The goods exchange: the resumption of cross-LoC trade

Cross-LoC trade continues to be a key confidence building measure between India and Pakistan

August 10, 2017 12:02 am | Updated December 04, 2021 11:06 pm IST

With the resumption of cross-Line of Control (LoC) trade on the Uri-Muzaffarabad route this week, it seems that the Chief Minister of Jammu and Kashmir, Mehbooba Mufti, has upheld her promise of supporting this trade, which is also a part of the ‘Agenda of Alliance’ between the Peoples Democratic Party and the Bharatiya Janata Party. Trade was stopped in Uri on July 21 after banned drugs were seized from a truck while trade on the Poonch-Rawalakot route has stopped for over a month now after border tensions.

It’s about barter trade

Of late, cross-LoC trade has been in focus after the National Investigation Agency (NIA) began probing the funding patterns of traders. Such administrative checks, although essential, do not address the root cause of trade irregularities. While the results of the investigations have not been made public, it is important to realise that this is barter trade wherein goods are exchanged against goods without involving any monetary exchange. Therefore, regular accounting and other practices of international trade may not be applicable here.

Now that it has been decided to resume this form of trade, it is imperative that steps be taken to strengthen trade practices and ensure that it does not fall victim to speculation and allegations once again. In this connection, the recent joint meeting between officials of both sides was a rare sight, given the rising tensions between the two countries. In order to streamline trade, it was decided that permanent and formalised communication facilities will be set up between the respective trade officers. Also, based on the ongoing research that the Bureau of Research on Industry and Economic Fundamentals (BRIEF) is conducting on strengthening cross-LoC trade, a number of steps have been proposed that could lead to a change in the trading mechanism.

Steps to better trade

First, a joint investigation team from India and Pakistan should be set up to investigate cases of narcotic and arms smuggling across the border. At present, truck drivers end up being the victims although they may or may not be involved directly. Such a team should address the root cause of such instances in a speedy and transparent manner.

Second, to keep a check on the traders and trade practices, a monitoring cell of officials from State and Central agencies must be constituted. It should monitor daily trade practices such as registration of traders, invoicing and exchange of goods, trade balancing, etc. to address allegations of hawala money, under-invoicing, and even misrepresentation of goods. Trade data and information for each registered trader should be mandatorily recorded in an electronic format by the trade facilitation officer and shared with the cell at regular intervals for analysis and other checks.

Third, there is a need to institutionalise and formalise trading communities. As an initiative, traders and chambers on both sides have come up with the idea of a joint chamber called the Jammu and Kashmir Joint Chambers of Commerce and Industry, which will have traders of both sides as well as the local chambers of Jammu and Kashmir and the Mirpur Chamber. Support from both governments will add weight to it. This will also help create more transparency in transactions and information flow among traders and chambers in both inter- and intra-LoC.

Train the trader

Finally, it is important to impart training to LoC traders. With support from excise and security agencies, training sessions should be conducted on the standard operating procedures of this trade as well as established accounting practices such as maintaining balance sheets. This would help traders and government agencies monitor trade and ensure trader accountability.

Over the last year, cross-LoC trade has been affected by a number of allegations. With a resumption of trade, the government must uphold its promise of taking cross-LoC confidence building measures (CBM) to the ‘next level’ — as mentioned in the ‘Agenda of Alliance’. Thus, it is necessary that the Central and State governments take the necessary steps towards reforming trade and ensuring capacity building of traders.

In October, cross-LoC trade will complete nine years. Irrespective of the negative perception around it, this form of trade continues to be one of the most successful CBMs between India and Pakistan. Cross- LoC trade has also managed to connect the two divided sides of Jammu and Kashmir, thereby creating a constituency of peace in an otherwise tense region. The governments must ensure that trade continues to flourish.

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

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