Pakistan and India share a long, unyielding history. The past is marred with political and territorial conflict, militarization, and a general sense of mistrust on both sides.
Since 2003, trade between the two countries has grown seven-fold, with Indian imports into Pakistan taking 80 percent of the share, according to data reported by International Trade Centre. While formal figures report bilateral trade of U.S $2.3 billion for 2013, some estimates contend that a larger share of bilateral trade between Pakistan and India comes through indirect or informal routes. Trade is estimated to be double what statistics report with significant Indian imports coming through Dubai into Pakistan.
Many studies which have aimed to estimate potential bilateral trade between Pakistan and India have concluded consistently that there are enormous economic synergies that can exist between the two economies given their trade complementarity and geographic proximity. Mutually preferential cooperation would benefit both Pakistan and India.
However, Pakistan has still not granted Most Favored Nation status (MFN) to India despite talks that seemed to have made progress in the past few years. Judging by the recent statements made by officials from Pakistan, it seems the country will remain flummoxed by the idea of granting MFN to India, contending one or more of the following as reason for their reservations:
- India gave MFN to Pakistan in 1996. For Pakistan, however, the trade deficit has only increased.
- MFN to India will hurt the local economy of Pakistan.
- Increasing trade with India has hardened India’s stance on Kashmir.
Unfortunately for Pakistan, the merits of these arguments are wearing thin. In fact, putting the Kashmir issue and trade on the same table ensures that neither side relents and both issues remain unaddressed.