PAKISTAN, November 5, 2011—The meeting between the trade and commerce ministers of Pakistan and India in September this year was an effort to increase trade between the two countries and could provide an opportunity for easing of tensions on the more difficult political front.
Pakistan and India have historic and deeply rooted tensions and these tensions started with the partition of Indian subcontinent into two countries as the state of Kashmir was claimed by both countries and has resulted in three wars and still is a reason of conflict between India and Pakistan.
Those tensions escalated in November 2008 with the Mumbai terror attacks in India, further hampering relations. The November 2008 attacks were across Mumbai, India’s largest city. The sole captured terroist, Ajmal Kasab claimed the attackers were of the Lashkar-e-Taiba, a Pakistan-based militant organisation. India, Pakistan, the U.S., U.K. and United Nations all consider the group to be a terroist organization (cite Wikipedia.)
During the attacks there were ten separate incidents of shootings and bombings resulting in in the death of more than 166 and injury of many Indian citizens and military personnel.
Following the attack, the meeting between the commerce ministers was the first high level diplomatic contact between the two countries since November 2008. During the meeting, the commerce ministers agreed to double the trade across the most heavily militarized border in the region in the next three years.
The recent September 2011 meeting between Pakistan Foreign Minister Hina Rabbani Khar addressed the Pakistani Parliament and stated that Pakistan will soon grant the status of most favored nation (MFN) to India.
The MFN designation means that Pakistan will not impose any special barriers on its trade with India and will treat India as it treats any other country. India has already granted Pakistan MFN status.
Next week on November 7 , the commerce secretaries of the two countries will again meet. Their agenda during this meeting is to define specific details to improve trade relations. The goal is to increase the number of items that can be traded by both sides, which will result in more businesses and financial institutions opening on both sides of the border
Within Pakistan, there is some controversy over granting MFN status to India. Pakistani businessmen and industrialists worry that MFN status will hurt Pakistani industries by undercutting prices.
Residents of Kashmir are concerned that granting India MFN status will put the Kashmir problem in abeyance. Additionally, opposition parties are angry that the government failed to consult with them before granting MFN status.
As the process of granting India the MFN status will come into affect next year, India has to remove the Non-tariff barriers on its imports from Pakistan. India also gives subsidies and has imposed anti dumping steps to any imports from Pakistan other than the non-tariff barriers.
India has reciprocated the Pakistani gesture by not vetoing the scheme proposed by the European Union in World Trade Organization (WTO) to increase imports from the 2010 flood affected areas of Pakistan for the period of three years. Earlier India vetoed the scheme. If India does not veto this scheme in WTO, it will increase the textile exports from flood affected areas of Pakistan to European Union about 10-15% for a period of three years.
Talks could suggest some thawing of relations between India and Pakistan and the success on the other serious conflicting issues, but serious difficulties remain. Just a week after the India Pakistan trade talks, India and Afghanistan signed a strategic agreement stating that Delhi will train and equip Afghan security forces.
Pakistan viewed this as an increase in India’s role in the region while undercutting its own and encircling Pakistan on its eastern and western borders by anti-Pakistan governments. Other important issues between the two countries include control over the state of Kashmir, Sir Creek a 60 mile strip of water and the Siachin glacier which is the second longest glacier in the non-polar regions of the world and also has the world’s highest battlefield at 21,000 feet.
The trade relations, and potentially wider relations, between Pakistan and India are improving but the progress is delicate. Any terrorist attack in either country or renewed tensions in Kashmir would set back any progress.
While any thawing in tensions is positive, progress on the trade front does not guarantee progress on the political front. For now, political progress will likely remain limited to visa relaxation and cross-border businesses, until trust between the two countries grows.
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