Explaining Pakistan’s Flip-flop On Trade With India

Context: An analysis of key takeaways from Pakistan’s U-turn on initiating imports from India.

Background:

• On March 31 2021, Pakistan’s Economic Coordination Committee (ECC)’s decision to import cotton, yarn, and 500,000 metric tons of sugar from India.
• A day later, Pakistan’s cabinet overruled the decision citing preconditions on India’s recent decisions on Jammu and Kashmir.

Takeaways: from Pakistan’s U-turn exercise.

• Economic compulsions in Pakistan: It relates to the ECC’s decision to import only three items from India, namely cotton, yarn and sugar.
  • Textile and sugar industry crisis in Pakistan: Pakistan Economic Survey 2019-20 cited, cotton and sugarcane production declined by 6.9% and 0.4%. Fewer areas under cotton cultivation, a decline in yield per acre, export loss and domino effect.
  • Fall in sugar exports: by over 50% in 2019-20, when compared to 2018-19, due to shortage and cost escalation mainly due to market manipulation and hoarding.
• Supremacy of politics over trade and economy: For the Pakistan cabinet, the interests of its own business community and its export potential become secondary.
  • This attitude acts as a curse in South Asia: Which explains the meagre percentage of intra-South Asian Association for Regional Cooperation (SAARC) trade and success (or failure).
• Focus on Kashmir: This goes against what it has been telling the rest of the world that India should begin a dialogue with Pakistan.
  • Pakistan’s position also hints at its precondition (revoking the August 2019 decision on Jammu and Kashmir) to engage with India.
  • Spillover: Exposes lack of depth in new strategy including ceasefire along Line of Control (LoC).

Conclusion: It is India’s turn to tell Pakistan that it is willing, but without any preconditions, and start with trade.