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Pakistan Peace Coalition demands free trade among all SAARC countries according to commitments

by Pakistan Peace Coalition, 20 July 2010

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PRESS RELEASE

Karachi, July 19, 2010

The Pakistan Peace Coalition (PPC) on Monday welcomed the signing of the Afghan-Pakistan Transit Trade Agreement (APTTA), allowing Afghanistan to export its goods to India through the Wagah border in Pakistan. The PPC, however, expressed its concern over the Commerce Minister’s statement that Pakistan has turned down Afghanistan’s demand to allow transit facility for Indian goods via Pakistan’s land route to Afghanistan.

In a statement, issued by the central General Secretary of PPC B. M. Kutty and General Secretary of PPC Karachi Adam Malik demanded that all SAARC countries should allow trade between regional countries as stipulated in the SAARC Charter and the South Asian Free Trade Agreement (SAFTA). The PPC termed the one-sided facility by Pakistan while
barring India to export its products to landlocked Afghanistan as ’inadequate’ and said this would violate the commitments made by the leaders of SAARC in its charter and the SAFTA.

Almost all South Asian countries are facing trade curbs due to the discriminatory policies of the governments. For example, Bangladesh does not allow free movement of goods to various eastern states of India through its land route and India bars Nepal to use its territory for trade with Bangladesh. All these restrictive policies are hampering the efforts for free trade among the regional countries.

The PPC leaders pointed out that the South Asia Free Trade Agreement (SAFTA), signed on January 6, 2004 during the 12th SAARC Summit at Islamabad, is a free trade agreement between the SAARC members. This is scheduled to become fully operational by 2016. As an active member of the SAARC, Pakistan is bound to give all countries free access to its land routes and for that a mechanism of checks and monitoring can be evolved to address security concerns.

They noted that South Asia houses 23% of the total world population. However, its share in the global GDP is less than 3%. The 400 million world’s poor in the region means nearly 30% of the region’s population lives below the poverty line. In the backdrop of intense underdevelopment, South Asian countries efforts for regional cooperation are half-baked, negatively impacting the region’s economy. The combined trade of all eight member countries accounts for less than 2% of global trade. Only 1.7%
of world exports and 3% of global FDI inflows take place in South Asia. The
contribution of South Asia in total Asian exports and imports is merely 4.7%
and 7.5% respectively.

Projecting an even more dismal picture is the abysmally low level of intra-SAARC trade which accounts for less than 5% of the total trade of the region. The bilateral disputes between Pakistan and India are a major cause of the low level of intra-SAARC trade. Though India is Pakistan’s ninth largest trading partner with bilateral trade between the two countries at $1.95bn in 2007-08, it still constitutes less than 1% of the global trade of the two countries.

The PPC leaders expressed concern that the bilateral disputes of the SAARC countries are also hindering the success of the SAFTA. Pakistan refuses to grant MFN status, a basic requirement under the WTO, to India and continues to conduct trade with India on the basis of a positive list. India, on the other hand, maintains high tariffs and non-tariff barriers on products of export interest to Pakistan. Similarly, during the recent 16th SAARC Summit at Thimpu, Pakistan declined endorsement of the Motor Vehicles Agreement to provide connectivity between Kabul and Dhaka criss-crossing the South Asian region. The SAARC countries bilateral disputes and insecurities means there are no direct land routes in operation between India and Pakistan or India and Sri-Lanka. Direct flight connectivity in the SAARC is also minimal. Cross border infrastructure facilitates intra regional trade and creates opportunities for ’land locked’ countries to become ’land linked’. ASEAN is one successful example in this regard, where intra-state and regional connectivity has grown fourfold over the past two decades.

Experts agree that the welfare effects of the SAFTA will contribute significantly to the economic development of the region. The SAFTA will generate significant benefits for Pakistan, with potential welfare gain at around US$254 million or 1.92% of the GDP. The performance of the transport sector alone will increase by 85% due to cheaper imported intermediate inputs from the SAARC region. The industry output of
other manufacture will rise by 5%, manufacturing equipment by 4%, and agriculture by 2%. Many studies suggest that free trade with SAARC countries will work in Pakistan’s favour by way of access to the vast market of the SAARC countries, greater market share for competitive suppliers in Pakistan and access to cheaper and better quality goods for consumers. Trade liberalization should permits Pakistan to expand its export sectors through enhanced competition.

Furthermore, creation of small industries and revenue generation through
utilisation of Pakistan’s roads as route to other SAARC countries will also
boost Pakistan’s economy. This would also facilitate the trade with other
landlocked countries in Central Asia.

The PPC office bearers highlighted the social and political benefits from free trade among South Asian countries. "The SAFTA can help members speak with one voice in global negotiations and on trade-related issues, reduce political disputes among members and attract greater foreign direct investments."

They said that bilateral disputes have seldom hindered trade between other countries. For instance Taiwan and China maintain a huge trade relationship, as do Japan and China. India and China still have unresolved border issues, but China stands as India’s largest trading partner. Sri Lanka too has forged a free-trade agreement with India, while India has opened borders with Bhutan and Nepal.

The PPC demanded that practical measures be taken for increasing bilateral and multilateral trade in the region. The anti-India jingoism particularly among the government functionaries is preventing the country from benefitting from the economic cooperation and development through increased trade.