Trade – low hanging fruit in Af-Pak ties – II
Kabul and Islamabad’s failure to pick up the phone and discuss trade-related matters more informally at the Track-I level is a key factor in sluggish pace of reform
Pakistan’s Federal Board of Revenue (FBR) and its counterpart in Kabul need to revisit the tariff and para-tariffs imposed on incoming goods from both sides. For example, in the case of Pakistan, even during a bumper crop there is additional regulatory duty on export of pulses to Afghanistan. A similar duty is seen in the case of yarn, and leather. FBR has a comprehensive list of business persons in alternate dispute resolution committee, but none with current experience of Afghanistan-Pakistan trade.
As researchers, we are confused while conducting interviews with officials on both sides. For example, while Afghanistan remains of the view that not allowing access to Afghan trucks for going up to India’s border is a violation of Afghanistan-Pakistan Transit Trade Agreement (APTTA); Islamabad also complains regarding lack of expedient response from Kabul on JEC decisions which included revision of APTTA.
Pakistan’s Commerce Ministry also awaits response on draft preferential trade agreement already shared with Kabul. Perhaps the failure of both Kabul and Islamabad to pick up the phone and discuss matters more informally at track-I level of trade governance is a key factor in sluggish pace of reform.
The Government of Pakistan tells us that if Afghanistan doesn’t move fast and respond to us, it is their trade and transit loss in the longer term. Eventually they will remain dependent on Pakistan for their food and consumer goods supplies due to cost disadvantages. The Government of Afghanistan tells us that we have now moved ahead. We are willing to buy expensive to end reliance on Pakistan for our trade needs. We believe both governments are acting naively. Ultimately, it is the loss of consumers on both sides who will end up paying for a breakdown of trade diplomacy. Many of these consumers are also manufacturers or are in agriculture- and manufacturing- value chains. An increase in their cost of production will also make both countries pay more for inputs, raw materials, plant, and machinery.
Getting a revised trade and transit agreement signed the next time a Ghani-Sharif meeting takes place can be an immediate and near-term goal
Allow us to also remind the governments that a break down in trade diplomacy will mean unanticipated results for some of the planned mega programmes both countries are pursuing. These include Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and Central Asia South Asia (CASA) 1000 electricity transmission projects which have the potential to strengthen energy security in both countries.
Despite the above-mentioned complex issues, the business community remains bullish on the APPTA and has already proposed that this arrangement should include investment and ‘trade in services’ clause. This can strengthen cross-border value chains and also promote trade-led investment in Afghanistan. Getting a revised TTA signed the next time a Ghani-Sharif meeting takes place can be an immediate and near-term goal. But operationalising the TTA will remain a challenge. Given that there is no significant pressure on governments to move fast on implementing minutes of the JEC, we propose some recommendations which can hold the political representatives and bureaucracy on both sides more accountable for their promises.
Firstly, the representatives of Afghanistan Pakistan Joint Chamber of Commerce and Industry should aim to call upon the respective Finance Ministers on a quarterly basis to seek appraisal regarding progress on JEC minutes. Secondly, the representatives of Afghanistan Pakistan Joint Chamber of Commerce and Industry should also meet with presidents of both ECO Chamber of Commerce and Industry and SAARC Chambers of Commerce and Industry with the request to send formal communication to both heads of states. This request should also demonstrate the loss to all stakeholders given the reduced level of cooperation. Thirdly, the apex chambers of commerce on both sides need to invest resources to showcase their argument in print, electronic and social media, and highlight the loss to producers, traders and consumers as a result of lack of bilateral trade cooperation. Our trade which has halved during the past five years now needs to be discussed at a household level, instead of just in public sector quarters. Fourthly, a detailed orientation may be organised for economic journalists in Kabul and Islamabad, so that repeated messaging is ensured through various forms. Sixth, Afghan and Pakistani think tanks should join hands in producing joint research and advocacy material. This will bring out an independent voice for pro-trade and transit reforms. Think tanks should then present these views to the business community, and to respective parliamentary bodies concerned. The proactive approach of these standing committees has often resulted in important reform measures. Seventh, equally important is to work with provincial governments. For example, the stakes are greater for the Government of Khyber-Pakhtunkhwa and their provincial counterpart across the border. Lastly, development partners will also need to invest resources in helping trade advocacy efforts on both sides. Such advocacy efforts should be backed by rigorous research which should demonstrate loss to the poorest of the poor as trade and transit volumes decline.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.