Talks and Trade – Dealing with a Terrorism infused Pakistan

By Mahendra Ved

Once again, there is a buzz about the resumption of trade between India and Pakistan. Strengthening it is Maryam Nawaz, Chief Minister of Pakistan’s Punjab and daughter of three-time Prime Minister Nawaz Sharif who wants the government led by his brother Shehbaz to improve relations with all neighbours.

The Shehbaz Government had sent clear signals last month, but India is cool, and showing any urgency. Howsoever, the government will take the call only after its general elections.

The Sharif family is into business and industry and Nawaz has been a long-time votary of trading with India. To the extent that he has been accused of “selling Pakistan to India.”

The issue is complex, with domestic politics and diplomacy being guided more by mutual mistrust and national security than economics in both the countries.

Although India’s current poll-time rhetoric on terrorists is “Ghar Mein Ghus Kar Marenge” (we will enter your house and eliminate you), some in Pakistan see a chance of some forward movement once India’s general elections are over in June. They are hopeful that even if Prime Minister Narendra Modi whose political agenda they dislike wins a third term, he may be open to bringing some kind of a normalcy to bilateral ties.

Of course, that depends on the Pakistani military establishment who funds, trains and infiltrates into India as a matter of exercise it is used to in routine.

Nudge from Washington DC

Add to that the nudge from the United States urging the two South Asians to talk.

A friend of both, the US is always looking for time and opportunity to dish out this counsel. Any India-Pakistan rapprochement would be a feather in Biden’s cap when he seeks re-election as the US President as neither the Ukraine, Gaza nor Iran-Israel conflicts are yielding positive results.

Statehood and Elections in Kashmir

Modi has promised restoration of statehood in Jammu and Kashmir by October 2024 and holding of early elections. One surmise is that this may give Islamabad a face-saver to restore full diplomatic relations, in freeze since 2019 when India annulled the special status and converted J&K into three union territories.

Islamabad hopes that this will pave the way to start the process of economic engagement by first opening a few product lines for trade.

However, the Indian approach may be cautious and make trade contingent on Pakistan meeting certain basic terms and conditions. India’s logic is that although both benefit from bilateral trade resumption, Pakistan needs it more than India to benefit in terms of prices, and movement of goods. The current movement through third countries makes it expensive.

India’s condition is only one: Stop Terrorism

The buzz for better relations got louder after Pakistan Foreign Minister Ishaq Dar said his government would engage with “all stakeholders” (read the all-powerful army that determines Pakistan’s India policy) on this issue. Dar said to seriously consider and examine if “at least to the extent of trade and economic activities something can be done”.

Former Army Chief, Gen. Qamar Javed Bajwa advocated it in 2021 when he emphasised that his country should move from “geopolitics to geo-economics.” But then Prime Minister Imran Khan baulked. Pakistani army, and some political leaders and fundamentalists, have nothing else to do except to keep the Kashmir pot boiling.

For India, the bottom line is that if talks and terror cannot move parallelly, then trade and terror also cannot.

Given Pakistan’s record, India’s principal demand, totally legitimate, is nearly impossible for Pakistan to fulfil. Its state policy has been to use non-state actors for low-intensity conflicts with not only India but also other neighbours, Afghanistan and Iran included. Unfortunately for the Pakistani people, their army and fundamentalists are deeply into geopolitics of hatred, not geoeconomics.

Given this history, External Affairs Minister Jaishankar has not allowed any wavering from Pakistan’s “industrial-level assembly line” of Jihadist terrorists.

India would not overlook terrorism just because “there was so much else at stake”.

A World Bank study suggests that trade between the two neighbours can easily be ratcheted up to US$37 billion by reducing taxes and removing bans on the import of Indian products by Pakistan. There is an existing business of about $ 12 billion, partly routed through Dubai and Singapore, according to unofficial estimates.

The November 2008 and Pulwama Terror Attacks

For India, the coin flipped after the Mumbai terror attack on November 26, 2008. Its been a policy of No Talks till the terror network is active. Finally, trade came to a grinding halt in 2019 after Pakistan’s Pulwama bombing attack. Caught in the conflict were people on the Attari-Wagah border, where hundreds of truckers, porters, customs house agents, and others were severely impacted.

India withdrew the Most-Favoured Nation (MFN) status and imposed a 200-percent import duty on all Pakistani products. A couple of months later, India suspended the cross-LoC trade in Jammu and Kashmir because it was being misused by Pakistan to smuggle narcotics, weapons, and counterfeit Indian currency. It had also become a major conduit for terror finance and drugs and associated money laundering in Jammu and Kashmir.

Despite the ban by Pakistan on Indian exports, the occasional permission to import much-needed food or other goods such as onions, and raw sugar has meant that even in April-January 2023, India exported goods worth $1.1 billion directly to Pakistan. According to Commerce Ministry data, while Pakistan which faces a 200 per cent tariff for its goods in India, it managed to sell directly goods worth nearly $ 3 million.

Assuming India will agree to the resumption of bilateral trade, Pakistan would remain a less than marginal player for India. While Pakistan desperately needs trade with India to improve efficiency, gain some markets, address supply its own chain problems, and moderate inflation, particularly in food items, the benefits for India are not commensurate.

For that reason, the strategic hawks are advising that India should not accept the old formulation of a Non-Discriminatory Market Access (NDMA) – a bilateral agreement that Pakistan would be free to rescind whenever it wanted. It should be Most Favoured Nation (MFN) for both sides or no trade.

What India needs, and can bargain for, is access to Afghanistan and Central Asia which Pakistan has been loath to allow.

Aware of this, India has already opened the sea route via Iran’s Chabahar port and a railway line that connects with Afghanistan, although the United States has not been happy about it due to its hostility to the latter.

Howsoever, trade would definitely help each country in improving relations with the other, and Pakistanis would get many items common to their taste with Indians at cheaper rates through the land routes.

Peace is always the best option for any country, at any time of history, but for that, a political, independently elected government is the right choice. Not a hatred infused political army with dreams of dominance and revenge for its own misadventures.

— The writer is a senior analyst and author. He is also the President Emeritus, Commonwealth Journalists Association (CJA).