Pakistan and India to boost trade

Pakistan's government says it will normalize trade with India, a sign of better ties between the two nuclear-armed rivals.
Indian border police Cmdr. Susheel Negi, left, hands a basket of sweets to Pakistani Rangers Supt. Major Asim, centre, at the India-Pakistan border on Oct. 26, the day of the Hindu and Jain festival Diwali. Trade relations between the countries are set to improve. (Narinder Nanu/AFP/Getty)

Pakistan's government announced Wednesday it would normalize trade with its India, a sign of better ties between two nuclear-armed neighbours whose tense relations have long poisoned South Asia.

The decision to grant India "most favoured nation" status — 15 years after India extended it to Pakistan — would enable Pakistanis to export more goods to booming India at a time when Pakistan's own economy is in the doldrums.

Some Pakistani business quarters welcomed the decision, but others expressed concerns about cheaper Indian goods flooding the market.

The World Bank estimates that annual trade between India and Pakistan is around $1 billion and could grow to as much as $9 billion if barriers are lifted. Much of the current trade is illicit — products go through Dubai, where they are repackaged and are smuggled into both countries, meaning higher prices and less tax revenue.

Pakistani Information Minister Firdous Ashiq Awan did not say when the new rules would take affect, but said that the country's powerful military — which dictates policy on India — agreed with the decision.

There was no immediate comment from India, which gave Pakistan most-favoured nation status in 1996 and has been waiting since then for it to be reciprocated.

No breakthrough expected on Kashmir

Pakistan and India have fought three wars since they were carved off from each other in 1947, with the disputed over Kashmir the main flashpoint. Both countries claim all of the state.

India has also been hit by attacks by militants trained in Pakistan, allegedly with the support of the Pakistani military. An attack in 2008 in Mumbai by Pakistani militants froze a slow moving peace process that has only recently begun again.

Despite Wednesday's move by Pakistan, no breakthrough is expected anytime soon in one of the world's most intractable conflicts, which saw its most recent significant incident just last week.

Granting a country most-favoured nation, or MFN, status means that countries trade on equal and improved terms, typically giving each other low tariffs and high import quotas.

Islamist groups and nationalists reared on hatred of mostly Hindu India complained that "trading with the enemy" was a concession to New Delhi that should be resisted.

"Any move to enhance trade ties with India without solving the issue of Kashmir is an exercise in futility," said Hafiz Hussain Ahmed, from the hardline Islamist Jamiat Ulema Islam party. "Why is the government granting MFN status to a country that has destabilized Pakistan?"