Secure the Line of Commerce with Pakistan

As bilateral relations get a boost from the Modi-Sharif bonhomie, it is time to widen the constituency for peace in Kashmir by scaling up trade across the Line of Control

December 30, 2015 01:29 am | Updated March 24, 2016 12:46 pm IST

“Trade across the LoC also serves as a source of employment, especially for the local youth, labourers and truck owners.” Picture shows Pakistani vehicles at the trade facilitation centre in the border area near Uri Salamabad.— Photo: Nissar Ahmad

“Trade across the LoC also serves as a source of employment, especially for the local youth, labourers and truck owners.” Picture shows Pakistani vehicles at the trade facilitation centre in the border area near Uri Salamabad.— Photo: Nissar Ahmad

From a “formal handshake” in Paris to a “friendly hug” in Lahore, the recent weeks can be amongst the most promising in terms of political engagement between India and Pakistan. The latest ‘birthday/hug’ diplomacy between Prime Ministers Narendra Modi and Nawaz Sharif has further strengthened hopes of reviving bilateral engagements between India and Pakistan. Dates for talks between their Foreign Secretaries have been finalised, making it important now for the bureaucratic machineries of the two countries to develop a road map for implementing measures for economic and political co-operation which can boost the relations of the two nations.

In November 2011, the Commerce Secretary-level talks almost saw a breakthrough when Pakistan contemplated granting a Most-Favoured-Nation (MFN) status to India but this did not come through due to “other domestic issues” in Pakistan. However, as a first move, Pakistan did shift from a “positive list”, which allowed only limited items to be traded, to a small “negative list”, containing 1,209 items that are banned from exporting to Pakistan. Phasing out of this negative list is awaited as that would usher in granting of the MFN status to India.

Apart from expediting the granting of MFN status, the talks should now focus on measures that have been successful in bringing India and Pakistan together, and can serve as precedent for furthering co-operation on other fronts.

The peace dividend

This brings to the fore the largely unexplored subject of “cross-LoC trade” and its revival. India and Pakistan mutually agreed to start trade across the Line of Control (LoC), between Jammu and Kashmir on the Indian side and Pakistan-occupied Kashmir on the other, in October 2008. Often referred to as the most successful confidence-building measure (CBM), this trade was expected to unleash the economic dividend between the two sides of Kashmir and eventually help reap peace.

In recent years, the term LoC has often being referred to as Line of Commerce and even Line of Cooperation. Trade volumes have increased despite being conducted under extremely restrictive conditions: barter trade, lack of proper communication channels, absence of a banking system, dearth of legal enforcement of contracts and limited number of trade days and tradable goods. The trade has not just increased in numbers, from $0.3 million (cumulative) in 2008-09 to $97.2 million in 2011-12 to $303 million in 2013-14, it is also creating a sizeable community with a stake in the peace and development process of the region. Trade across the LoC also serves as a source of employment, especially for the local youth, labourers, truck owners, etc. Such linkages also offer Kashmiris an opportunity to reunite and associate with family members and friends, despite being on opposing sides of the LoC line.

Room for more

Unfortunately, over the last few years the focus of policymakers on cross-LoC trade has been limited and the potential that this trade showed initially could not be achieved. Bottlenecks to trade have been highlighted at various levels but have not yet received the necessary attention. It is important that the development of cross-LoC trade is back on the priority list of the two governments and appropriate measures necessary to boost this trade are taken through astute policies that would deliver politically, socially and economically.

Measures such as provision for financial transactions, increase in tradable items, dispute resolution mechanisms, encouraging women entrepreneurs into this trade, and improved communication channels between traders will have a positive impact on this trade. These measures would also help grow the trading community and make significant improvements to the economy of Jammu and Kashmir.

Undoubtedly, the six-decade-long Kashmir dispute has exacted a tremendous human and economic cost. Cross-LoC trade deserves serious and immediate attention because the short- and long-term impact of trade across divided Jammu and Kashmir would have major implications for the region. Based on repeated interactions with numerous stakeholders, it is evident to me that if both national governments give this trade proper attention, it has the potential to deliver positive economic benefits to the state and, in the long run, to the two nations.

Cross-LoC trade need not be considered only from an economic prism as there is a deeper political benefit as well, which was the essence behind initiating this trade as a CBM. The current political discussions have created the right environment to place cross-LoC trade in the overall economic agenda between India and Pakistan and eventually take this initiative beyond being a mere CBM.

(Afaq Hussain is director, Bureau of Research on Industry and Economic Fundamentals, New Delhi. Views expressed are personal.)

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