Pakistan-India Trade:

Perspectives from India
Pakistan. The losers would really be the Japanese or other exporters. But
it is very important to be clear about that.
The second thing that I learned, from the Sri Lankan businessman,
was that the FTA allowed him and his business peers to have a certain
amount of economies of scale so they could test their products outside
Sri Lanka. Consider, for instance, their expansion into South India, particularly
Tamil Nadu, with tea. Twenty years ago, you would never have
thought of having Sri Lankan tea in India, because we were one of the
biggest exporters and producers of tea. Now you do see that. Sri Lankan
tea growers have now moved into the neighboring Indian state of Tamil
Nadu, and established their brand names. So the economies of scale afforded
by an FTA really do offer an opportunity for a smaller country to
test its markets, and develop a little bit of skill, which then allows it to go
out and compete in a totally different market.
So these are two things, I would submit, that Pakistanis have to be
aware of, and see how they can use. In the case of Sri Lanka, they also
used the opening to increase tourism from India, and this could also
conceivably apply to Pakistan. The point is not that tourism per se is
likely to be important in the India-Pakistan context, but that business
has to be alert and open to all kinds of new opportunities that might
arise, and be ready to grab them. You have to have a positive attitude.
My final point relates to new initiatives. Let me put it in two different
ways. In thinking of any next steps beyond MFN, it will be
useful to re-energize SAFTA (the South Asian Free Trade Agreement).
For a long time SAFTA was handicapped by a fundamental constraint,
the asymmetry in MFN status between Pakistan and India, because
of Islamabad’s refusal to grant MFN to India. Once this asymmetry
is removed through effective MFN status for India in Pakistan, the
foundation will be set for SAFTA to progress with greater speed and
effectiveness. One might anticipate substantial gains from that. And
this would also provide political cover to those who are in favor of
free trade versus those who are opposed in principle to this concept.
SAFTA in a way provides the cover for doing this. As Professor Nabi
(among others) argues elsewhere in this volume, fully implementing
SAFTA could convert South Asia into a true crossroads.
Looking even farther afield, South Asia is a potential crossroads not
only to Central Asia, but also to Southeast Asia. This is a particularly
| 57 |