It is a well-known fact that China and India have a far more tense relationship than India and Pakistan have. Yet they continue to trade and have enjoyed the benefits of a growing exchange of goods and services for several years now.

Sri Lanka, a much smaller country than Pakistan, went forward with a comprehensive economic partnership agreement with India (a more liberal regime than a free trade agreement), not fearing any notions about India taking over Sri Lankan agriculture and industrial markets. This has resulted in greater trade-led Indian investment in Sri Lanka with significant pro-poor impacts via employment generation.

The Indian and Pakistan governments have now come closer on a consensus upon trade-related matters while the business community in Pakistan is also of the view that their profit margins will go up if cheaper inputs and intermediate goods come from India. Why then, after several months of a liberalised trading list, the trade volume has not grown the manner in which various studies had anticipated?

One needs to look deeper into Pakistani exporter’s perspective in order to answer the question. At the very outset they are of the view that they have not been facilitated by the government in terms of firstly, access and availability to basic ingredients of production i.e., energy and logistics, and secondly, the overall deteriorating law-and-order situation threatens the security of assets and profits. There are also deeper concerns when one talks about sector-specific details. Over here, we will discuss three sectors namely textile, leather and agricultural produce.

The exporters also complain about Pakistan’s weak trade diplomacy with India. The fact that it is still cumbersome to get Indian visa sends a discouraging message to the local business community aspiring to tap a potentially large market.

Pakistan’s textile items have vibrant scope in Indian market. Our textile industries are capable of producing long width cloth due to usage of advance machineries whereas in India long width cloth is attained by stitching two single sheets of cloth. We can also import chemicals dyes from India instead of Germany at low cost.

However, Pakistani textile exporters are facing various problems from Indian side; for instance, a delay on account of certification. Major trade in textile between the countries is taking place through indirect routes which increases the cost of freight. Exporters have to obtain certificate from Bureau of Indian Standard (BIS) which is valid for only three months and its renewal is costly.

In leather items, Indian industries are more focused toward value addition rather than exporting raw leather whereas, in Pakistan, the quality of leather is better due to slaughtering of younger animals. India could be a potential market for leather exports. However, exporters are facing stiff criteria from BIS and other Indian standard enforcing agencies. Apart from that, India has allowed imports of Pakistani leather through sea routes while major leather industries are situated in the northern region of Pakistan. The condition from Indian side has increased the transit cost.

Pakistan’s fruit and vegetable products have been going to India via informal channels. The trade in this sector is not formalised because of lack of coordination between plant departments of both the countries, although Pakistan is importing tomato through Wahga border and exporting dry dates and soybean to India through same route. Most of the fruit and vegetable exporters in Pakistan foresee India as a profitable market for their items due to low transit cost as compared to other destinations.

The above-mentioned is a testimony that if Pakistani exporters continue to wait for relaxation in non-tariff or other barriers on the Indian side, the trade position in terms of exports to India may not improve much. Pakistan has to learn from China whereby Pakistani exporters will need to adapt to the barriers in India. Our exporters will also need to be innovative. There are several sectors in India that Pakistani production units can serve. One such example is that of halal food sector. Pakistan’s halal food certification is well-respected globally and there is demand for this segment in India owing to a substantial Muslim population.

Finally and as pointed out in a recent article by Deputy Executive Director, Sustainable Development Policy Institute (SDPI) Dr Vaqar Ahmed, the trade-investment nexus also needs to be explored. Pakistan and India both have opened up foreign direct investment for each other. Indian business community has shown interest in investing in Pakistan’s infrastructure including energy, rail and road sectors.

The actualisation of this opportunity will require: i) full implementation of recently agreed upon liberalised visa policy, ii) harmonisation of product with global standards iii) a bilateral investment treaty with in-built sovereign guarantees that hedge against the risk of any future political upheavals.

The writers are economists at Global Research Insight for Development