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interview
'Let's do trade, peace will follow'
www.jang.com, July 27, 2008

By Shahzada Irfan Ahmed

Pradeep S Mehta is the founder secretary general of the Jaipur-based Consumer Unity & Trust Society (CUTS International), one of the largest consumer groups in India established in 1983-84. It has overseas centres in London, Geneva, Lusaka, Nairobi and Hanoi.

Mehta has also served on several policy-making bodies of the Government of India, related to trade, environment and consumer affairs, including the National Advisory Committee on International Trade of the Ministry of Commerce and its working groups. Besides, he chairs the advisory board of the South Asia Network on Trade, Economics and Environment, Kathmandu and has also been an NGO Adviser to the Director General, WTO, Geneva, Switzerland.

Recently he was on a personal visit to Lahore during which The News on Sunday got a chance to interview him in the backdrop of Pak government's decision to increase imports from India. Excerpts follow:

The News on Sunday: The PPP government is being criticised for announcing an 'India-centric' trade policy while many outstanding issues between the two states remain unresolved. What would you say on this?

Pradeep S Mehta: First, let me congratulate the Government of Pakistan on this visionary, bold and pro-Pakistan step. However, I would like to make a correction. It was Pakistan, sometime ago, under President Musharraf which first decided to put other bilateral matters on hold and concentrate more on bilateral and regional trade. This means even an army chief had to change his stance and focus his attention on issues related to trade and other fields where the people of the two countries could cooperate. About the second part of the question I would say the trade policy of Pakistan is not at all country specific. I feel the decision has been taken only for the reason that cheap imports from India, especially those of industrial raw materials, are the best option the country has to stay competitive in the international market, and also curb inflation.

I don't want to say that the two countries must forget the outstanding issues between them. What I am suggesting is that these countries must not link mutual trade with the resolution of some difficult issues. I am sure peace will follow if trade is allowed to grow freely. You may call it 'peace dividend' if you want to use a pure economic term. This is by no means a utopian thought. Brazil and Argentina, who were once at daggers drawn with each other, had to abandon their nuclear programmes and concentrate mainly on mutual trade. As a result smaller neighbouring countries of that region have also benefited.

TNS: Pakistan already has a yawning trade deficit with India which may increase manifold if the said trade policy is implemented. How do you think can Pakistan overcome this worry?

PSM: Here I would try to remove a misperception that trade deficit is detrimental to an economy's growth or survival. What if Pakistan has trade deficit with India? It also has a trade deficit with China. The United States has had trade deficit with the rest of the world, forever. Even China has trade deficit with India. It's a fact that out of the $30 billion India-China trade, Indian exports have an overwhelming share. China imports cheap raw material from India and sells the finished goods to the world. I think Pakistan can also benefit from the import of cheap Indian raw materials and minimise the ever-increasing costs of production its industry is burdened with.

Another count on which Pakistan can gain a lot is the transportation cost. The cost of transporting goods from the neighbouring India is much cheaper than getting them from distant countries. With global fuel prices constantly on the rise the transport cost factor is becoming more and more significant. About the import of cheap finished goods, it is very much expected that some businesses will shut down for being non-competitive. It happened in India too, when we had to liberalise the import of consumer goods. But at the same time the end consumers will have the opportunity to buy cheaper goods. Everywhere in the world imports are used to control prices and promote healthy competition.

TNS: There is a perception among many Pakistanis that the goodwill measures have been one-sided. They say while Pakistan is opening up its market, India has not shunned its habit of imposing non-tariff barriers on imports from Pakistan.

PSM: The perception is very much there on both sides of the border. But the fact is that they are mostly the sector lobbies that try to protect their interests by pressurising their respective governments. For example the Indian cement industry opposed cement imports from Pakistan on grounds that the product does not meet international quality standards. But finally the imports were allowed. My point is that if Pakistanis are using the same cement and their buildings are not coming down, there's no harm importing it. Similarly the Pakistani sugar industry kept on propagating for long that Indian sugar has excessive phosphorus content which is harmful to health. Here I would say if Indians can consume the same sugar without getting affected why can't Pakistanis have it. Some imports have often been opposed on religious grounds. In this respect I would say if the Arab states can import packed buffalo meat why can't any other Muslim country. In the overall context, if Pakistan liberalises imports from India, let me assure you that India will not lag behind. With the high growth in India, the market is huge and can absorb many goods from Pakistan, whether intermediates or finished goods.

TNS: How helpful can import of fuel from India be for Pakistan? Do you think the two countries can work together to overcome the deepening energy crises especially that faces Pakistan?

PSM: Here I would try to remove a misperception that trade deficit is detrimental to an economy's growth or survival. What if Pakistan has trade deficit with India? It also has a trade deficit with China. The United States has had trade deficit with the rest of the world, forever. Even India has trade deficit with China. It's a fact that out of the $30bn India-China trade, Chinese exports have an overwhelming share. China imports cheap raw material from India and sells the finished goods to the world. I think Pakistan can also benefit from the import of cheap Indian raw materials and minimise the ever-increasing costs of production its industry is burdened with.

Another project that can bring India and Pakistan closer and help meet their energy needs is the proposed gas pipeline that will come to India from Iran and pass through Pakistan. Pakistan will be able to earn a huge rental if this project gets through as well as get its share of the natural gas passing through it. India cannot sell electricity to Pakistan as it is facing energy crisis itself. It is as severe as the one haunting Pakistan. It's a fact that hardly 10 years back India was planning to buy 500 megawatt electricity from Pakistan. It is strange that the same country, which had surplus energy at that time, is unable to meet its domestic needs. Down the line, new investments in the power sector in Pakistan did not happen. That is something which your government should address more seriously.

TNS: You seem quite optimistic. But how can you convince those who fear smaller economies in South Asia will collapse due to India's exponential economic growth?

PSM: This is another Cassandraic and poorly-argued thought. All economies of the region can ride on the bandwagon of India's huge economic growth and gain. That has been the experience around similar situations. Let me take the example of Vietnam which is growing at 10 percent per annum for long, in spite of the giant China. One critical factor is that the government in Vietnam has kept their economy open, rather than close it to competition. This only goes on to prove my point. Saath chalen gay tu sab ka fayda hoga! 

(Revised on: August 08, 2008)

This interview can also be viewed at: http://jang.com.pk/