A time-tested way to trade away conflict

Eleven years ago, on October 21, 2008, a truck loaded with rice, turmeric and red chillies crossed the Jhelum river at the Line of Control (LoC) to reach Uri. The banners at Kaman Aman Setu (‘bridge of peace’) read: “From Home to Home, we extend a very warm welcome to our Kashmiri Brethren.”

Such was the spirit and the emotion of people on both sides of the LoC. A fresh beginning, it also brought with it the hope of reuniting friends and families across the LoC. This marked the beginning of cross-LoC trade.

Confidence building measure

It was in 1972 that the LoC between India and Pakistan was thought of as a part of the Shimla Agreement. Though the LoC was almost always an issue of contention, it was 33 years later that the two governments decided to take a giant leap. On April 7, 2005, Indian Prime Minister Manmohan Singh flagged the first cross-LoC bus, called ‘Karwaan-e-Aman’, from the Sher-i-Kashmir stadium in Srinagar towards Muzaffarabad. This Confidence Building Measure (CBM) came as a humanitarian reform reuniting divided families and friends.

In 2008, a significant year, the two governments decided to further exploit the potential of existing transport routes by establishing trade. In May that year, the Foreign Ministers of India and Pakistan decided to finalise the modalities of intra-Kashmir trade and truck service. Cross-LoC trade, following barter system, thus began in October that year, across Uri-Muzaffarabad and Poonch-Rawalakot, for a list of 21 mutually agreed tradeable items. Given the underlying conditions, trade was seen as a ray of hope to establishing peace. This measure was aimed at converting social interconnectedness into commercial interdependence of the two similar yet separate sides of the LoC, rightfully presuming that trade would flourish on the basis of the emotional capital of the people living on either side. The LoC gave rise to hope in the virtuous cycle between trade, trust and people-to-people connect.

Cross-LoC trade would have failed in its infancy had it not been for the sentiments of the people attached to it. It was much more than a mere commodity exchange. The whole concept of exchange across this border was not coined as isolated economic activity but, instead, to open a new chapter of building bridges and (re)connecting communities. And cross-LoC trade did manage to connect the two divided sides of Jammu and Kashmir, thereby creating a constituency of peace in an otherwise tense region.

More than metrics

Till April 2019, when cross-LoC trade was suspended by India, both bus links and trade had survived for more than a decade despite intermittent suspensions and ceasefire violations. Between 2008-2018, trade worth ₹7,500 crore was transacted across the LoC, generating more than 1.7 lakh job days and an approximate freight revenue of ₹66.4 crore for transporters in J&K, on account of 75,114 truck crossings and ₹90.2 crore paid to labourers. While these numbers may be minuscule when looked at through the lens of the overall trade of India, the impact of such CBMs go beyond standard metrics. The case of thriving businesses and reunited families on both sides of the LoC stand testimony to the story of change. A sizeable community of traders, businesses, transporters and labourers have benefited from this trade and have a stake in keeping the trade process active.

Steps for a revival

Given the present situation in J&K, it is imperative that India plans an outreach connecting all stakeholders from across the spectrum including the ecosystem of cross-LoC trade. However, there is need for a revised strategy towards re-initiation of cross-LoC trade. Concerns around transparency have negatively impacted this trade over the last decade. The lack of transparency needs to be addressed in the complete ecosystem which includes the standard operating procedure, invoicing, Goods and Services Tax (GST) norms, and trader registration. Other steps such as clarifications on harmonised system codes to avoid misrepresentation of commodities, rules of origin to avoid third country goods, GST rates and inter-State taxation rules to avoid tax evasions, and a trader registration policy to ensure credible traders are involved in this trade, are needed to address long-standing concerns around cross-LoC trade.

Digitisation of systems and procedures at the trade facilitation centres at Uri and Poonch is another important step to help take LoC trade to the next level. Globally, when we look at trade facilitation — international as well as domestic — digitisation of procedures and lower human intervention are the two major pillars that drive trade across borders. And today, more than ever before, there is increasing focus on improving India’s ‘ease of doing business’ ranking. Hence, similar steps are needed with respect to cross-LoC trade. Digital platforms to monitor invoicing, traders’ records, balancing and truck details will ensure real time checks by the authorities, leaving lesser room for misuse.

The current suspension of LoC trade could be seen as a window of opportunity to address these issues and revive this trade in a stronger and more organised manner.

As talks begin for a revival of normalcy in J&K, strengthened and more transparent cross-LoC trade mechanisms could be put on the table as a part of the economic package. Cross-LoC trade in its new avatar could continue to prove the value of a peace-through-trade policy, and one that has stood the test of time globally.

Afaq Hussain is Director and Nikita Singla is Associate Director at the Bureau of Research on Industry and Economic Fundamentals (BRIEF), New Delhi. The views expressed are personal

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Printable version | Jul 22, 2021 11:28:07 AM |

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