Pakistan-India Trade:

Additional Trade Challenges: Transport, Transit, and Non-Tariff Barriers
Administering the positive list created several unnecessary hassles for
traders in both countries. The classification codes provided by Pakistan
for the positive list did not match with the Indian classifications. Due to
the mismatch in classification, customs officials very often classified items
under the positive list at their own discretion. Additionally, in some cases
the descriptions of items provided in the positive list did not match with
the Indian classifications, and for some of these a corresponding description
did not even exist. Frequent changes in the positive list created uncertainty
for traders. Permitting imports of certain items from India for only
limited periods further created ambiguities in the trading environment
(Taneja 2007). The positive list approach lacked transparency, created uncertainties
for traders, and led to high transaction costs.
Perhaps a major problem associated with the positive list is that a
separate list has been maintained for the road route between the two
countries at the Wagah border crossing. Along this trade route, only 14
of the 1,934 items on the overall positive list are allowed to be traded.
In accordance with the sequencing and timelines for the move toward
full normalization of trade laid down by the two countries in the joint statement
of November 2011, Pakistan made a transition from the positive list
approach to a small negative list of 1,209 banned items. In the next stage
(and as of this writing), the negative list was to be phased out by the end of
2012. Until the negative list is abandoned completely, the positive list will
continue to be in operation, though in a much more reduced form.
The ChallenGes of TransPorT and TransiT
The movement of goods between and through the two countries has long
been undercut by inadequate logistical support required for trade. The
road route was closed for several years; rail and air links have been cut
off several times; and the sea trade has operated under a very restrictive
agreement. These impediments have led to high transaction costs of trading.
Since 2005, several measures have been undertaken to improve infrastructure
and to remove restrictions on the movement of goods by road,
rail, sea and air. These policies are likely to bring about a reduction in the
costs of trading. However, for further reductions in these costs, several
new steps need to be taken to achieve the goal of seamless transportation
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