Munich Personal RePEc Archive

Regional trade in south Asia-impediments and the way forward

Mamoon, Dawood and Aslam, Rizwan and Mughal, Hammad and Paracha, Sohail and Ain, Noor ul and Ayesha, Anam and Qudus, Maliha and Saif, Osman Bin (2010): Regional trade in south Asia-impediments and the way forward.

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Abstract

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.

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