India and Pakistan agree to expand trade, rewrite the rules

April 29, 2011

India and Pakistan have agreed to try to improve trade ties during the first meeting of their commerce secretaries since the November 2008 attack on Mumbai.  The official statement released after the talks in Islamabad suggests the agreement is so far largely aspirational, with working committees set up to look at everything from tariff barriers, to India selling electricity to Pakistan, to visas for businessmen.

But the aspiration in itself represents a dramatic shift in relations between India and Pakistan, who have embarked on what may turn out to be their most organised, if slow, attempt at peace-making in their history.  Pakistan has in the past been wary of a a gradual approach to peace-making, fearing India would try to normalise ties while maintaining the status quo on Kashmir.  The Indian government has said that it is ready to discuss all issues, including Kashmir.

Reflecting that aspirational shift, India’s Business Standard called the trade talks “a game-changer”.  Mint newspaper noted that trade between India and Pakistan now amounts to only $2 billion, compared to India’s global trade of about $600 billion.  It quoted Biswajit Dhar, head of Delhi-based think tank Research and Information System for Developing Countries, as saying that, “if  trade relations improve, there will be movement on the political level because a constituency for peace will be created for better ties.”

It also quoted former Indian foreign secretary Kanwal Sibal as dismissing the proposals as “timid and tentative”. “Setting up a joint working group means postponing decisions that they could have taken soon. This is to maintain the appearance of movement that fits into the objectives of both countries,” he said. “Pakistan will never allow itself to become energy dependent on India till there is tangible progress in bilateral relations.”

Yet something quite important is happening here. The commitment to foster better trade tries coincided with a promise of progress on a pipeline which is meant to bring gas from Turkmenistan through Afghanistan and Pakistan to India.  The TAPI pipeline was one of the issues raised by Pakistan Prime Minister Yusuf Raza Gilani at a meeting in March with Afghan President Hamid Karzai.  Pakistan meanwhile is talking about trying to build economic cooperation with Afghanistan through greater regional trade and economic integration which would have big implications for both China and India.

Pakistan’s talks with Afghanistan have raised alarm bells in Washington after the Wall Street Journal suggested Pakistan was trying to convince Afghanistan to give up on the United States in favour of China  The report was presented as evidence of an ever deteriorating strategic relationship between Pakistan and the United States. That however, may be missing the point. Within the region, strategy is an old story. The new one is economic development.

As I noted in my last post, democratically elected governments tend to care a lot about the economy, since that is what helps get them re-elected. The Pakistan government is not far off becoming the longest serving civilian government the country has ever seen.  Its accidental president, Asif Ali Zardari, has been arguing for several years that Pakistan’s economic salvation lies in improving trade with India. 

And the Pakistan Army, which dominates foreign and security policy, has huge stakes in the economy – a legacy of being the most powerful institution in the country.  Its army chief, General Ashfaq Pervez Kayani, according to some analysts, also sees the strategic depth which Pakistan once sought in Afghanistan as lying in a strong economy.

India, meanwhile, has been in no doubt for years that it should focus on economic growth.  For better or for worse, it just displayed its political independence by deciding to short-list two European combat aircraft for a contract worth $11 billion, while rejecting American bids.

In many ways, South Asia is moving on. It is trying to build its economic inter-dependency a way that the United States once encouraged. As the history of Europe showed, only when France and Germany began weaving their economies together after World War Two did they put behind them years of conflict. And the governments of South Asia are no longer waiting to solve their political disputes before they try to forge better economic cooperation and trade.

The United States, meanwhile, is trapped in a post 9/11 war in Afghanistan, trying to fight an old battle with al Qaeda, while other countries supposedly under its tutelage are setting their own course.


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I really wish Pakistan’s democratic infrastructure grows stronger. It will surely help diffuse all the tension in the region and shift the focus towards peace and co-existence. It is important for Gilani to complete his full term as Prime Minister of Pakistan, followed by electoral process. This exercise will bring hope and faith in democratic exercise. Civilian leaders always seek peace and improved relations with their neighbors. I am hoping that Pakistan will turn into a strong democracy driven by civilian governments for a couple of decades. That process will curtail the nefarious schemes of its warped military and its intelligence wing which has earned the reputation of being clubbed with terrorist groups like Al Qaeda. Going the democratic way is the only last option Pakistan has got. India should definitely work with Pakistan’s democratic government.

Posted by KPSingh01 | Report as abusive

KP Singh said:

> Civilian leaders always seek peace and improved relations with their neighbors.

Er, three words – Zulfiqar Ali Bhutto.


Posted by prasadgc | Report as abusive

“Er, three words – Zulfiqar Ali Bhutto.”

Add Indira Gandhi as well. These are not really civilian leaders. They are civilian dictators. In India, every state has such dictators. But in the long democratic practice, such dictators slowly begin to disappear. You forgot Nehru. A few bad apples do not make the system bad. But military rulers have never been a better alternative.

Posted by KPSingh01 | Report as abusive

[...] the original here: India and Pakistan agree to expand trade, rewrite the rules … Categories: 2011, Education, and India. Post Tags: agreement, aspiration, expand-trade, india, [...]

In my opinion, this is nothing but window dressing. I think Mr. Sibal is dead on. These govts are really good at making grand gestures and promises and only carrying out a few of them. Myra talks about the aspiration itself representing a significant shift. However, I think the foundation behind the aspiration is hollow. It is only to put on a show for the international/national audience.
I believe the link between post WW2 Europe and South Asia cannot be made. First off, Germany was de-industrialized by the Allies and lost most of its manufacturing base. This lead to a lot of problems for the Germans.
We forget that there was a fundamental decision made by the Truman admin regarding Germany (West) and to allow it to be part of the European recovery. Onwards came the aid and the start of the economic integration. I believe that decision of allowing Germany to participate in the recovery lead to the whole “peace and prosperity” we see now in Europe.
I don’t think that the moment has come now for India and Pak, and definitely don’t think that this agreement represents that fundamental step. I believe that time will come when “K” is dealt with.
Anywho, only time will tell.
Myra, Keep up the great work. I really enjoy reading your work. Planning to read your book soon. Thanks!

Posted by rainydays | Report as abusive

I just learned Pakistan lost The Great Leader! Sorry Paks.

Posted by netizen | Report as abusive

[...] For those reasons, the talks on Siachen starting on Monday between the defence secretaries of India and Pakistan have an importance beyond the conflict itself. No one is expecting an early resolution of the war which erupted in the Karakoram mountains above the Siachen glacier in 1984, and which has been both literally and figuratively frozen since a late 2003 cease-fire.  But the talks will help gauge how quickly India and Pakistan will move on what is for now a very slow but steady peace process. [...]

Indo Pak trade should go on in parallel with peace talks, Kashmir issue always remain main focus as far as Pakistan is concern. Todays domecratic government in Pakistan making good efforts to start the peace talks with india after Mumbai attacks.
Both India and Pakistan should make efforts to revive there economy specially make trade agreements.

Posted by Utrade | Report as abusive

[...] for a moment to the current state of India-Pakistan relations. A rather well organised peace process has allowed both countries to set aside for now their priority issues – for Pakistan, disputed [...]

[...] for a moment to the current state of India-Pakistan relations. A rather well organised peace process has allowed both countries to set aside for now their priority issues – for Pakistan, disputed [...]

[...] for a impulse to a stream state of India-Pakistan relations. A rather well organised assent process has authorised both countries to set aside for now their priority issues – for Pakistan, [...]

[...] for a moment to the current state of India-Pakistan relations. A rather well organised peace process has allowed both countries to set aside for now their priority issues – for Pakistan, disputed [...]