India and Pakistan are united by language and history, divided by commerce
Saturday, February 19, 2011; 8:55 AM
But by the time it hits the shelf at Sajid Khan's shop in this city's old marketplace, it has traversed 2,000 miles of sea and land, been smuggled over the Hindu Kush and marked up 25 percent.
Pakistan and India share language, culture, history and an 1,800-mile border; they are South Asia's largest economies. What they barely share is trade - officially at least, because of a quasi-blockade that dates from partition in 1947, and all but chokes off commerce under a dizzying web of rules.
The hurdles have spurred off-the-books trade, much of it shipped through third parties in such places as Dubai, where products are re-labeled as imports from other lands - journeys that result in 40-to-70-percent markups. Only recently did Pakistan make its first export to India by truck: a load of gypsum rock.
But economists, business groups and U.S. officials are pushing to loosen at least the most maddening restrictions, and they are hopeful that the two nations' decision two weeks ago to resume peace talks might help. Free trade, they say, would benefit both India and Pakistan and might help to ease tensions whose gravity is reflected in rival nuclear arsenals.
"Economics 101 dictates that countries' major trading partners should be their neighbors," said Shuja Nawaz, director of the South Asia Center at the Washington-based Atlantic Council. "To change the dialogue from a zero-sum game to a positive, win-win outcome for both India and Pakistan, you need to start with the low-hanging fruit of opening trade and tourism."
For a Pakistani economy in tatters, experts say, a freer flow of goods from India would allow cheaper access to products and raw materials, and could open up India, with its enormous population, to exports of Pakistan products such as cement.
Some research indicates that bilateral trade - currently at about $2 billion a year, less than 1 percent of each country's total trade - could swell 20 to 50 times under more liberal policies. Estimates of illicit trade range from $2 billion to $10 billion a year.
But for now, progress creeps. India admits all Pakistani products, but Pakistani firms complain that stringent standards and paperwork make many exports unviable. Pakistan, for its part, allows a slowly expanding list of Indian products that now includes artificial kidneys, camphor, parachutes and 1,931 other items - but not Fair and Handsome cream, which is instead legally exported from Kolkata to landlocked Afghanistan, via the Pakistani port of Karachi, then smuggled back into Pakistan.
Travel restrictions are another barrier. Businessmen in both countries say they wait months for visas that allow travel only within major cities in the other country - preventing visits to rural factories or farms - where they are often tailed by intelligence agents.
Then there is the logistic muddle of land trade at the one border crossing, midway between Lahore and the Indian city of Amritsar. The twice daily cargo train involves an engine switch: A train carrying Pakistani exports, for example, can enter mere miles into India, at which point the Pakistani engine and conductors are replaced by an Indian ones before continuing inland. With so few trains, exporters wait months for cargo space.
Trucks have only eight hours each day to cross, because each afternoon the two-lane road is overtaken by Indian and Pakistani border guards' theatrical gate-closing ceremony. Even then, trucks must stop just past the frontier, where porters transfer the goods to local trucks. That is an advancement: Before 2007, trucks were barred from crossing at all, and laborers lugged all cargo across the boundary on their heads.