Trading with India: some current impediments for Pakistan

Author:Rabia Manzoor, Abbas Murtaza Maken, Shujaat Ahmed Syed, Vaqar Ahmed
Position:Department of Research, Sustainable Development Policy Institute, Islamabad, Pakistan
Pages:39-55
SUMMARY

Purpose This study aims to examine the possible gains and challenges for the enhancement of bilateral trade ties between India and Pakistan. It is interested specifically in analyzing and deliberating an attempt to identify the key challenges and bottlenecks in cross-border trade. Design/methodology/approach This paper offers in-depth case study of trade between India and... (see full summary)

 
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Trading with India: some current
impediments for Pakistan
Rabia Manzoor,Abbas Murtaza Maken,Shujaat Ahmed Syed and
Vaqar Ahmed
Department of Research, Sustainable Development Policy Institute,
Islamabad, Pakistan
Abstract
Purpose This study aims to examine the possible gains andchallenges for the enhancement of bilateral
trade ties between Indiaand Pakistan. It is interested specically in analyzingand deliberating an attempt to
identifythe key challenges and bottlenecks in cross-border trade.
Design/methodology/approach This paper offers in-depth case study of trade between India and
Pakistan using time-series data and through various stake holders' interviews. As further discussed in the
paper, the data investigationand interviews highlight impediments in IndiaPakistantrade from trade policy
to other policiesinvolved in this process.
Findings Based on time series data and stakeholdersinterviews, the study concludes that poor trade
logistics and abysmal transport infrastructure, high tariffs and non-tariff measures, lengthy customary
procedures, heavy import duties, port restrictions, lack of appropriate storage facilities, strict visa regime,
nancial transaction barriersand lack of telecommunication facilities are the major challenges in the way of
regionaltrade.
Originality/value The study proposessome key reforms and policy measures to boost the formal trade
to minimize the trade obstacles such as publicprivatepartnerships and inclusion of private sector in a joint
trade commissionto strength the business relations between the two countries.
Keywords Investment, Non-tariff measures, Trade logistics, Transport infrastructure
Paper type Research paper
1. Introduction
The current body of literature on regional trade in South Asia suggests that there is often
less trade among neighboring countries than there is with geographicallydistant countries
(Ahmed et al.,2014). Perhaps, this notion also applies to the trading relationship between
India and Pakistan. Even though both countries have relatively large economic size within
South Asia, they have a less than optimal levelof bilateral trade, which stands around 3 per
cent of the total trade volume. The volume of exchange as of 2010, stood at US$2.6bn far
lower than the estimated trade potential of US$20bn(Taneja et al., 2016). Despite numerous
efforts to promote trade between India and Pakistan, there has not been tangible progress
(Batool and Ahmed, 2014).
Trade also takes place either through informal channels or personal baggage scheme
through the land borders or third countries via UAE, Singapore and Thailand. The actual
volume of informal trade is unknown, but there are different informed guesstimatesof
informal trade betweenIndia and Pakistan (Ahmed et al.,2014).
Export categories may changeif tariff and non-tariff measures are lowered and informal
goods are allowed to gradually come through formal channels. Additionally, this will also
require addressing the complex, non-transparent or divergent regulatory requirements (e.g.
custom formalities, technicalregulations and sanitary standards) that markedly increase the
Trading with
India
39
Received23 April 2018
Revised11 September 2018
26September 2018
3 October2018
Accepted3 October 2018
Journalof International Trade
Lawand Policy
Vol.18 No. 1, 2019
pp. 39-55
© Emerald Publishing Limited
1477-0024
DOI 10.1108/JITLP-04-2018-0017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1477-0024.htm
transaction costs of trade, thereby encouraging traders to escape formal procedures and
duties (e.g. in Pakistan, traders often lack information on often changing regulatory
requirements and facelengthy and costly custom delays when trading formally).
Informal cross-border trade can also arise due to lack of land routes and banking
facilities, dissimilar custom procedures, visa restrictions, labeling and packaging
requirements and the excessive checkingof consignments among others. Finally,weakness
in the rules of origin,resulting in traderouted through a third country, results in leakages
in transit trade in turn further distortingdomestic policies and lead to higher indirect taxes
and give rise to illegal transportof goods.
This study therefore is an attempt to identifythe key challenges and bottlenecks in cross-
border trade. Section 2 describes literature review which resulted in identication of
research gap. Section 3 presents methodologyand ndings focusing on identication of key
challenges and bottlenecks in cross-border trade between India and Pakistan. Basedon the
results, focus will be on reforms and policy measuresfor formalizing and encouraging trade
in both countries inSections 4 and 5. Section 6 concludes.
2. Literature review
Bilateral trade between Indiaand Pakistan seems to be one of the challenging and daunting
tasks for policymakers of the present and past. Hiccups and measures in this regard are
mostly associatedto:
retaining the existing trade;
scaling up the trade;
IndiaPakistan trade and investment cooperation.
So when one looks at the challenges in bilateral trade, it is to note that despite creation of
South Asian Cooperation (SAARC) in 1985 and South Asian Free Trade Area (SAFTA) in
2004, economic integration in South Asia has been far surpassed by the economic activity
witnessed in other regions due to hostility and volatile nature of relations (Taneja et al.,
2015).
Similarly, there are several regulatory impediments in increasing the level of cross-
border trade in South Asia in general and trade between India and Pakistan in particular
(Sahai and Laxmi, 2014). Taneja et al. (2013) pointed out the limited transportation routes
and vehicles in addition to the negative lists and bureaucratic hurdles involving transport
protocols and procedural clearances along with transportation costs as hindrance to
bilateral trade.
To achieve benets from pre-existingbilateral and regional frameworks for further help
in sustaining politicaland economic linkages, there is need to have focus on:
logistics;
management of positive and negative lists; and
product diversication (Dash, 2013).
Further to scale up trade, continuity in the existing volume can be achieved through the
elimination of non-tariff barriers to facilitate the cross-border movement of goods and
services and help cementa cordial relationship both the countries (Ali et al., 2015).
Beside continuity, a politically stable Pakistan with an improved infrastructure and
power system is deemed essential to economic development and trade promotion in the
country. Specically, measures by federal and provincial governments to improve the
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