Civilian, military, and business leaders on both sides of the India-Pakistan border have long resisted normalizing trade with their historic rivals. But two new reports commissioned by the New America Foundation's National Security Studies Program from leading Pakistani economist Mohsin Khan and leading Indian economist Nisha Taneja argue that economic analysis reveals massive untapped trade potential between the two countries, which leaders of key manufacturing sectors in both nations now understand.
Both reports demonstrate the removal of tariff and non-tariff barriers could result in an expansion of trade between the two countries from its current value of 2 to $2.5 billion to estimates ranging from $20 to $50 billion. Khan’s report, India-Pakistan Trade Relations: A New Beginning, acknowledges that Pakistan will have both winners and losers in result of opening of trade relations, but the number of new opportunities it would bring to the country’s struggling economy would outweigh any pain that could also occur. For example, Pakistan’s automobile and pharmaceutical industry would likely suffer from free trade with India, but the entire nation would gain access to India’s more advanced technology and machinery.
Similarly, Taneja, a professor with the Indian Council for Research on International Economic Relations in New Delhi, found the Indian goods with the most potential for export to Pakistan include machinery, mechanical appliances, and electrical goods. And according to her report, Enhancing India-Pakistan Trade, the items India would most likely import from Pakistan include textiles, jewelry, and precious metals.
Though the Pakistani and Indian governments have recently made moves toward improving trade relations — exemplified in Pakistan’s granting of Most Favored Nation (MFN) status to India, business owners in both countries still fear the political backlash that might occur if they sell their products on the other side of the border. Restrictive visa regimes and insufficient transportation systems across the border continue to depress trade and investment exchanges. Both Khan and Taneja outline reason for hope in their illuminating reports but also note many hurdles will need to be overcome before the historic enemies can claim full economic ties.
To read the full report by Pakistani economist Mohsin Khan, click here.
To read the full report by Indian economist Nisha Taneja, click here.
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