PROLOGUE

On January 16, 2023, Prime Minister Shehbaz Sharif sat down with the Dubai-based television channel, Al Arabiya and, among other issues, spoke about Pakistan’s relations with India. Sharif stated, “It is up to us to live peacefully and make progress or quarrel with each other and waste time and resources…My message to…Prime Minister Narendra Modi is that let us sit down…and have serious and sincere talks to resolve our burning issues like Kashmir.” Sharif also said the United Arab Emirates (UAE) could play an important role in facilitating the resumption of dialogue between India and Pakistan.

In a pro forma response, India’s Ministry of External Affairs’ spokesperson, Arindam Bagchi said, “We [India] have said that we have always wanted normal neighbourly relations with Pakistan. But there should be a conducive atmosphere which does not have terror, hostility or violence.”

Much has happened since January 2023. Pakistan’s economy has continued to decline and the country is simmering with political discontent. The February 8 election, widely considered to be rigged at both system and operational levels, has only worsened the situation. The overt and covert repression might have quietened down the full expression of dissent but it continues to fester, affecting the body politic, and will likely recrudesce.

India has gone through an election too, which saw the Bharatiya Janata Party (BJP) emerge victorious, albeit without securing a clear majority on its own. After 10 years, India now has a coalition government, but the BJP remains the predominant driver of that coalition. This essentially means that while Modi, now in his third term as prime minister, might not be able to strong-arm the opposition internally as he is used to, his coalition will go along with his foreign and security policies. In other words, we are unlikely to see much change on that front.

The cutting edge of that wedge is India’s Pakistan policy: stall talks, hurt Pakistan diplomatically and by sponsoring terrorism at the sub-conventional level, while continuing to accuse Pakistan of “terrorism” and speak of a conducive atmosphere as a precondition for any talks.

No one actually disputes that talking would be better than hostile actions between Pakistan and India or that greater trade would not be beneficial to the two countries. But can such talks and greater trade take place in the context of current Pakistan-India relations? And would they solve their ongoing bilateral issues? Ejaz Haider uses international relations theory to challenge the common narrative…

The question then is, to quote the headline from a recent op-ed by Engr Khurram Dastgir-Khan, “What to do with India?” The question implies that Pakistan has to do something, given not just the physical fact of India’s presence in the east but also because India has continued to harm Pakistan at multiple levels.

Khan is a Pakistan Muslim League-Nawaz (PML-N) heavyweight and has run commerce, defence and foreign ministries. He is not an outsider taking an outside-in view, but has been an inside player. It is instructive when he says that as a first step Pakistan should “stop offering talks to India, which the present government [led by his party] has inadvisably done more than once.” He was referring to recent statements by the prime minister and the foreign minister.

Another former PML-N leader and twice Pakistan’s finance minister, Dr Miftah Ismail, argues that Pakistan should keep every other issue/dispute on the back-burner and trade with India. When interviewed for a Dawn article, Dr Ismail said, “All trade is beneficial, and given the countries’ proximity, it is beneficial to both countries. China and Taiwan have a dispute, but their trade is booming. India and China have a dispute, but their trade is flourishing. China and India have skirmishes at the border but trade with one another.”

Pakistan-India relations can be discussed and debated from a number of perspectives. Here, I will focus on just two: talking to India and trading with it.

PURITY VERSUS CONTEXT

Saying that X must talk to Y because talking is better than fighting is unlikely to beget much disagreement because talking is generally regarded as a better option. In its purity the statement makes eminent sense. But then life happens and life is all about context.

Take, for instance, the above statement: X must talk to Y means X isn’t talking to Y. But unless it can be proved that X isn’t talking to Y despite Y wanting to talk to X, one has to delve deeper into X’s reasons for not talking to Y.

The problem is a chicken and egg one. Trade requires better relations and better relations require trade, or at least for relations to reach a point where other disputes cannot derail trade. Clearly, reaching that point requires a bilateral consensus. The liberals argue that all will be well when Pakistan and India resume full trade but don’t know how to get the two sides there.

In the event that we figure out that X is not talking to Y because Y wants to cut X loose, we have moved the problem from the purity of the desirability of talking to the context of why talks are not happening — or what the cost for X would be to appeal to Y. Purity is the state of simple consciousness; context is the state of self-consciousness.

This is a deliberately simple exercise in problematising purity. I have not used any interstate/IR theoretical framework to add to the complexity of context. The English language has an adage, “It takes two to make a row.” This is wrong because, while it often takes one to make a row, it most definitely takes two to make peace, unless one of the two actors has been completely subjugated or annihilated by the other.

Let me give an example used in the Realist framework but which should be obvious even in a non-theoretical sense.

When the Athenian generals arrived in Melos, they made a straightforward demand of Melian commissioners: submit, become a part of the Athenian empire, and your people and possessions will be spared harm. The Melian commissioners argued that “by the law of nations, they had the right to remain neutral, and no nation had the right to attack without provocation.

Thucydides tells us that Athenians wouldn’t be persuaded.

Melians: “And how pray, could it turn out as good for us to serve as for you to rule?”

Athenians: “Because you would have the advantage of submitting before suffering the worst, and we should gain by not destroying you.”

Melians: “So you would not consent to our being neutral, friends instead of enemies, but allies of neither side?”

Athenians: “No; for your hostility cannot so much hurt us as your friendship will be an argument to our subjects of our weakness and your enmity of our power.”

When the Melians asked if that was their ‘idea of equity’, the Athenians responded: “As far as right goes…one has as much of it as the other, and if any maintain their independence, it is because they are strong, and that if we do not molest them, it is because we are afraid…”

Some might say the world has come a long way from the Peloponnesian War; we have international law and international institutions, alliances, norms and taboos. They need only look at the Russo-Ukraine war and Israel’s savage war on Palestine. The list is long but I mention these two because they are ongoing and because memories are short.

Talking is preferable when the context allows for it. Or when it is between equals or even when the asymmetry is not too great. In any other case, it is about the terms of surrender, not necessarily in a military sense, but in the sense of accepting that the other party, in this case a state actor, is far too strong and it is better to accede to its diktat than be destroyed by it.

When Khan says it is inadvisable for the present government to offer talks to India and be shunned by it, he is not arguing against talking. He is offering a context. In that op-ed, he goes on to list what needs to be done before talks can have any meaning; put another way, to change the context in a way where talks is not just X’s need but also Y’s imperative. That is the only point where one can ascribe any meaning or meaningfulness to the talks.

Talking is better than fighting but many such rounds in the past have failed to pluck even low-hanging fruit. Reason: Pakistan has continued to decline on all indices and there’s nothing on the horizon to indicate that it has finally taken a turn for the better. If anything, the country has regressed on all counts in the last two years and continues to slide.

TRADING WITH THE ENEMY

Let’s get to trade now and begin again with purity. Should one trade? Will trade be beneficial? Both questions are erroneous. Where there’s a seller and a buyer, trade will and does happen, if not dyadically then through third parties. Similarly, trade is always beneficial, even if there’s imbalance — what economists call a trade deficit. It’s better to get Rs 10 even if the other is getting Rs 100 because Rs 10 is better than Rs 0.

Many studies have shown that the relaxation of constraints would benefit bilateral trade. As Dr Ishrat Husain noted in 2011, “The theoretical argument is that countries in relative geographical proximity tend to trade more with each other than with more-distant countries, because of lower transport and communication costs.”

Makes perfect sense. I begin with this because the proponents of trading with India are quick to allege that those who insist on moving the issue from its purity to a context are somehow opposed to trading. This is false and they resort to this to avoid answering difficult questions.

To explain the issue, I would divide the purists and contextualists into two categories, liberals and realists, respectively. Realists argue that ‘relative gains concerns’ will always determine a state’s response and militarised disputes, even short of war, will badly impact trade between them. Liberals insist that disputes should not prevent Pakistan reaching out to India. This is, of course, not the first time for such arguments, given the ebbs and flows of Pakistan-India relations.

The problem is a chicken and egg one. Trade requires better relations and better relations require trade, or at least for relations to reach a point where other disputes cannot derail trade. Clearly, reaching that point requires a bilateral consensus. To put it another way, the liberals argue that all will be well when Pakistan and India resume full trade but don’t know how to get the two sides there. In sum, they ‘accept’ the realist position implicitly in the first instance, but argue nonetheless that once trade is given a chance, a different causality will kick into play, trumping the realist assumptions.

At this point, it is important to note that liberals are right about one thing: the inevitability of trade, the point I noted above, but wrong in arguing that trade brings peace dividends. There is empirical data to support this, compiled by American political scientist Katherine Barbieri. Barbieri also co-authored with fellow political scientist Jack Levy an article in the Journal of Peace Research (Vol 36, no 4, 1999), captioned, ‘Sleeping with the Enemy: The Impact of War on Trade.’ Barbieri and Levy maintain that “there are numerous historical cases of trading with the enemy during wartime, including trade in strategic goods that directly affect the ability of a state to prosecute the war.”

Trade will continue even when states are at war. While dyadic trade will be negatively impacted, trade through third parties and circuitously will continue. This is not to say that trade through third parties in such circumstances is preferable to dyadic trade. The point is that empirical data does not support the central tenet of the liberal theory that trade promotes peace or the realist assumption that states, because of vulnerability, will snap those ties.

If there’s a demand in State Y for item A made by State Z, A will get to Y, regardless of the conditions of war and peace. This is also borne out by informal trade linkages between Pakistan and India, especially trade through third parties and even smuggling. The argument that dyadic trade is better is correct but not relevant to what I am arguing here.

Realists further argue that even if trade ties were not to snap because of security concerns and trade in fact increased, high interdependence will increase rather than decrease the chances of conflict. They point to the well-known fact that the European powers had very high levels of trade and high interdependence in the run-up to World War I. Going by the liberal argument, those levels of trade and interdependence should have prevented war. But war happened and mutual dependence actually increased vulnerability rather than decreasing it.

So, how does one explain that through the interdependence argument? The realist correlation seems to be right but, as Canadian political scientist Dale Copeland argues in his International Security article (Vol 20, no 4; Spring 1996), “trade levels had been high for the previous 30 years [in the run-up to WWI]; hence, even if interdependence was a necessary condition for the war, it was not sufficient.

Copeland offers a different, syncretic approach and calls it a theory of trade expectations where the new causal variable is the expectations of future trade — what’s the impact on the overall expected value of the trading option if a state decides to forgo war. “Levels of interdependence and expectations of future trade, considered simultaneously, lead to new predictions. Interdependence can foster peace, as liberals argue, but this will only be so when states expect that trade levels will be high into the foreseeable future.

Copeland’s argument is that “high interdependence can be either peace-inducing or war-inducing, depending on the expectations of future trade.”

CURRENT TRENDS AND TRADE ARGUMENTS

By now it should be obvious to any keen observer that the world’s two largest economies — USA and China — are in a peer competition. Off-shoring is giving way to in-sourcing, re-shoring and friend-shoring. The neoliberal trade order is giving way to geo-economics, rival trade blocs, protectionism and sanctions.

I use the term geo-economics in the sense it was used and coined by American conservative Edward Luttwak in a 1990 article and later expanded by former American diplomat Robert Blackwill and academic Jennifer Harris to mean “the use of economic instruments to promote and defend national interests, and to produce beneficial geopolitical results; and the effects of other nations’ economic actions on a country’s geopolitical goals.”

To discuss this trend in some detail is outside the scope of this article, but it’s important to flag it. A good example of the Blackwill-Harris approach is the US decision to stymie the progress of China’s semiconductor industry and to force US allies in the chip-making value chain — Taiwan, The Netherlands, South Korea, Japan — to follow US sanctions against China’s chip industry. For its part, China has been sanctioning US individuals and companies and has used the sanctions stick against other states such as Australia and Taiwan et al.

All of this is being done in the service of national security. It will be an interesting exercise to apply Copeland’s trade expectation theory to the ongoing Russo-Ukraine War and further expand its application to Sino-US competition and the impact Sino-US bilateral disruptions will have on other economies.

This also provides me the segue to go back to Dr Ismail’s two examples: India-China and China-Taiwan trade linkages. Neither is useful for the Pakistan-India case. Consider.

China-Taiwan example is flawed for two reasons: Taiwan cannot afford to go to war with China and the latter needs Taiwan, for instance for cutting-edge semiconductors. China considers Taiwan an unfinished issue from the civil war and lays claim on Taiwan, but it can bide its time and, meanwhile, accrue the benefits of imports from Taiwan.

Taiwan is also encouraged by China to invest in the mainland, though a May 2024 report from Taiwan’s Ministry of Economic Affairs says “the island’s investments in mainland China have fallen to the lowest level in more than 20 years, dropping nearly 40 percent to $3 billion last year from a year earlier.” Meanwhile, Taiwan’s investments in the US have surged nine-fold, to $9.6 billion in 2023. China is stepping up efforts to woo Taiwanese businesses to invest in China because the idea is to integrate Taiwanese economy into China’s. In 2023, Taiwan’s trade surplus with mainland China and Hong Kong was USD 80.55 billion.

Meanwhile, Washington and Taipei signed a trade agreement last year and are now negotiating the next phase. According to US Assistant Secretary of State Daniel Kritenbrink, “Everything is motivated by… a desire to build Taiwan’s deterrent capability and their resilience, all in support of maintaining the status quo and deterring China from being tempted to take… action against Taiwan.”

‘India and China’ is a different dyad. China is already a great power — India is aspiring to be one. Relations have been fraught since the 1962 War and the border issue remains unsettled, despite various agreements. China needs India’s market and it has a massive trade surplus with India. If it can prick India while retaining the Indian market, that’s a win-win for China.

After the June 2020 skirmishes in Ladakh, the Indian government slapped sanctions on Chinese apps and also sought to shrink the Indian market for certain Chinese products, but the volume has since picked up again. That works fine for China.

India, for its part, doesn’t have many options. It can either go bellicose and risk a major confrontation with China or try to manage relations at the Line of Actual Control (LAC) with overall relations, including in the area of trade. China can bide time and occasionally draw blood; India doesn’t have the capacity to force a resolution. That creates a balance. Meanwhile, both sides have something to sell so both are prepared to buy.

ANOTHER PROBLEM

The ‘two sides have something to sell, so both are prepared to buy’ is an important factor. What does Pakistan have to sell to India? A 2005 State Bank of Pakistan report tells us that “Generally, Pakistan’s exports consist of more raw material than finished products (italics added).” Corollary: if India wants to stop trading, it doesn’t lose anything. Pakistan is not offering (and cannot) anything that India cannot produce itself or get from somewhere else.

To make this point clear, using Dr Ismail’s reference to Taiwan, while China threatens a cross-strait invasion, it cannot sanction Taiwan’s semiconductors because cutting-edge chips are vital to China’s industry and military modernisation. Corollary: if, hypothetically, Pakistan could become a world leader in something that everyone needed, including India, that would be a game changer. [Nota bene: the semiconductor reference also validates the theory that trade will always happen even between adversaries.]

The second issue generally implied in the trade-with-India argument is that it will improve Pakistan’s economy. I am not an economist but basic common sense tells me that while it might bring paltry revenues, it can’t in and of itself streamline the country’s economic woes, which have nothing to do with trading or not trading with India. Those structural problems are owed to rent-seeking, extractive elites that have fattened themselves on cash inflows when a conflict involving a great power’s interests rages in the northwest.

The venality of the extractive elites will not vanish simply because Pakistan begins to get another one or two billion dollars in its embarrassingly small kitty. Dr Ismail himself has often written and spoken about what those problems are. I will refer to just one op-ed by him, ‘Foreign Trade Debate’, which appeared in this newspaper. He picks up one issue, which is also central in many ways: what should be Pakistan’s foreign trade strategy: export promotion, or import substitution? And he goes on to tell us how and why we have the worst of both worlds.

IN CONCLUSION

The discussion on dealing with India has to be contextualised. I have discussed just two factors: talks and trade. There are many others. The debate cannot be had in silos. Trade is inevitable and it’s happening even as I write these lines. Its volume is low and will remain low because Pakistan has not innovated and has nothing to offer in value-addition terms.

The paltry benefits of trade have, therefore, to be weighed against the cost of dealing with an adversary that has a considered policy of not engaging with Pakistan while continuing to hurt it in multiple ways.

Talking is better than fighting but many such rounds in the past have failed to pluck even low-hanging fruit. Reason: Pakistan has continued to decline on all indices and there’s nothing on the horizon to indicate that it has finally taken a turn for the better. If anything, the country has regressed on all counts in the last two years and continues to slide.

Without addressing the internal contradictions, Pakistan cannot engage any external actor meaningfully, much less India. It needs a strategic pause to work out its internal contradictions before it can hope to be taken seriously externally.

The writer is a journalist interested in security
and foreign policies. X: @ejazhaider

Header image: Pakistani porters (red) exchange goods with Indian porters (blue) at the Wagah Border on December 23, 2006: many studies have shown that a relaxation of constraints would benefit bilateral trade | AFP

Published in Dawn, EOS, July 21st, 2024