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What Can <strong>India</strong> and <strong>Pakistan</strong> Do To Maximize the Benefits from <strong>Trade</strong>?<br />
food, chemicals, and garments are not available at borders. Given all<br />
these limitations, the returns from investments to improve trade facilitation<br />
and transport can be huge in South Asia, even with modest resources<br />
and limited capacity.<br />
Gains froM <strong>Trade</strong> BeTWeen india and PaKisTan<br />
Several empirical studies have examined the likely gains to be made from<br />
removing the barriers to trade between <strong>India</strong> and <strong>Pakistan</strong> (see Figure 1).<br />
Some estimates suggest that with a bilateral free trade agreement, trade potential<br />
is nearly 20 times larger than it is today. For example, according to a<br />
Peterson Institute for International Economics gravity model estimate, total<br />
trade between <strong>India</strong> and <strong>Pakistan</strong> could expand from its current level of $2.5<br />
billion to as much as $42 billion for the two countries (Khan 2011). Other<br />
estimates assert that gains could increase by as much as 27-fold.<br />
figure 1: Gains in india-<strong>Pakistan</strong> <strong>Trade</strong>, Gravity estimates<br />
Srinivasan and Canonero (1995), <strong>Pakistan</strong><br />
Srinivasan and Canonero (1995), <strong>India</strong><br />
Gain in <strong>Trade</strong> (No. of Times)<br />
Rahman et al. (2006)<br />
De, Raihan and Ghani (2012)<br />
World Bank (2011)<br />
Baroncelli (2007)<br />
Hirantha (2004)<br />
Khan (2011)<br />
Batra (2004)<br />
Source: De, Raihan, and Ghani 2012.<br />
Note: Base year varies across gravity estimates.<br />
0.5<br />
2.5<br />
2.5<br />
4.0<br />
| 103 |<br />
9.0<br />
10.0<br />
13.0<br />
18.0<br />
27.0
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