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Indo-Pak Trade Corridor

Mains -GS2- International Relations

1. India-Pakistan relations have always been viewed through the prism of Kashmir.

2. The opening of the Kartarpur corridor has unlocked the possibility of looking at bilateral relations through the prism of Punjab.

3. Even this move is viewed as Pakistan’s interest in reviving the Khalistan movement.

Opening Trade Corridor in Punjab

1. Punjab can be considered to be made central to the India-Pakistan relationship by opening new trade corridors or fortifying existing trade routes running through Punjab.

2. These trade corridors or routes could be developed with an aim to foster a free trade area that can bring the Punjab regions closer.

3. Such a free trade area could allow absolute free trade in agricultural and industrial goods and services, benefiting farmers of Punjab.

4. It would also amplify the size of the markets for producers and consumers of Punjab from Chandigarh to Lahore.

Special GATT provision

1. An FTA can be drafted, under Article XXIV.11 of the General Agreement on Tariffs and Trade (GATT), especially for India and Pakistan.

2. The Article allows the World Trade Organization (WTO) member countries to enter a customs union (CU) or enter into FTA subject to the following conditions:

a. The countries need to eliminate barriers on substantially all trade between them.

b. The countries need to ensure that their tariff barriers with third countries are not “on the whole higher or more restrictive” than what they were before the CU or FTA came into existence.

3. The provisions apply to all trade agreements in goods entered into by all WTO member countries but have some exemptions to a trade deal that India and Pakistan may enter into.

4. India and Pakistan should be allowed to enter into special agreements as GATT contracting parties recognize both countries as one economic unit.

5. The exemptions allow India and Pakistan to do two things:

a. The two countries can enter into special trading arrangements and such an arrangement need not meet the requirements of the entire GATT.

b. Even after the two countries agree upon trade arrangements, they may depart from GATT rules.

6. The only requirement is that these arrangements should, in general, be consistent with GATT’s objectives.

Peace Dividend

1. A positive correlation between trade and peace exists. In India-Pakistan ties, augmenting bilateral trade is expected to yield higher ‘peace dividend’.

2. Free trade fosters better economic relations between countries and boosts ties of interdependence between the private sectors and the governments.

3. This interdependence creates new demand and lobby for peace as it serves their interests. It would result in fewer conflicts and more peaceful relations.

Dealing with Pakistan

1. India has to deal with both

a) The Pakistani deep state (influential members of government agencies or the military having control over government policy.)

b) The business community, including in Pakistani Punjab, as part of a larger political process.

2. Boosting trade can be one way to cultivate such a peace process and to collectively fight against poverty.

India – Pakistan Trade

1. Currently, bilateral trade is around $2.5 billion annually, while the potential, according to the World Bank, is $37 billion.

2. The trade ties have suffered from political decisions

a) Pakistan did not reciprocate the Most Favoured Nation towards India for a very long time.

b) India unilaterally increased custom duties on all Pakistani after the Pulwama terror attacks.

c) Pakistan suspended all trade ties after the abrogation of Article 370 by India.

3. Creating a new trade corridor from Chandigarh to Lahore, and a free trade area across the Radcliffe Line can help in normalizing trade interactions.

Source: The Hindu