India and Pakistan can start opening up to trade

Despite their nearly seven decades of rivalry, India and Pakistan have a bottom-line interest in increasing commerce between them.


  • Official bilateral trade between both is barely $3 billion in 2014, it could easily amount to 10 times that much.
  • Both governments lose millions in potential customs revenue to smuggling.
  • India has granted Pakistan “most favored nation” trading status since 1996, when both countries joined the World Trade Organization.

One idea to resurrect the relations, a jointly run special economic zone on the India-Pakistan border

  • This scheme would skirt several of the most contentious trade issues.
  • To ease security concerns, goods, workers and executives going into and out of the zone could be monitored.
  • The US and the European Union, for instance, might offer tariff-free access to any goods exported from the zone.
  • Foreign companies that currently manufacture in both countries – Honda and Toyota, could be encouraged to consolidate their operations.

Ideally, initial success would fuel enthusiasm among the local business community for widening the experiment, and make more difficult conversations between the nuclear-armed neighbours just a little bit easier.

 

Foreign Policy Watch: India-SAARC Nations
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