When goods cross borders, soldiers don’t
https://arab.news/8r4e9
Pakistan’s prime minister, delivering a speech at the first ever Islamabad Security Dialogue, stated that India will benefit economically from peace with Pakistan as it will enable New Delhi to directly access the resource-rich Central Asia region. The army chief, General Qamar Javed Bajwa, similarly advocated that it was time for both India and Pakistan to bury past differences to ensure connectivity between East and West Asia. However, both the PM and army chief made clear that “the unresolved Kashmir issue was the biggest hurdle between the two countries.”
While it is imperative that the issue of Kashmir is resolved through dialogue, it is wrong to assume that countries with adverse political relationships cannot engage in cross-border trade without giving up their principled stand on disputes. Singapore and Malaysia broke up as partners of a political union, but both countries have improved political relations through close economic ties. Confidence-building measures and the creation of stakeholders through trade foster a better understanding of each other’s viewpoints, which eventually defuse tensions and make way for the peaceful resolution of disputes and disagreements.
While it is imperative that the issue of Kashmir is resolved through dialogue, it is wrong to assume that countries with adverse political relationships cannot engage in cross-border trade without giving up their principled stand on disputes.
Javed Hassan
The restoration of basic rights of Kashmiris has to be the starting point, but it should not be necessary for other issues to be resolved before resuming economic relations. If engagement picks up steam, the new stakeholders, who benefit from such engagement could challenge the hawks in each country. Investors, traders, transporters, bankers, business groups who will be working for Indian firms in Pakistan and vice versa, will act as strong lobby groups to nurture, preserve, and promote peaceful bilateral political relations between the two countries.
History reveals that shifts in bilateral economic dynamics bring about radical changes in the socio-political relations of nations, which can eventually shape into sound economic cohesion. In spite of their 70-year-old dispute, China and Taiwan signed an agreement on direct air, sea and postal links on November 4, 2008 as a result of vertical growth in trade, which witnessed a tremendous increase from $8.1 billion in 1991 to over $150 billion in 2019. Also, despite ongoing border disputes, the volume of two-way trade between India and China, which was only a billion dollars in the 1990s, has increased to $87.6 billion in 2020.
The economic growth of nation-states is nowadays inextricably linked to their ability to exploit interdependencies within strong regional blocs. Various forums such as the EU, Association of South East Asian Nations (ASEAN), and United States-Mexico-Canada (USMCA) are successful examples of how connectivity and trade liberalization considerably boost overall regional economic activity. Consequently, the potential opportunities for Pakistan of regional trade development not only with China, but just as much with Afghanistan, Central Asia, and, in particular, India need to be explored and developed.
Pakistan affords India and the rest of the South Asian Association for Regional Cooperation (SAARC) countries access to the economic opportunities that can come with developing trading relationships and economic interdependencies with the Central Asian region. These economies are undergoing an economic transformation and have the potential of developing into new export markets for SAARC. As traffic grows with trade flows along these transit routes, new jobs in the logistics sector in areas such as warehousing, trucking and packaging would also be created in both the Afghan and Pakistani economy.
Turkmenistan is home to the world’s second-largest deposit of natural gas, and the Turkmenistan-Afghanistan-Pakistan-India Pipeline (TAPI) would allow the Central Asian country to diversify its exports destinations by delivering energy to South Asia. A concerted, focused effort by Pakistan, India and the Central Asian states can lead to the optimal commercial development of Central Asian oil and gas resources, and at the same time address the energy security needs of 1.5 billion South Asian consumers. Access to energy resources and relatively low-cost human resource would result in the development of labor-intensive export-oriented manufacturing geared toward western and other markets. Such a strategy has the potential to create a large number of jobs.
One of the key concerns of opening bilateral trade is that Pakistan would run a trade deficit with India, which is a larger, more diversified economy, and also produces goods that Pakistan exports. However, a country’s bilateral trade balance need not always be positive. There would be no cross-border trade if every country required its balance to be positive with their trading partners. The determining factor should be whether the cost of imports from India is less than comparable quality imports from other sources.
Pakistan runs surpluses with other countries and these could expand as it sources cheaper inputs from its neighbor, for example, cotton for the export-oriented textile sector.
Pakistan’s local industry and its consumers both stand to benefit. Finally, having trading relations will help minimize the possibility of conflagration between two nuclear states. Paraphrasing the economist Frédéric Bastiat, “when goods cross borders, soldiers don’t.”
– Javed Hassan has worked in senior executive positions both in the profit and non-profit sector in Pakistan and internationally. He’s an investment banker by training.
Twitter: @javedhassan
