The unofficial word from Islamabad is that Pak-India trade is over for now, in line with unofficial advice from Rawalpindi. The contrast with the Nawaz Sharif/Khurram Dastagir Khan-generated bonhomie of the last year is stark. But this time, no one can claim they didn’t see it coming.
The argument for trade with India has won over many proponents since the de-escalation post Kargil and the 2003 agreement regarding the Line of Control. With ‘globalised trade flows’ and even ‘regional trade’ dominating the narrative across the world, this shift was inevitable.
Consequently, apart from the spoilers — the auto sector and big pharma, for example — most businesses and traders on both sides of the border have long been dreaming of windfall gains and pushing for freer trade. And in Pakistan, all their hopes were pegged on the Sharif scions.
But the weight of history has proven too much for even the pro-business Sharifs and their gang of pro-trade industrialists.
To be fair, the PML-N government did try. The grant of MFN status to India, for example, had assumed political baggage of its own. And it took much effort by Commerce Minister, Khurram Dastagir Khan, to bleed the term of its poison, transform it into a more neutral ‘Non Discriminatory Market Access’ and sell it to the sceptics.
High-profile official delegations exchanged notes, high-powered committees were set up. Even though initiatives to phase out the negative list or set up bank branches in India began under the PPP administration, it was the PML-N government that embarked on the serious, back-end work that would have made either possible. The terms of bilateral conversation, for example, were expanded to include the role of the NLC, customs procedures, and the centrality of Wagah to the trade facilitation enterprise.
Reciprocal visits by trade delegations, too, became more frequent. This was significant because the skirmishes at the Line of Control since 2013 continued unabated and the Indian side kept up the pressure regarding access to the Mumbai attackers. But Islamabad’s willingness to engage never wavered.
Perhaps the most important factor was that businesses and traders felt Nawaz Sharif meant business, especially when he said he was waiting for the new Indian government to settle in. It suggested a maturity of purpose and an understanding that the Pak-India trade project needed complete political buy-in from both sides.
Unlike other pro-dosti leaders, Sharif seemed to understand that opening the border for trade wasn’t just about overcoming the decades of mistrust. Obviously, the trust deficit — and complicated issues of foreign policy and national security — kicks in whenever a businessman wants to travel across the border or when a bank wants to set up shop next door. But besides this, both economies have developed their own peculiarities which need to be massaged, if not resolved outright, if the free trade project is to have a hope in hell.
Take agriculture, for example. Geography precludes every option other than reciprocity: sell tomatoes, buy sugar. But despite the fact that agriculture is protected in both countries, the markets are not equal. Land reforms and targeted subsidies (worth INR 100 billion, according to one estimate) render the Indian product far more competitive; Pakistani farmers, meanwhile, gave up the dream of subsidised electricity and turned to diesel and solar power.
Greater investment in R&D in India has resulted in the shorter crop cycles and longer shelf lives so essential to export via road. But this also translates into a situation where Indian products compete — and frequently take over — even those domestic markets Pakistan should theoretically hold. (For example, the Indian tomato hits the Pakistani markets three to four weeks before the Pakistani tomatoes ripen, selling at close to four times the price the Pakistani tomato eventually sells for.) And given that Pakistani agricultural produce is frequently subjected to lengthy quality control procedures at Indian Customs — prompting furious allegations of Non Tariff Barriers by Pakistani agriculturalists — the chances of a fruitful co-dependency degenerate further.
Even other sectors are pregnant with the seeds of this discord. The auto sector in Pakistan, for example, has long benefited from protectionism and has since perfected the policy capture of Islamabad. Even big pharma — with its deep pockets — has made similar inroads into the legislative and bureaucratic apparatus of state and resisting their combined will, thus, becomes a political minefield for any government.
But as it turned out, that moment never came as both governments fell prey to domestic political imperatives.
In the fourteen years since he was last premier, Nawaz Sharif succeeded in convincing the military establishment that he could work with them again. But his cherished ambition of civilian supremacy ran him afoul of the establishment soon after he assumed office in June 2013. He seemingly caved in on the choice of defence secretary and the matter of Ashfaq Pervez Kayani’s further extension but dug in his heels on the issue of Pervez Musharraf’s trial, Geo, and dialogue with the Taliban.
Even Sharif’s pledge to not interfere in Afghanistan and his May 2014 decision to attend Narendra Modi’s swearing in ceremony was believed to have caused severe heartburn in Rawalpindi but he persisted nonetheless.
That Sharif was simultaneously battling on several other fronts also had him distracted. When the country wasn’t burning up with militant attacks, there was the tanking economy, an unprecedented energy crisis, the run on the rupee, the allegations of electoral rigging and the Karachi Operation.
By the time the Sharif administration mollified its rightwinger allies, jettisoned the good-Taliban/bad-Taliban paradigm and brought the dollar down to Rs98, its critics had successfully painted it as a bumbling and inept government. For its part, the establishment waited patiently till it finally wrangled the go-ahead for the operation in Waziristan.
The operation was key to the resurrection of the image and the credibility of the military. Musharraf’s ignominious departure and Osama bin Laden’s death in Abbotabad exposed the establishment to the slings and arrows of outrageous fortune and vile politicos; to rebuild its image, it was forced to go into deep hibernation. But the chance to ‘prove’ its usefulness to Pakistan pushed the establishment back into the game; the weakening of the civilian government as a consequence of its perceived incompetence opened new doors.
The engineering of the fortnight-long PTI and PAT dharnas then — as well as the tactically driven “third force” rumblings — have now catapulted the establishment back into the driving seat. And the view from this seat shows that peace and trade with India make little sense.
Obviously, Modi’s own compulsions have done little to bolster the confidence of his Pakistani counterpart. Giddy with the success of the landmark sweep, the BJP government now wants to rewrite Kashmir in its constitution. The +44 formula the Indian government is thus pursuing leaves little room for magnanimity and a broader, region-wide vision.
By taking unexpected umbrage over a routine meeting of the Pakistani High Commissioner with Hurriyat leaders, New Delhi delivered a stinging snub by cancelling foreign secretary level talks. With the border skirmishes having worsened and the water war on in earnest, trade is likely to be low on the agendas of the foreign secretaries when they meet eventually. Unless, of course, Sharif and Modi set out to prove they are as independent and pro-business as they claimed to be when campaigning.