Should Politics Trump Common Sense on the LOC Trade?

Arjimand thinks big and comes short of endorsing the present euphoria on the cross-border commerce

(Mr. Arjimand Hussain Talib, 33, is from Srinagar and matriculated from Tyndale Biscoe Memorial School in 1991. He subsequently graduated with a Bachelor's degree in Engineering from Bangalore University. He is also an alumni of the International Academy for Leadership, Gummerbach, Germany. Arjimand writes regular weekly columns for the Greater Kashmir and The Kashmir Times since 2000 on diverse issues of political economy, development, environment and social change and has over 450 published articles to his credit. His forthcoming books: " Kashmir: Towards a New Political Economy", and "Water: Spark for another Indo-Pak War?" are scheduled for release in 2008.)

Re-thinking LoC Trade: There are some serious missing links in the current debate

Srinagar: As the air continues to be filled with smoke over the actual Indian and Pakistani positions on the trans-LoC trade, there seem to be some serious missing links in our domestic debate on the issue as well. Looking at the statements of our trade bodies and leaders of the Coordination Committee, for now it seems our strategy is overly unilateralist and unidirectional. There is so much emphasis on our own economic benefits and reach to international markets through the Jhelum Valley Road that there seems little space for the other party to tread on.

Cost benefit analysis – and, sorry, not emotive sloganeering – continues to guide international trade between sovereign states. In other words, Kashmir’s current approach to the trans-LoC trade needs re-thinking as it seems to be high on emotional quotient and low on realistic strategy. Let us not forget that international trade is very rarely based on emotive politics and that modern nation states weigh matters through the prisms of mutual benefit. The point is that we are bound to offer the other side of Kashmir and Islamabad some tangible benefits too before the idea could meaningfully materialize, or else this exercise would also be lost in meaningless symbolism.

Our approach and statements – especially on the question of our “unbridled access” to Central Asian and Middle Eastern markets – reflects that our emotions and thinking are frozen in pre-1947 times. The current international trade system - including trade in Central Asia, Pakistan, Afghanistan and Middle Eastern countries - is influenced by altogether new dynamics. Sloganeering alone within the limited scope of trans-LoC trade may not necessarily mean Kashmir’s automatic access to world markets and unidirectional trade benefits. We have a lot of homework to do to make it go beyond symbolism.

The first thing for us to do is to deeply understand the dynamics of the current Indo-Pak trade and the factors that influence the international trade in the South Asian region. One thing to recognize is that the current balance of Indo-Pak bilateral trade is too much to Pakistan’s disadvantage, and as such there are some serious misgivings in Islamabad over the idea of an import flood from Kashmir – which naturally under the current system would be in Indian currency. The prospects of Kashmiri goods flooding Pakistan with the trade taking place in Indian currency are bleak without Srinagar being able to offer matching trading benefits to Muzaffarabad and Islamabad.

Indo-Pak bilateral trade swelled from $235.74 million in 2001-02 to more than $ 2 billion last fiscal year. Between July 2007 and June 2008, Pakistan imported goods worth around $1.409 billion from India against $ 1.281 billion in the previous fiscal year.

On the other hand, Pakistan’s exports to India have increased from less than $50 million in 2001-02 to about $300 million in 2005-06. This trade imbalance to Pakistan is a big cause of worry to her. The reason that Pakistan continues to disapprove granting the Most Favored Nation (MFN) status to India is that the trade balance is highly in India’s favor.

The main commodities of Indian exports to Pakistan include sugar, dyes, plastic & petroleum products and cotton while main import items from Pakistan are petroleum & crude products, fruits & nuts, cotton yarn & fabrics and organic chemicals.

Beyond the official trade imbalance, Islamabad is also worried about the unofficial Indo-Pak trade through third countries, which is estimated at $10 billion - again at Pakistan’s disadvantage. A World Bank study has estimated informal trade between India and Pakistan at $545 million in 2005 alone. The smuggled trade exports to Pakistan include industrial machinery, tyres, chemicals and tea. Indian imports in this category include edible oil, spices, dry fruits and pulses.

Another factor which is normally not considered in this issue is the Afghanistan factor. Pakistan is currently losing out in Afghanistan to Indian and Iranian businesses. Presently, most of the trade between Pakistan and Afghanistan takes place in the informal sector, where the volume of clandestine business (smuggling or re-routing of Afghan transit trade goods) between the two countries is estimated to be more than 10 billion dollars. Pak-Afghan trade witnessed a decline of almost 400 million dollars in 2006-07 because Indian manufacturers have flooded Afghan markets with their goods, ousting Pakistani products.

Kashmir’s trading bodies need to identify commodities which they can offer to Muzaffarabad and Islamabad in exchange of their fruit and other exports to mutual satisfaction. It is also important to note that the market for Kashmir’s handicrafts in the other part of Kashmir and Pakistan is limited. When we talk in the historical sense, trade across the LoC was not limited to Muzaffarabad and Pakistan; it fledged much beyond those borders.

What we also need to recognize is that a meaningful cross-LoC trade has something to do with the minimum convergence of ideas and interests between Srinagar, New Delhi, Muzaffarabad and Islamabad. Quite naturally, there are many convergences between Srinagar and Muzaffarabad. But what seem to be consistently ignored are the basic trading aspirations of the people living close to the LoC on the either side, whose day-to-day small historical trade has vanished because of the LoC. A trans-LoC trade which does not take into account their needs and aspirations may not be entirely fruitful. One of the daunting tasks before the trading bodies of the Indian Administered Kashmir and the Pakistan Administered Kashmir is to articulate their interests before their respective governments. Governmental thinking may be overly bogged with geo-politics and not necessarily in tune with people’s aspirations.

Srinagar and Muzaffarabad’s trading communities need to sit together and have a re-look at the lists of trade items that New Delhi and Islamabad had shared for the cross-LoC trade some time back. They have also to explore ways of how their trade interests could go beyond the borders with Afghanistan and the Arabian Sea. That is something where trading communities could make a beginning and Kashmir’s political leadership makes that part of the larger political discourse.

The reason that the trans-LoC trade idea has not made progress is that this trade is treated as a function of the overall Indo-Pak trade and the chronic geo-politics, where Pakistan’s disadvantage automatically aggravates. That may not work, let us understand. Cross-LoC trade offers opportunity not only to the divided parts of Kashmir but even to New Delhi and Islamabad. The only thing to do is to bid good bye to old dirty geo politics and make economics guide the sail.