The formal Trade Minister-level talks between India and Pakistan will formally begin on Wednesday when the two nations seek to take bilateral trade and strategic economic cooperation to a new level, including working on easing visa restrictions for businessmen from both sides.

Pakistan Trade Minister Makhdoom Muhammad Ameen Fahim reached Mumbai on Monday on a six-day visit to India at the invitation of Commerce and Industry Minister Anand Sharma. Mr. Fahim will hold talks with the business honchos and political leadership in Mumbai before flying down to Delhi on September 28. Both the Ministers are likely to hold a number of sessions, including business talks.

These talks are a follow-up to the Secretary-level talks held in Islamabad in April this year. Mr. Fahim is accompanied by a large delegation comprising the business community of Pakistan, including representatives of various chambers of commerce in Pakistan. This is the first meeting between the Trade and Commerce Ministers of the two countries after a three-year gap.

Pakistan has already expressed its desire to “positively” consider granting Most Favoured nation (MFN) status to India. Pakistan has also announced its intention to move over from the positive list to negative list on trade with India. Currently, Pakistan has given access to 1,940 product lines on its positive list and has 12,000 on the negative list. But half of the items on the positive list are not exported by India or it imports these items. Pakistan is likely to take up the issue of end to non-tariff barriers (NTBs) that prevent many of its goods from entering India. With Pakistan blocking Indian imports by the positive list, India has so far maintained that the NTBs Pakistan claims are not country-specific.

The two sides are also likely to deliberate and work out a way for easing the business visa regime and greater volume flow trade by the land routes. The problems plaguing the cross-Line of Control trade will sought to be eased by more trading days, smoother entry permits, adequate facilities and better phone services and banking.

The trade between the two countries might have grown fourfold to $2.7 billion during 2010-11 in seven years, but it is still one fourth of the informal trade of over $10 billion between the two countries.

Circular trade

According to a FICCI study, informal trade through third countries or circular trade, as it is called, is mainly conducted via agents operating in free ports like Dubai or Singapore and Central Asian Republic (CAR) countries. The size of circular trade underlines the potential of flourishing bilateral trade between the two countries. Converting this into direct trade would help Pakistan immensely as it would enable it to get Indian goods at cheaper price due to reduced transportation cost.

Pakistan's share in India's total exports increased from 0.45 per cent in 2003-2004 to 0.78 per cent in 2008-09 and imports from Pakistan as percentage of total imports of India, marginally increased from 0.07 per cent in 2003-04 to 0.12 per cent in 2008-09.

While Pakistan exports a host of items to India, it has maintained a positive list of 1938 items vis-à-vis imports from India.

On the other hand, India does not impose equivalent formal restrictions on exports to or imports from Pakistan as it had unilaterally granted MFN status to Pakistan decades ago in accordance with the WTO rules.

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