Trade relations with India have been a subject of contention and controversy for long. Popular opinion in Pakistan dictates that these relations be rejected until the Kashmir issue is settled. Others hold the view that trade and commerce have their own dynamics and may not be held hostage to political differences.
The controversy has been raging for decades. India, besides bilateral efforts, has also used the SAARC platform to secure bilateral trade and transit rights through Pakistan to have access to Afghanistan and the land-locked Central Asian states. The political situation in Afghanistan, involvement of US and other western powers has encouraged India to tie transit rights with the Afghan situation. The US has mounted intense pressure on Pakistan to provide over land route for Indian exports to Afghanistan. Secretary Clinton has openly canvassed hard, telling Pakistan that its "obsession" with India's hostility is misplaced.
Pakistan has, however, rejected any such thesis. India's role and policy in the region and its alleged involvement in sponsoring terrorism in Balochistan as well as FATA have created serious concerns regarding Pakistan's security environment. Pakistan also has concerns about smuggling, massive flow of drugs and arms from Kabul into Pakistan. The prevailing hundi system could also lead financing terrorism in Pakistan.
A trilateral summit was held in May in Washington with presidents of Pakistan and Afghanistan attending the event hosted by Clinton. The deliberations succeeded and a MoU was signed on May 6, committing the "two countries achieving a trade transit agreement by the end of this year." This agreement had remained under discussion for 43 years without resolution. A euphoric Clinton declared the MoU as an "important milestone" and "historic event" for the countries in the region.
The real intentions and objectives behind this initiative of trilateral summit and signing of the MoU was to extend the transit right to India, surreptitiously. The MoU has certainly been a major triumph and will not only enhance Pakistan's trade with Afghanistan but also provide its product the market of Central Asian states.
Pakistan has so far succeeded in resisting US pressure to extend India the transit facility. Afghanistan, acknowledging that such an agreement will not be feasible in near future, has accepted Pakistan's offer for 60 trucks a month for transporting its goods up to Wagah. Both also agreed that in transit, goods would be checked through an electronic tracking mechanism mounted on the vehicles.
Concomitant with these diplomatic efforts by the US to seek concession for India, the bilateral trade between Indian and Pakistan has flourished. With the trade deficit exceeding one billion dollars, Pakistan exports to India have stagnated around $400 million, despite the fact that India has granted MFN status to Pakistan. To deflect diplomatic pressure and keeping in view its political and economic interest, Pakistan should gradually liberalise trade with India but not allow the derailing of the Kashmir issue with its transit route to India. Pakistan may, however, continue to encourage trade with India consistent with our economic and security concerns. Word is that Pakistan has invited three multi-billion Indian companies, TATA, Reliance and Essar, to a meeting of potential investors in the power sector for the development of the Thar Coal Power Project.
Pakistan must exploit its geo-political location by improving transit trade with the Central Asian states and should accelerate transit transport agreements with Central Asian republics to secure its hold in the region.