Raza Khan


In the recently concluded Chicago Summit of NATO on the future of Afghanistan, Pakistan remained on the sidelines due to its present disturbed relations with the US. Nonethless, making use of the opportunity, Islamabad and Kabul agreed to extend their transit trade agreement to the Central Asian Republics.

The resolve of Pakistan and Afghanistan to open their respective territories to each other for carrying out trade beyond one another’s land is a welcome development. However, this resolve needs to be given practical shape.
Because, only in this case would Pakistan be able to conduct large-scale trade with the Central Asian states, while Afghanistan could have regular trade with India. However, keeping in view the relatively unsatisfactory progress on the Pakistan Afghanistan Transit Trade Agreement (PATTA), one is not very optimistic about extending the transit trade network between the countries to other states of the region.

The advocates of increase of international trade, apart from mentioning other benefits of business relations between and among states, argue that such ties lead to political stability by subsuming political conflicts between the concerned states. When Pakistan and Afghanistan, in 2010, signed an agreement for establishing a new bilateral trade regime, it was anticipated that growing economic interdependence would lead to better political ties.
However, this could not be put to test because the new transit trade regime called Pakistan Afghanistan Transit Trade Agreement (PATTA) has not been implemented as yet. In fact, the agreement seems to have been lost somewhere between the political issues between the two countries. Pakistan and Afghanistan were able to reach a new transit trade agreement that was aimed at replacing the old Afghan Transit Trade (ATT) truce signed between them in 1965. The new agreement, PATTA, had to come into force once the competent forums of both countries, the Afghan parliament and the Pakistani federal cabinet gave it the go ahead. This approval was subsequently given. The PATTA signing, after several rounds of threadbare parleys between Afghan and Pakistani officials, as expected, turned out to be ceremonious because the key issues were not addressed before reaching the agreement. Even its ratification by the parliaments of both the countries has not made the agreement a workable framework to facilitate the transit trade between the two states. Even on the ATTA of 1965, both Afghanistan and Pakistan have had serious reservations.

However, the nature of objections of both countries had been fundamentally different, but mutually reinforcing. Afghanistan had been complaining that the ATTA of 1965 gave undue leverage to Pakistan for restricting the trade of Kabul with the rest of the world. These restraints by Pakistan, as believed by Kabul, came in the shape of limiting the number of items Afghanistan could import via Pakistan and outright rejection of exports from certain countries like India. For Pakistan the problem with ATTA has been the landing back through smuggling of a colossal amount of goods imported by Kabul and meant for local consumption in Afghanistan. The smuggled goods imported under ATTA have been inflicting huge damage on the Pakistani economy in the form of huge revenue losses of around $5 billion a year. The damages to the local manufacturing sector have been apart from the revenue losses. The unending huge smuggling through ATTA has been the reason behind Islamabad’s protective measures of limiting the number of items Afghanistan could import through Pakistan and denying of India a trade corridor through Pakistan for Afghanistan.

Pakistan has been fully justified in rejecting Indian and Afghan requests for giving both a trade corridor. Because, on the one hand, war-ravaged Afghanistan, with the limited writ of the central government, has never been in a position to check the landing back of ATTA goods into Pakistan. Thus, giving Indian goods access to Afghanistan would have been suicidal, as Pakistani markets would then have been flooded with Indian goods and due to their low manufacturing cost and relatively good quality, would be the choicest consumer items in Pakistan.

Pakistan has also been hard-pressed to deny Indian goods access through its territory to Afghanistan, because in this way New Delhi would increase its political influence in Afghanistan. Remember the old maxim, “The flag follows trade.” Obviously, Indian political influence in Afghanistan would be at the cost of Pakistan. Therefore, the analysis of PATTA must be done in the above-mentioned historical context regarding transit trade. The most important feature of the proposed PATTA is the denial by Pakistan to India for use of its territory for carrying out trade with Afghanistan and onwards with the Central Asian states. Although, the Afghan government, besides the United States, demanded for years from Pakistan to give India access to Afghan and Central Asian markets through its territory, Pakistani authorities refused to budge from the old stand of not giving any concessions to its arch-rival, India, in Afghanistan.

At a moment when there has been no reduction in the smuggling back of goods meant for Afghanistan into Pakistan and the intense Cold War between Pakistan and India in Afghanistan, it seems the most appropriate decision.
However, Pakistan failed to resist the US, Afghanistan and Indian pressure for giving access to New Delhi exports to Afghanistan, as under PATTA India has been allowed to transport goods through Pakistani airspace to Afghanistan. As the air travel time from India to Afghanistan is just minutes more than from Pakistan, India would still manage to ship a large amount of goods to Afghanistan by air if the land route is unavailable to it. But now that Pakistan has already announced to give India Most Favoured Nation (MFN) status, it automatically would lead to providing India a trade corridor to CARs. Because under the MFN, when India could send its goods to Pakistan then Islamabad should not worry about Indian exports to Afghanistan and CARs. The best available option for Pakistan is to get in return as many concessions as it can from Afghanistan for expanding its own trade with Central Asia. This would not only open new markets for Pakistani exporters but also importers could import a large variety of goods which cannot be produced in Pakistan at a lower cost.

In this way, Pakistan's dependence on Chinese goods could be reduced. It may be mentioned that at the time of signing PATTA, Islamabad was not able to gain for its traders access to CARs and the Pakistani government claims that Afghanistan had reciprocated Pakistani actions in PATTA and had given access to Pakistani traders to Central Asia was an erroneous perception. Thus, it is time for Islamabad to reclaim the losses which it made by signing PATTA.

-cuttingedge