Expansion of bilateral trade:

Consumers in Pakistan, India to benefit

Sustainable Development Policy Institute (SDPI) and its research partner CUTS International Thursday said consumers in both countries can have huge gains from a more open trade between Pakistan and India and the agreement to expand bilateral trade up to US$6 billion, double the existing level, is a welcome step.

With support from The Asia Foundation and in partnership with the SDPI and other organisation in South Asia, CUTS is doing a study on the cost of economic non-cooperation to consumers in South Asia. The data for the study estimates that annual welfare gain to Indian consumers on account of importing some products from Pakistan would be almost 4 billion US dollars. Much of this gain would accrue from importing rice and textile products. Similarly, annual welfare gain to Pakistani consumers would be almost 280 million US dollars as a result of increased import of pharmaceutical products, automobile parts and petroleum products from India.

“Both countries should remove much of the products that they have listed in the negative list of South Asian Free Trade Agreement,” said Pradeep Mehta, Secretary General of CUTS International, a Jaipur-based consumer advocacy group. Welcoming the visit of Pakistan’s trade minister to India, he said that the decision to form expert groups on energy and petroleum is a move in the right direction to double the volume of bilateral trade from the current level of 2.7 billion US dollars annually.

Though cross-border trade between India and Pakistan is growing over the last few years it is still much less than its potential. Informal trade and trade routed through places such as Dubai is much higher and consumers are paying more than what is required. Both countries are importing products at a much higher cost from sources other than themselves and from other South Asian countries.

The SDPI-CUTS study gathers perceptions of some influential stakeholders from both sides to understand the political economy of trade relations. It is found that lack of reference to consumer welfare gains in the academic literature as well as in popular media has heavily influenced the perception of all categories of respondents.

Most respondents of the study believe that currently intra-regional trade among South Asian countries is under-performing and its potential is highly under-rated. A striking observation is consumer groups in general are more unaware about consumer welfare gains from a more open trade regime than most other groups. This is because they have little or no representation in trade policy making process in the region and hence, minimal exposure to the subject.

As against a popular perception, most stakeholder groups in the region have positive expectations from enhanced intra-regional trade but it is mostly hidden as a result of pessimism about political relations. This general positive expectation can be tapped best by building networks of producers/exporters groups and consumer organisations. There exist strong complementarities in enhancing mutual interests of producer and consumer groups through a more open intra-regional trade regime and this should be tapped.

Intra-regional trade among South Asian countries is hovering around five percent of their total trade and is the lowest among all regional groupings in the world. Most stakeholders believe that it can be enhanced to more than 10 percent within a next few years and for that to happen consumer groups should play a more assertive role.