Why Pakistan Reverses its Decision on Trade with India?

Synopsis: Pakistan recently took back its decision to allow trade with India. It is an evaluation of Pakistan’s reversal of trade decision with India.

Background

• Recently, the decision by Pakistan to allow for the import of cotton and sugar from India has been withdrawn within a fortnight.
• It has been stated that restoration of J&K’s special status will be the precondition for opening up trade with India.
• However, Pakistan’s textile industry has not welcomed the decision. Because, for them, importing cotton yarn from India is an immediate need, else, it would impact their export potential.

Evaluation of Pakistan’s Decision

• First, Pakistan’s decision to import only three items from India, namely cotton, yarn and sugar was based on Pakistan’s immediate economic needs. It is not a political confidence-building measure to normalise relations with India. This is clear by the following observations.
  1. Cotton-related products (raw and value-added) earn close to half of the country’s foreign exchange.
  2. According to the latest Pakistan Economic Survey, 2019-20 cotton and sugarcane production were declining.
  3. The Cotton industry estimates that in 2021, there would be a 50% decline (2020-21) in cotton production mainly due to supply chain disruption and decreasing yield in cotton areas.
  4. This means that Pakistan’s cotton export would reduce, creating a domino effect on Pakistan’s garment industry.
  5. So, to balance the loss in output, Pakistan decided to import cotton from India which is more practical and the most economic for Pakistan.
• Second, the crisis in Pakistan’s sugar industry due to a shortage of sugar for local consumption and increasing cost. Market manipulation and hoarding further resulted in the increased sugar price.
  1. The sugar crisis was an outcome of Pakistan’s sugar policy that primarily focused on exports over local distribution.
  2. Again, in this case, importing sugar from India would not only be cheaper for the consumer market in Pakistan, but it will also help Pakistan’s exports.
• Third, the U-turn to overrule the decision to open trade with India highlights the supremacy of politics over economy and trade.
  • Not only in Pakistan, but this situation is also true to the whole of South Asia. This is the reason for very low intra-South Asian Association for Regional Cooperation (SAARC) trade.
• Fourth, the emphasis on Jammu and Kashmir by Pakistan to start bilateral relations goes against any further developments in India-Pak relation. It also hints at Pakistan’s precondition of revoking India’s decision on Jammu and Kashmir to future engagements with India.

In conclusion, Pakistan has to move away from the politicization of all problems. Else it is only Pakistan that will suffer in the long run. So, it is only friendly India-Pakistan relations will benefit both.

Source: The Hindu