(MENAFN - Khaleej Times) The economic conference organised in Lahore earlier this month did more than bring together business leaders from Pakistan and India.
It offered a timely opportunity to assess progress in the trade relationship, identify the hurdles, and propose ways to overcome them.
Soon after Independence when the General Agreement on Tariffs and Trade (GATT) was concluded, its framers envisaged that Pakistan and India would constitute a customs union in a mutually supportive economic relationship.
That the Lahore conference was celebrating the move towards according Most Favoured Nation status to each other " an agreement simply not to discriminate against one another " served both as a reminder of the reversal in the two nations' trade relationship in the six decades after Independence and a measure of how far they have to go to realise the potential of trade.
The conference took place in the backdrop of an improved bilateral environment and launch of official initiatives to liberalise trade. In April a new, integrated border customs post was opened to facilitate the flow of goods. In February Pakistan's cabinet decided to replace the positive with a negative list, substantially increasing the items to be traded. The plan now is to phase this out and remove restrictions on tradable items by December 2012, once negotiations are successfully concluded with India on a level playing field for Pakistan.
Along with the common refrain at the conference about the need to move past the past, the obstacles in trade relations were highlighted. "Nothing", said Razzak Dawood, "will happen unless the visa regime is simplified". This elicited assurances from officials that the upcoming meeting between the interior secretaries of the two countries would liberalise the cumbersome visa regime for the business community.
The advantages of mutual trade between South Asia's two largest economies have long been compelling. Even if all that happens is the bilateralisation of current indirect trade " which takes place through third countries or other 'informal' ways " the dollar volume of the present level of 2.6 billion in annual trade could quadruple. The potential, of course, is much more. Several speakers said trade would rise to 12 billion annually by 2015.
To achieve this potential, trade has to be free, but it also has to be fair. Trade liberalisation can be sustainable only if is fair, balanced and mutually beneficial. At present bilateral trade consists of 15 per cent of exports from Pakistan and 85 per cent from India. So a conscious effort is required, and preparation by Pakistan's trade and industry, to ensure greater equity in trade flows.
In particular the WTO's provisions on non-tariff barriers and other disguised means that India uses to limit competitive exports as well as those relating to explicit and hidden subsidies need to be faithfully implemented. Otherwise, the spirit and substance of MFN will be defeated.
The issue of tariff and non-tariff barriers (NTBs) resonated at the conference. Other than more general problems arising from India's trade regime there are several Pakistan-specific barriers. They include stringent and lengthy certification requirements, transit restrictions, undue delays at customs posts and multiple customs clearances.
These issues and asymmetries in the tariff structures of the two countries have to be resolved for fair trade. A positive outcome to negotiations underway with India on elimination of NTBs remains a prerequisite to implementation of MFN status and scrapping the negative list.
Moreover, trade liberalisation and accompanying improvements in the political ambience are as yet fragile. Moves towards trade normalisation should not create a sense of complacency that resolution of disputes has become any less urgent or imperative. On the contrary, the positive atmosphere created should be utilised to find solutions wherever possible.
If the political obstacles can be addressed this can open the door to three new and exciting dimensions of mutually beneficial economic cooperation.
Implementation of the South Asia Preferential Trade Agreement (SAPTA), in terms of population the largest customs union in the world.
Significant investment flows from within and outside the SAFTA zone.
Establishment of transit, transportation and energy links between South Asia, Central Asia, West Asia and China.
The prosperity that these three approaches could generate is limitless. But it requires both the governments of India and Pakistan to make hard choices.
Dr Maleeha Lodhi served as Pakistan's ambassador to the US and United Kingdom