Trade is low and limited because the trade regimes of each country are closed to each other. Bilateral trade between Pakistan and India has always faced a series of tariff and non-tariff barriers, that are a consequence of the political tensions between the two countries. Neither Pakistan nor India are generally open economies. They have among the most restrictive trade regimes worldwide.
Bilateral trade is constrained by poor infrastructure, both soft and physical. There is huge potential to expand bilateral trade. The Pakistan and Indian economies are highly complementary, and are becoming more so over time. The two countries also share a common border, history and cultural similarities. Yet, despite this, trade ties between the two largest economies in South Asia remain weak. Both countries have made moves towards improving economic relations.
Pakistan decided to extend MFN status to India in , with an aim for this to become effective from 1 January , but this target was missed. During the last quarter of the previous century international relations witnessed a strong surge towards regionalism. The underlying idea was to promote peace and economic progress through multilateral partnership of states in the region by pooling the available resources.
Further impetus was provided by the emergence of new issues that threatened the fabric of international norms, such as terrorism, drug trafficking, extremism, and economic crisis. It was realised that these problems could not be solved at bilateral level and required joint efforts and close coordination. Saarc came into being in December , with the adoption of its charter in Dhaka.
The objectives were to promote the welfare and improve the quality of life of the people of South Asia by accelerating economic growth in the region and building up mutual trust among the member states. The importance of Saarc as a regional organisation despite its rather unsatisfactory record, is recognised by all leaders. The feeling that peace and prosperity are indivisible and that the South Asia region has a common destiny and a shared struggle for a better and brighter future has emerged dominant theme.
Its performance has not been entirely dismal. Despite failings, a number of significant achievements such as i The Regional Convention on Suppression of Terrorism ii Saarc Agriculture Information Centre at Dhaka iii Saarc audio visual exchange programme SAVE and iv Social Charter to set targets for eradication of poverty, population stabilisation and human resource development fall to its credit.
Similarly declarations on enhancing political cooperation and promotion of mutual trust and understanding reiterated in each summit have registered limited success. Moreover, in recent past Nepal was a monarchical country and Pakistan was a military-ruled country.
Naturally, India and Pakistan have taken a contradictory position in different international issues. This is because almost every state in the region has problems in its bilateral relations with India. As for example, the following disputes can be mentioned between India and Pakistan centering on Kashmir, between India and Bangladesh focusing on the distribution of water in the Ganges, between India and Nepal centering on the water distribution of Mahakali River and in some recently disputed border regions like Kalapani, Lipulekh, etc.
In reality, due to the special importance of bilateral and conflicting issues, the bond of cooperation between the SAARC countries could not be strengthened. It is to be remembered here that the basis of regional cooperation is the equal interest of allied countries in the mutual benefit and equal participation in enhancing cooperation.
But in terms of geographical size, population, military might, economic development, etc. This could lead to mass protests against the authoritarian rulers of those countries. This apprehension, in their opinion, has created a negative attitude towards India.
As a result of a lasting animosity developed between them, they cannot trust each other at all. The lingering Kashmir issue also remained a great hurdle in the process of progress and cooperation. Besides, earlier the neo-colonial foreign states like the USA had committed themselves to pursue colonial interests by keeping the mutual distrust and animosity among the states of the South Asian region.
However, NTMs become barriers to trade in the form of NTBs, only when they are combined with unnecessary bureaucratic procedures, corruption and lack of information. As in the case of South Asia, NTBs have increased the cost of intraregional trade and also reduced quantities traded. Regional trade has remained below five percent of the total trade of South Asian countries, as it is more expensive than trade with countries outside the region. SPS deals with regulations for food safety and plant and animal health.
TBTs are measures taken to protect domestic markets, consumers and industries, which can indirectly discriminate against imports from other countries. While these NTMs cannot be eliminated, it is important to ensure that they are accompanied by relevant policy measures so that they do not hamper trade and become NTBs.
Further, NTMs unfairly discriminate against exports of smaller nations with lesser capacities as they lead to high costs. Another major NTB comes in the form of customs duties, rules, and regulations,. These are sometimes unreasonable and reflect the inability of South Asian countries to overcome protectionist economics.
Lack of connectivity in the region also adversely affects intraregional trade. The creation of a smooth flowing regional supply chain will require investment in physical infrastructure for transport across borders.
There is a lack of synchronized and coordinated border infrastructure in road freight, rail, shared waterways, and connectivity by sea. For instance, goods transported between Delhi and Dhaka would take only five days with improved road connectivity. Border infrastructure such as land customs stations and warehouse facilities are weak. The low yield for investment in such projects have discouraged governments from taking a more active role in trade facilitation through cross border infrastructural development.
Additionally, border authorities in South Asian countries have been noted as highly dysfunctional, further affecting trade. The BBIN countries have recorded higher amounts of integration by undertaking measures for trade facilitation and improved connectivity. The Bangladesh-India Memorandum enables improved bilateral trade between the two countries, while also allowing Bangladesh access landlocked states of Bhutan and Nepal through Indian territory.
India has been given access to Bangladeshi port in Ashuganj, since June , in order to access its remote northeastern region. Bus connectivity was established along the Kolkata-Dhaka-Agartala route in June The Dhaka-Shillong-Guwahati bus service, which was to start operating in May , has been stalled due to technical issues. Improving bilateral relations within a sub-region can lead the way for the rest of South Asia by demonstrating its successes.
It can encourage and help implement similar projects in the rest of the region. Comparative advantage on trade in goods is difficult to exploit in the region, as all countries are characterized by labour surpluses and lack of capital.
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