The history of South Asia is laden more with the incidents of hostilities than with the memories of friendship. Zooming in, between Pakistan and India, the arch rivals, enmity overrides empathy.
At the hostility level, between Pakistan and India, the Cold War era (1947-1991) was a characteristic of at least two full scale wars in 1965 and 1971 while the post-Cold War era experienced only a limited war in Kargil in 1999.
Nevertheless, it seems that the space for hostility between both the countries is fast shrinking. Neither the Kargil war nor the terrorist activities (like the terrorist attack on Indian Parliament in 2001 and the terrorist attacks across Mumbai in 2008) by non-state ...view middle of the document...
95 million) more than the preceding FY. The trend indicated that, despite the Kargil war, Pakistan was importing more goods from India than India was importing from Pakistan through a formal trade route.
Further, according to the KCCI, the trade volume between both the countries fell from US $ 2 billion in the FY 2007-2008 to US $ 900 million in the FY 2009-2010, owing to Mumbai attacks. The overall trend indicates that the years from 2002 to 2008 were the boom period for trade between the two countries. In totality, the trade trend indicates that the Pakistani market is in need of Indian goods.
Moreover, according to the KCCI, the current volume of informal yearly trade between Pakistan and India is between US $ 1 to 2 billion. That means currently the share of formal and informal yearly trade is 50% each. Nonetheless, the estimated potential of trade between the two countries is at least US $ 10 billion, according to the KCCI.
The two main formal trade routes across the Pak-India international border are through Lahore-Wagah and Tharparkar-Munabao crossings. The construction work on Integrated Customs Check Posts (ICCP) at Wagah Border has been started and is expected to be completed before the end of 2011. Further, across the Line of Control (LoC) in Kashmir, two trade routes (Muzaffarabad-Srinagar and Rawalakot-Poonch) have been established.
Trade across the border and boundaries is considered one of the Confidence Building Measures (CBMs). In the past, the CBMs were thought of more in political terms until now when the CBMs are viewed more in economic terms. The post-Cold War world tends to be an economically interdependent world than an independent one.
It seems that the space for hostility between both the countries is fast shrinking.
The CBMs are considered an anti-dote to the ills of trust deficit. One of the major apprehensions of Pakistan is that in case of liberal trade policy with India, the Pakistani manufacturing sector will become uncompetitive and that the Pakistani market might be glutted with the Indian products – to the detriment of the local industry – as the trade balance tilts in favour of India (and against Pakistan). The second apprehension of Pakistan is that India may overpower Pakistan economically. In this regard, the question is can a country with a small sized economy overturn the trade balance is the next best question? Instead of making its industrial products competitive, Pakistan is adopting a policy of isolation. The point is for how long Pakistan can avoid trade with India at the formal level?
At the formal trade level, there are two compulsions on both Pakistan and India. That is, both the countries are members of the South Asian Association for Regional Cooperation (SAARC) and World Trade Organisation (WTO). Both the organizations make mandatory on their members to do trade with one another – which is another way to meet immediate economic needs.
At the platform of the SAARC,...