Putting the skids under border trade
The India-Pakistan face-off is having more repercussions than intended, with border economies the worst hit
•In February 2019, in the wake of the Pulwama attack, India decided to withdraw the Most Favoured Nation (MFN) status to Pakistan; subsequently, it imposed 200% customs duty on all Pakistani goods coming into India. After the Balakot airstrikes, again in February, India and Pakistan closed their airspace,with Pakistan keeping the ban in place for nearly five months. In April, India suspended trade across the Line of Control in Jammu and Kashmir citing misuse of the trade route by Pakistan-based elements. And more recently, post the Jammu and Kashmir Reorganisation Bill, Pakistan cut off diplomatic and economic ties with India — expelling the Indian envoy, partially shutting airspace and suspending bilateral trade.
•Escalating tensions between the two neighbours naturally led to the announcement of retaliatory unilateral decisions, one after the other. Like in the past, the impact has trickled down to trade relations between both the countries; this time it is much more severe.
•In 2018-19, bilateral trade between India and Pakistan was valued at $2.5 billion — India’s exports to Pakistan accounted for $2.06 billion and India’s imports from Pakistan were at $495 million. India’s decision vis-à-vis withdrawal of MFN status and imposition of 200% duty has hurt Pakistan’s exports to India, falling from an average of $45 million per month in 2018 to $2.5 million per month in the last four months.
Western border trade
•The quantum of loss that has been incurred by traders in both India and Pakistan has varied according to the nature of trade and the trade route. For example, through the Wagah-Attari land route, bilateral trade was heavily in favour of Pakistan; in the last two years, India’s imports from Pakistan accounted for 82% of the total trade through the land route. After February, most of this business has been badly affected with only a handful of items including rock salt, continuing to be imported.
•Unlike national economies, border economies owe their existence to cross-border economic opportunities. These economies generally experience a sudden boom-bust cycle on account of political changes, trade bans, price and exchange rate and tax fluctuations. As seen elsewhere in South Asia such as via the inception of India-Bangladesh border haats, the costs and benefits are mutual to the border economies on both sides; much more in cases such as Amritsar where major economic activity is largely dependent on border trade with Pakistan.
•Amritsar is land-locked, is not a metropolis and traditionally has no significant industry. Hence, any decision on India-Pakistan trade has a direct impact on the local economy and the people of Amritsar. Since February, according to estimates on ground, 5,000 families have been directly affected in Amritsar because of breadwinner dependence on bilateral trade. Traders and their staff members, customs house agents (CHAs), freight forwarders, labour force, truck operators, dhaba owners, fuel stations, and other service providers are closing shop and going out of business. Of the nearly ₹25-30 crore that was being added to the local economy of Amritsar every month, the estimate now is that three-quarters has been lost in the last six months.
•Many a time, upsetting the trade apple cart can have more repercussions than intended. For example, gypsum, imported from Pakistan, was being used in India as well as in Nepal for the cement plants there. To avoid empty backhauling on the return journey, trucks carrying these consignments brought back specific products such as yarn from mills in Uttar Pradesh to Punjab. In the absence of gypsum trade, the freight rate of trucks from Uttar Pradesh to Punjab, as per the ground reports, has increased from ₹3 to ₹7 per kg, with a single trip absorbing the cost of the entire journey. Earlier, prices of tradeable goods which were kept under check owing to the balancing out mechanisms of international trade, are experiencing fluctuations now because of the trade disruptions.
Pakistan takes a hit too
•There is gloom on the Pakistani side too. With Pakistan deciding to completely suspend bilateral trade, exports of cotton from India to Pakistan are expected to be affected the most, eventually hurting Pakistan’s textiles; the lawn industry which will now have to source pricier cotton from alternative markets in the United States, Australia, Egypt or Central Asia; or there is a high possibility that Indian cotton, along with other products, will be routed through third countries such as the United Arab Emirates and Singapore, thereby increasing the share of indirect trade which is estimated to be more than double the direct trade between India and Pakistan.
•Hence, while the overall economies of the two countries may very well manage to stay afloat despite the suspension of economic ties, it is the local economies that will suffer the most and are already perishing. In this connection, there has been a loss in business, rise in prices, lack of alternative sources of livelihood, as well as an expected increase in bank defaults. There are also individual cases, for example a CHA in Amritsar, who has no means to pay the equated monthly instalment for his home loan, highlighting the hardship of locals dependent on border economies.
•In the spirit of nationalism, the trade fraternity on both sides, by and large, has stood by their respective governments. But locals in border economies on both sides have mouths to feed, which calls for a solution. What are the alternative sources of livelihood that can be generated to keep border economies afloat? Is there a sword hanging over the future of other bilateral arrangements such as the transit of goods from Afghanistan through Pakistan into India?
•While it’s about damage containment for now, one can only hope that the appetite for trade engagement still remains.
A life in the balance: On Kulbhushan Jadhav
India must use all available channels with Pakistan to negotiate a reprieve for Jadhav
•More than three and a half years after Pakistan announced it had arrested Kulbhushan Jadhav on charges of espionage and terrorism, India finally received consular access to him on Monday. The path to receiving the access, which should technically have been provided shortly after the arrest, had to be bitterly fought for by India. Despite being a signatory to the Vienna Convention of 1963, which mandates that arrested foreign nationals be allowed to meet consular officers, Pakistan refused the access until it was ordered to by the International Court of Justice at the Hague this July 17 in response to an Indian petition. Even after India won the case for consular access, Pakistan took weeks to respond, offering to allow the meeting only in the presence of video cameras, and Pakistani officials. India rejected this at first, and it is unclear why the government finally accepted those same terms, and nominated its Charge d’affaires to meet Mr. Jadhav despite the conversation being recorded, and Pakistani officials being present. According to the officials who met him, Mr. Jadhav’s responses during the meeting seemed to be tutored and coerced, much like his “confessional” statements that were released by Pakistan during his trial in a military court. The MEA concluded that he was under “extreme pressure to parrot a false narrative”. As a result, Pakistan’s consular access appears to be as much of a sham as the trial itself, which was held in complete secrecy. And Mr. Jadhav, who was not allowed to choose a competent lawyer, was pronounced guilty and handed a death penalty in a matter of months.
•Despite the disquiet over the process thus far, the consular access provided on Monday marks Pakistan’s initial compliance with the ICJ ruling, and it is hoped that Islamabad will follow through with the next part of the court’s verdict. This includes a review of the trial process and a reconsideration of the death sentence, pending which Mr. Jadhav’s execution must be stayed. This will clearly be complicated by the present breakdown in bilateral ties, including rising rhetoric over the government’s moves in Jammu and Kashmir, Pakistan’s daily efforts to raise the issue at global fora, and its leadership’s repeated reference to the threat of nuclear conflict. While it may be difficult to imagine such a scenario at present, the two sides must use their diplomatic channels to negotiate a possible reprieve for Mr. Jadhav, or discuss conditions under which Pakistan may be prevailed upon to release him to India. New Delhi has been able to secure access to Mr. Jadhav by appealing to international processes, but the road ahead must be negotiated bilaterally, with the understanding and empathy that a man’s life hangs in the balance.
India, Japan to hold 2+2 dialogue on Indo-Pacific cooperation
The two countries have made steady progress in Maritime Domain Awareness
•India and Japan have decided to hold their first Foreign and Defence Ministerial Dialogue (2+2) ahead of the Japan-India annual summit this year for “advancing cooperation towards peace and prosperity of the Indo-Pacific region”. Accord on the meeting was reached by Defence Minister Rajnath Singh and his Japanese counterpart Takeshi Iwaya at the India-Japan annual defence ministerial dialogue, the Defence Ministry said on Tuesday.
•“The Ministers recognised that peace and stability of the Indian and Pacific Oceans are crucial for ensuring prosperity of the Indo-Pacific region and the entire world, and had a frank exchange of views on the current security situation in the Indo-Pacific region, including developments on the Korean Peninsula and in the South China Sea,” the Defence Ministry said in a statement. The Ministers shared their views on exploring cooperation with countries in the Indo-Pacific region through various initiatives that would further the shared vision of peace and stability, it added.
•The Prime Ministers of Japan and India, in their vision statement in October 2018, had reiterated their commitment to working together towards a free and open Indo-Pacific. Mr. Singh is on a two-day visit to Japan, during which he also met Japanese Prime Minister Shinzo Abe. He will proceed to South Korea from Japan.
•The Ministry said that the two Ministers “shared their intention that Japanese Maritime Self Defence Force (JMSDF) and Indian Navy will make efforts towards participating in multilateral exercises including participation as observers.”
•In this regard, the Ministers welcomed both the Japan-India-U.S. trilateral maritime exercise ‘Malabar 2019’, which would be held from late September to early October, and the second Japan-India-U.S. trilateral mine-countermeasures exercise (MINEX) that was held in July, and expressed their resolve “to continue the trilateral exercise in the same framework from next year onwards.”
•The Armies and Air Forces of India and Japan held their first bilateral exercises, ‘Dharma Guardian’ and ‘Shinyuu Maitri’, in 2018. Last year, Japan also joined the India-US Air Force exercise ‘Cope India’ as an observer for the first time.
•The two countries have made steady progress in Maritime Domain Awareness (MDA) based on implementing the arrangement for deeper cooperation between the two Navies, signed last year. The Ministers also noted the progress on the ongoing negotiations for the Acquisition and Cross-Servicing Agreement (ACSA), which commenced after the summit meeting in October last year.
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