Amid tension with China, India’s trade with Pakistan seems to have fallen off the policy charts

Indirect routes like the UAE and Iran will continue to exist to reroute India’s trade with both Afghanistan and Pakistan. (Representative image)

By Nikita Singla & Priya Arora

While trade between India and China has been in public focus of late, trade with Pakistan seems to have fallen off the policy charts. The February 2019 Pulwama terrorist attack has further limited the already low level of trade between the two countries. The direct impact of a disruption in border trade is felt most in Punjab, especially among more than 9,000 families in Amritsar dependent on this trade. A handful of Afghan trucks crossing the border are not enough to keep porters and traders near the check-posts economically engaged. Our recent study, Unilateral Decisions, Bilateral Losses, shows that Amritsar’s local economy has suffered a net loss of nearly Rs 30 crore earned every month from this border trade.

On July 15, Pakistan re-opened the Wagah-Attari border for Afghanistan’s exports to India, suspended due to the Covid-19 lockdown. The decision seemed timed to coincide with the tenth anniversary of the signing of the Afghanistan Pakistan Transit Trade Agreement (APTTA)which enabled Afghanistan to export to India via the Wagah-Attari border. However, trucks returning to Afghanistan go empty since APTTA does not allow Indian goods to be transported across the border.

On a visit to the Attari border, one would generally witness the vibrancy of a border economy—where trucks moved consistently, tea stalls and dhabas remained busy, majority of porters unloaded cement and gypsum off Pakistani trucks and others offloaded dry-fruit from Afghan trucks. As the Pakistani trucks got reloaded and Afghan trucks prepared to return empty, a unique camaraderie amongst Afghans, Indians and Pakistanis would be seen. This was all before February 2019.

In February 2019, on one hand, Wagah-Attari saw trade become a casualty of Indo-Pak relations, and on the other, Afghanistan was preparing its first export shipment to India through Iran’s Chabahar Port. The face-off between India and Pakistan in 2019 also included barring each other from respective airspaces, hitting Afghanistan’s exports to India. Trade between India and Afghanistan has remained vulnerable to the volatilities in the region.

APTTA has been enwreathed with repeated concerns around its asymmetric nature. The proposals to allow the transit of Afghanistan’s imports from India have been met with resistance from Pakistan, fearing flooding of Indian goods in Pakistani markets affecting its domestic industry. However, studies indicate that restrictions in APTTA have not been able to limit the informal trade between India, Pakistan and Afghanistan. The presence of a trade agreement facilitates trade, but the absence of an agreement does not necessarily restrict trade. Our new report, The Dubai Angled Triangle (2020), provides evidence of informal trade between India and Pakistan. For example, a gap in the mirror data between the UAE’s exports to Afghanistan and Afghanistan’s imports from the UAE, supported by interviews on the ground, shows re-routing of Indian goods into Pakistani markets while they are destined to reach Afghanistan from the UAE.

Indirect routes like the UAE and Iran will continue to exist to reroute India’s trade with both Afghanistan and Pakistan. But the border economies in Wagah and Attari are paying the highest price. Facilitating trade—direct and transit—could support the ecosystem of border economies, where people are heavily dependent on trade. The pandemic can perhaps remind us that the payoff from collaborative growth and development will far exceed the stall backs owing to pending political issues between our countries.

Singla is associate director and Arora is senior research associate, BRIEF, New Delhi