Pakistan-India Trade:

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What Can India and Pakistan Do To Maximize the Benefits from Trade? percent. The CGE simulation suggests significant gains for both Pakistan and India under these scenarios. Not surprisingly, the gains are higher with improvements in trade facilitation. The simulations indicate that the welfare effects of MFN would be very high for India and Pakistan if trade policy liberalization is accompanied by improved trade facilitation measures, and in particular reduced transport costs. Therefore, improvement of connectivity and trade facilitation between India and Pakistan should get the utmost priority in order to make the benefits arising from new trading arrangements more inclusive. The global CGE simulation suggests that there would be some trade diversion after Pakistan grants MFN status to India, as Pakistan would divert some of its imports from other countries to India. But the simulations suggest that this trade diversion would result in negligible welfare effects on the other countries. Figure 2 shows a list of sectors that would benefit from a rise in imports from India. These benefits would arise due to India’s unit-cost advantage compared to that of Pakistan’s other trading partners. The change in imports by Pakistan from India would vary from dairy products to vegetables, fruits, and nuts. Pakistan’s imports from India would rise in chemicals, rubber and plastic, food processing, mineral fuels (petroleum and coal products), metals, machinery and equipment, textiles, leather products, and sugar, for example. However, under the MFN-plus-trade facilitation scenario, there would be much larger rises in imports from India. Pakistan’s exports to India, meanwhile, would rise by a staggering 202 percent under the MFN-plus-trade-facilitation scenario, against only 0.19 percent under the mere MFN scenario. Option 2: SAFTA (with or without MFN given to India and trade facilitation between India and Pakistan) Full implementation of SAFTA refers to a situation where the customs duties of all traded goods are reduced to zero by the year 2016. Three scenarios are simulated here. First, the full implementation of SAFTA; second, full implementation of SAFTA with the granting of MFN by Pakistan to India; and third, full implementation of SAFTA, MFN, and trade facilitation improvements. The results suggest that the | 105 |
Kalpana Kochhar and Ejaz Ghani figure 2: sectors Getting higher Market access in Pakistan (Percent Change in imports of Pakistan from india) Total Pub Admin/Defence/Health/Educat Recreation and other services Business services Financial services Air transport Sea transport Transport Trade Construction Manufactures Machinery and equipment Transport equipment Motor vehicles and parts Metal products Metals Ferrous metals Mineral products Chemical, rubber, plastic prods Petroleum, coal products Paper products, publishing Wood products Leather products Textiles Beverages and tobacco products Food products Sugar Dairy products Vegetable oils and fats Meat: cattle, sheep, goats, horses Minerals Fishing Forestry Animal products Cattle, sheep, goats, horses Crops Vegetables, fruit, nuts Cereal grains Source: De, Raihan, and Ghani 2012. Note: BTF=Better trade facilitation. 32 202 MFN+BTF 91 0 49 84 0 0 94 2 94 2 92 1 87 0 91 0 97 2 10 53 28 39 235 357 265 291 539 552 MFN 4 694 130 46 53 55 109 8 78 15 116 34 79 26 139 78 4 38 69 31 16 93 24 128 14 89 28 83 3 13 70 0 48 6 283 319 286 362 267 397 336 408 368 348 230 608 746 0 100 200 300 400 500 600 700 800 | 106 |
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| vii | Contents The Pakistan-india
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The Pakistan-India Trade Relationsh
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Moving Toward Pakistan-India Trade
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Pakistan’s Trade with India: Thin
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BoX 2: The new (old) road to Kashmi
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Perspectives from India | 53 | ARVI
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