on the basis of existing pattern of Pakistan's trade with the rest of the world and price structures, the total trade potential (exports plus imports), between Pakistan and India could be around $ 5.2 billion. Though the overall market size available for Pakistan's exports may reach $ 5.1 billion, given the fact that additional exportable surplus might not be available in the short run,
... Similar results and arguments have been drawn in other studies like Qamar (2005) and Ghuman and Madaan (2006). ...
... According to Mamoon et al. (2011) Qamar (2005) describe greater opportunity for both countries to work together and identified some of the potential elements and said that in this regard Pakistan is likely to get advantage because of cut in transportation costs. India it can demand relaxation on these terms, which one way or the other could be a liability at Indian part. ...
... There is special reason to that because during this period Pakistan increased the list of its permissible items to 600. Similarly, more Pakistan can have significant benefits by granting MFN to India and for these benefits it has to transfer its import and export products in the region especially towards India where it can have larger market access which is also sign of growth for the country's growth itself (Qamar, 2005). ...
REGIONAL TRADE BETWEEN INDIA AND PAKISTAN: PROSPECT OF MOST FAVOURITE NATION (MFN)
... At the time of independence, more than 70 percent of the trade of Pakistan was with India while 63 percent of the exports of India were with Pakistan (Khan, 2009). After 1947, exports of Pakistan to India reached as high as 30 percent while imports from India reached 10 percent of Pakistan's total imports (Qamar, 2005). In 1951-52 share of Pakistan in India's overall export and import was 2.2 percent and 1.1 percent respectively. ...
Pakistan and India have failed to establish substantial and sustained economic relations between them. Despite being neighbours, they couldn't enjoy a good volume of bilateral trade in multiple sectors. This study traces the history of bilateral trade between Pakistan and India. While identifying patterns of trade between them, the study attempts to identify barriers in bilateral trade between them like trade regimes, non-tariff barriers and other discriminatory measures. The study also makes an attempt to address the question concerning how the impediments in bilateral trade can be removed to enhance bilateral trade and economic connections. On the basis of interviews of Key Informants (KIs), this study explores the potential of bilateral trade between Pakistan and India and finds possible sectors where bilateral trade can be augmented. Lastly, this study finds possible sectors where Pakistan and India can initiate joint ventures to seek win-win approach in bilateral economic relations.
... At the time of independence, more than 70 percent of the trade of Pakistan was with India while 63 percent of the exports of India were with Pakistan (Khan, 2009). After 1947, exports of Pakistan to India reached as high as 30 percent while imports from India reached 10 percent of Pakistan's total imports (Qamar, 2005). In 1951-52 share of Pakistan in India's overall export and import was 2.2 percent and 1.1 percent respectively. ...
Pakistan and India have failed to establish substantial and sustained economic relations between them. Despite being neighbours, they couldn't enjoy a good volume of bilateral trade in multiple sectors. This study traces the history of bilateral trade between Pakistan and India. While identifying patterns of trade between them, the study attempts to identify barriers in bilateral trade between them like trade regimes, non-tariff barriers and other discriminatory measures. The study also makes an attempt to address the question concerning how the impediments in bilateral trade can be removed to enhance bilateral trade and economic connections. On the basis of interviews of Key Informants (KIs), this study explores the potential of bilateral trade between Pakistan and India and finds possible sectors where bilateral trade can be augmented. Lastly, this study finds possible sectors where Pakistan and India can initiate joint ventures to seek win-win approach in bilateral economic relations.
... At the time of independence, more than 70 percent of the trade of Pakistan was with India while 63 percent of the exports of India were with Pakistan (Khan, 2009). After 1947, exports of Pakistan to India reached as high as 30 percent while imports from India reached 10 percent of Pakistan's total imports (Qamar, 2005). In 1951-52 share of Pakistan in India's overall export and import was 2.2 percent and 1.1 percent respectively. ...
Pakistan and India have failed to establish substantial and sustained economic relations between them. Despite being neighbours, they couldn't enjoy a good volume of bilateral trade in multiple sectors. This study traces the history of bilateral trade between Pakistan and India. While identifying patterns of trade between them, the study attempts to identify barriers in bilateral trade between them like trade regimes, non-tariff barriers and other discriminatory measures. The study also makes an attempt to address the question concerning how the impediments in bilateral trade can be removed to enhance bilateral trade and economic connections. On the basis of interviews of Key Informants (KIs), this study explores the potential of bilateral trade between Pakistan and India and finds possible sectors where bilateral trade can be augmented. Lastly, this study finds possible sectors where Pakistan and India can initiate joint ventures to seek win-win approach in bilateral economic relations.
... Akram (2008) examines the export potential of Pakistan with 154 countries including SAARC for 19 major sectors and concludes that potential exists to increase exports to partner countries. Qamar (2005) argues that Pakistan can benefit not only by accessing markets for its exports but can also save significantly by substituting its expensive imports from the rest of the world with those from India by granting MFN status to India. ...
We investigate parents’ perceptions of various educational systems and their impact on the decision to either send their children to school, or engage them in other childhood activities. Childhood activities are categorised as follows: secular schooling, religious (non-secular schooling), child labour, child labour combined with secular schooling, and leisure (inactivity). The paper uses the household survey data of 2,496 children, 963 households, and 40 villages in Pakistan. A Multinomial Probit Model analysed the impact of various socio-economic variables on the likelihood of choosing an activity for children. Results indicate that the following factors influence the parents’ decisions in selection of activities for their children: the parents’ level of education, mother’s relative authority in household decisions, degree of religiosity of the head of household, beliefs in tribal norms, household income, and proximity to the school. The findings provide insignificant evidence to support the “luxury axiom” hypothesis that children only work when their families are unable to meet their basic needs.
... Initial studies by Govindan (1994) and Pigato (1997) highlight that intra-regional trade can benefit more to small countries than India in the region. Qamar (2005) further extends this by saying that Pakistan not only can get benefit by accessing a big market for its exports, but also can save significantly, while substituting its expensive imports from the rest of the world to imports from India under the MFN status. Shaikh and Rahpoto (2009) show that under the SAFTA arrangement, Pakistan can enjoy consumer surplus in exports of the products like food items, cotton made garments, dates and leather. ...
The purpose of this study is two fold. First, to estimate the impact of institutional and non-institutional arrangements on bilateral trade, and second to analyse the impact of SAFTA on bilateral trade in the short as well as in the long run. The empirical analysis which is based on the panel of eight South Asian countries, comprising data over the period i.e. 1975–2013 is conducted using fixed effects model along with Pooled Mean-Group (PMG) estimator for estimating the short and long-run relationships. The analysis has shown that trade agreements including South Asian Free Trade Area (SAFTA) and the Most Favoured Nation (MFN) are not effective in promoting trade, due to low institutional quality and stringent non-institutional arrangements, including high tariff along with low physical infrastructure. Further empirical analysis has shown that both SAFTA and MFN can only contribute to bilateral trade significantly, if complemented by institutional framework. As a policy lesson, to improve the trade ties between India and Pakistan, improvement in physical as well as soft infrastructure is required. Any trade agreements between the two, including MFN can only be effective, when it is supported by a well-defined and enforced institutional framework that ensure the implementation of policy reforms needed to reduce tariff rate and remove non-tariff barriers.
... Economic cooperation between them in long run help full to decree the defensive issues. Pakistan has already traded with India in 1936 products so it will not be problematic for Pakistan to giving MFN status India [14]. Through direct bilateral trade increase the revenue and cooperation among the South Asian Region. ...
This study shows the importance of trade to create the peace and stability among the Pakistan and India. Pakistan-India trade relations, trade restrictions, benefits of bilateral trade among them and benefits obtained through trade are argued in this paper. Trade is a tool of achieving peace through interdependence and attaining the mutual economic benefits. Pakistan-India negotiations on border disputes and purpose of establishing the peace are critically important for both nations. Trade is soft and positive way to reduce the conflicts. Openness to international trade is significant driver of liberal peace.
... If this dream can come true it will reduce tension and throwing lot of money in purchasing arsenals. Second most desired wish of India is getting declared its trade status as Most Favored Nation through confidence building measures and track-2 diplomacy ( Cheema, 2006;Khan et al., 2005;Qamar, 2005;Yusuf, 2011). However, can both countries move forward without resolving long-outstanding issue of Kashmir and above all the main source of tension/conflict between both countries is the right on the use of water of six common rivers ( Ammad, 2011;Gazdar, 2005;Gleick 2014;Hilali, 2005;Hodges, 1995;Iyer, 1999Iyer, , 2005Khan et al., 2011;Kilgour and Dinar, 2001;Pappas, 2011;Yamin et al., 2007). ...
River Ravi was major source of recharging groundwater table around Lahore City. However, scenario has
totally been changed after indus water treaty (IWT) between India and Pakistan. In dry season, almost 60
K.M long reach of river (Ravi siphon to Baloki Headwork) passing nearby the Lahore city is converted into
drain. The groundwater table which is being recharged from untreated urban as well as industrial sewage
is becoming highly contaminated. IWT was signed without carrying out any kind of Environmental Impact
Assessment study. Due to this low flow condition many other environmental parameters are being affected,
for example, drastically lowering of groundwater table, contamination of ground as well as surface water,
degradation of esthetic value of river, endangered aquatic flora and fauna, usage of contaminated water for
irrigation, degradation of human health, and increased water borne diseases. These all problems have been
associated with low flow in River Ravi. In this research, the effect of low flow condition on the lowering of
groundwater table is studied in detail in which groundwater table data of the past 60 years is analysed. Very
obviously it can be concluded that there is drastic change in groundwater table depth before and after IWT.
As a compensation and mitigation measure very essential recommendations is suggested that extra amount of
water should be added at Ravi Siphon. This will not only mitigate sewage dilution problem rather it will also
enhance recharging capability of River Ravi.
... The study shows that the potential for India's trade with Pakistan is the highest in the SAARC region. Ahmad and Shabir, (2005) [8] Investigates the prospects of trade with India in a selected industrial chemical product, namely caustic soda. The authors recommend that government should make efforts to expand trade with India by increasing the range of chemicals on the positive list or by granting MFN status to India. ...
Bilateral trade between India and Pakistan is as old as the two countries are, but the volume of trade between them is minuscule relative to the size of their economies.. This paper is an attempt to measure importance, strength and nature of bilateral trading relationship between India and Pakistan. Several statistical indices can be used to measure trade relations between two nations. One such index is the trade intensity used in this paper. Bilateral trade relationships between India and Pakistan described in terms of intensity indices helps to identify how intensively the countries are trading with each other. Bilateral trade intensity indices have been calculated for the time period 1994 to 2008.. The limitation of the study is that the trade intensity indices have limited application for measuring bilateral potential trade between nations. The policy implications of the analysis are that there is no option for the two countries than to increase the economic ties. This paper is divided into three sections. Section first Introduction followed by result and discussions in section second and section third conclusion.
... They think that Indian goods will not be levied. 48 However a systematic analysis shows that the arguments are weak and mostly based on emotional and wrong perceptions. ...
Pakistan and India are two neighboring countries, whose inhabitants share a long history and have many commonalities, but relations between both the countries have been strained by different activities and issues since birth of the two. Like other relations the Trade relations between Pakistan and India have never been good and productive since last six decades. This has hampered the economy of Pakistan and India, and has contributed a lot to the increasing level of poverty in both the countries. Using the lens of commercial peace theory, this study explores that Trade relations between Pakistan and India need a revival to combat the economic problems of the people on both sides of the border. Also it argues that trade, in spite of its economic benefits will contribute to peace between the countries and the region. It explains that there is a long list of issues contributing to this situation, needing focus to achieve the target of peaceful trade relations.
... According to Qamar (2005) 1 the analysis of the comparison of Indian and Pakistani trade composition provides a clue about the potential of trade and identifies the potential items. The author does suggest that Pakistan can benefit not only by accessing a big market for its exports it can save significantly by substituting its expensive imports from the rest of the world with those from India. ...
The paper sets out to suggest that regional trade between South Asia is quite low when compared to other regional blocks like NAFTA, EU 15, ASEAN, and MERCOUSER. The paper identifies non cooperation between India and Pakistan to be the main reason behind low trade in South Asia. The paper focuses on the pending trade issues between both countries that are preventing India and Pakistan to increase bilateral trade and economic cooperation. The first issue discussed in the paper is granting of MFN status to India by Pakistan. The paper finds that it is in the benefit of both countries if Pakistan gives MFN status to India. But before such a step is taken, it is essential that Pakistan moves from a positive list approach to a negative list approach. Pakistan can include industries like textiles in the negative list to prevent the flood of cheap Indian textiles. Once MFN status is granted to India, Pakistan would be able to raise more substantive issues, notably Indian NTBs, subsidies, and protective tariffs. Currently India practices various forms of NTBs against Pakistan. The visa restrictions and absence of financial services are the major NTBs. Such NTBs have prevented Pakistan to export more to India. Another trade issue highlighted in the paper is that of transit facility. India does not provide Pakistan a transit route to Nepal and Bhuttan. In contrast Pakistan has provided Afghanistan transit route to India, though Pakistan does not allow India a transit route to Afghanistan or beyond. The paper finds that there is a high risk of informal trade in case Pakistan provides India with the land route to Afghanistan through its territory. It is anticipated that most Indian exports to Afghanistan would be smuggled back into Pakistan affecting Pakistan’s local industry. The transit facility is by far the most complicated trade issue of the three. Though the paper concludes in favor of granting India MFN and against the imposition of NTBs, It only gives a conditional recommendation in favor of granting India transit route to Afghanistan in case India provides Pakistan transit route to Nepal and Bhuttan.
China’s Belt and Road Initiative (BRI) is a game changer because it offers comprehensive plans for socio-economic progression and regional
integration at the global level by providing linkages through land and sea routes. As for South Asia is concerned, it is the least integrated and backward
region and BRI’s two plans, China Pakistan Economic Corridor (CPEC) and Bangladesh China India Myanmar Corridor (BCIM) have the potential to
upraise the regional economy. The main obstacles on the way to South Asia’s economic progression are the persisting mistrust between India and Pakistan
and ongoing Sino-Indian standoff. The CPEC and BCIM will create winwin scenario for China, India and Pakistan that compel them to cooperate
with one another. To realise the association between economic development and stability, the theory of neo-functionalism provides understanding to
comprehend this debate. The connectivity between CPEC and BCIM will be advantageous to India and Pakistan for their economic rise and eradicating
mistrust between them which will lead towards regional peace and stability.
The idea behind this study is to identify the importance of trade in Pak-India peace process. This study emphases that trade is instrumental in achieving and maintaining peace and stability in the Indian subcontinent. Economic interdependence promotes peace and mutual economic benefits preclude war between nations and this concept has been argued in the paper. Furthermore, considering Pakistan-India trade relations; barriers to bilateral trade; current trade volume; measures needed to be adopted for improving bilateral trade and its role in Indo-Pak peace negotiations, territorial and border disputes and peace settlement have been analyzed. It is, therefore, concluded that trade can play a soft and positive role in conflict resolution between the two long standing adversaries.
This paper attempts to evaluate the possible gains and losses arising from the gradual opening up of pharmaceutical trade between India and Pakistan. We explain the comparative advantages of both countries at a disaggregated level, followed by a qualitative analysis of various perceptions and experiences of Pakistan’s pharmaceutical manufacturers with respect to trade with India. We find that a gradual opening up of pharmaceutical trade with India may allow Pakistan to enhance the quality of locally produced medicines through raw material, intermediate inputs, knowledge, and skills transfer from India. Pakistan, in the medium to long run, may also be able to diversify its pharmaceutical export base, reduce cost of production and achieve higher competitiveness through the development of value chain linkages with India. Such linkages are important to cater to the projected rise in demand for pharmaceuticals in Pakistan, Afghanistan and abroad.
This chapter aims to update past estimates on informal trade between India and Pakistan. This survey-based study captures the informal merchandise flow from India through the various routes identified by Pakistani traders. The quantitative estimates provided by the wholesaler and retailer community were validated through clearing agents and customs officials. We found that the key sectors in which informal flow from India takes place are fruits and vegetables, textiles, automobile parts, jewelry, cosmetics, medicine, tobacco, herbal products, spices and herbs, paper and paper products, and crockery. The major routes from where these goods are channeled into Pakistan are Dubai, Kabul, Kandahar, Chaman, and Bandar Abbas. The minor routes include several places in the adjoining border region. Our estimates show that the value of this informal flow from India to Pakistan is US$1.79 billion annually. While such flows have narrowed the demand-supply gap in various product categories and created livelihoods for several in the poor regions, we also observe that this expansion in informal trade is hurting the manufacturing community. Pakistani producers end up competing with items on which duty has not been paid and, thus, are cheaper in the local market. There is also a loss of revenue to the government, as these goods are not subjected to the usual customs procedures. In the case of food, herbs, and pharmaceutical items, the merchandise is not checked for health and safety standards, which poses risks to human health. We argue that given the large volumes of informal trade, it is in the interests of the government to move fast and adopt measures that lead to the formalization of trade. The overall process of India-Pakistan trade normalization can certainly help this endeavor. © Indian Council for Research on International Economic Relations (ICRIER) 2015.
Using the gravity model to estimate the trade flows for the major trading partners of Pakistan and India in the sports goods sector, we find, as expected, that the distance between the two countries has a negative impact on exports, while the exporter and importer GDPs affect exports positively. For Pakistan and India, specifically, we find that trade between Pakistan and India is 288 % lower (according to the pooled OLS) and 249 % lower (according to random effects model) than trade between any two similar countries. The trade that is already taking place between the sports goods sectors of the two countries is in accordance with their revealed comparative advantage. However, there is a need for the two countries to export sports goods in which they have higher RCAs. We also found that both countries export the same product lines, so there is a need for further disaggregated analysis within product lines. When we calculated the trade concentration index, we found that Pakistan’s exports to India have become more diversified, but Indian exports to Pakistan are more concentrated in terms of product lines. We also found evidence for the presence of both inter- and intra-industry trade in the sports goods sector of Pakistan. © Indian Council for Research on International Economic Relations (ICRIER) 2015.
The main objective of this paper is to analyse the emerging issue of resource
competition between local fishermen in selected areas of the conflict‐affected
Trincomalee district in the Eastern province of Sri Lanka and migratory
fishermen from the southern and western parts of the country. As precursor for a
more comprehensive study on fisher livelihoods, this paper intends to provide
indicative insights into these undocumented emerging issues. Although they
share historic linkages, the mechanisation process and the protracted war
damaged these linkages and introduced tensions between local and migrant
fishers. Due to loss of equipment because of the war, the local fishers are unable
to compete with the migrants. The situation is rife with potential conflict which
can erupt into violence if not managed sensitively. The analysis will draw on
themes of possible conflict triggers linked to identity and perceptions and
potential mitigation methods in terms of integrated resource management
systems and alternate livelihood options.
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