[Answered] “Trade strengthens peace and there needs to be a revised strategy towards restarting cross-Line of Control trade.” Comment.

Demand of the question
Introduction. Contextual Introduction.
Body. Impact of India-Pakistan tussle on cross-loc trade. Why cross-loc trade is important? What are the trade facilitation measures need to be taken? Conclusion. Way forward.

The India-Pakistan face-off in the recent period is having more repercussions than intended, with border economies the worst hit. In February 2019, in the wake of the Pulwama attack, India decided to withdraw the Most Favoured Nation (MFN) status to Pakistan.

Hard hit cross-loc trade:

  1. The impact of the escalating tensions has trickled down to trade relations between both the countries, much severe this time.
  2. In 2018-19, bilateral trade between India and Pakistan was valued at $2.5 billion which has come down.
  3. India’s decision in regards with the withdrawal of MFN status and imposition of 200% duty has hurt Pakistan’s exports to India.
  4. The exports fell from an average of $45 million per month in 2018 to $2.5 million per month in the last 4 months.
  5. With Pakistan deciding to completely suspend bilateral trade, cotton exports from India to Pakistan might get affected the most, eventually hurting Pakistan’s textiles.
  6. Decision on India-Pakistan trade has a direct impact on the local economy and the people of Amritsar. Since February 2019, estimatedly, 5,000 families have been directly affected in Amritsar because of breadwinner dependence on bilateral trade.

Why cross-line of control trade is important?

  1. The trade measure enable converting social interconnectedness into commercial interdependence of the two similar yet separate sides of the LoC.
  2. In all, the LoC trade rise to hope in the virtuous cycle between trade, trust and people-to-people connect, building bridges and reconnecting communities
  3. The Cross-LoC trade is much more than a mere commodity exchange as the sentiments of the people attached to it kept it successful.
  4. Importantly, cross-LoC trade help to connect the two divided sides of Jammu and Kashmir.
  5. It, thereby, is important to create a constituency of peace in an otherwise tense region.

What are the trade facilitation measures need to be taken?

  1. Given the present situation in J&K, it is imperative that India plans an outreach connecting all stakeholders including the ecosystem of cross-LoC trade.
  2. Besides, there is a need for a revised strategy towards the re-initiation of cross-LoC trade.
  3. The lack of transparency needs to be addressed in the complete ecosystem. The measures could include standard operating procedure, invoicing, GST norms, and trader registration.
  4. Other steps to address the long-standing concerns around cross-LoC trade include:
    • Clarifications on harmonised system codes to avoid misrepresentation of commodities.
    • Rules of origin to avoid third country goods.
    • GST rates and inter-State taxation rules to avoid tax evasions.
  5. A trader registration policy to ensure that credible traders are involved in the trade
  6. Digitisation of systems and procedures at the trade facilitation centres is another important step to help take LoC trade to the next level.

Until the trade suspension, both bus links and trade had survived for more than a decade despite intermittent suspensions and ceasefire violations. The current suspension of LoC trade could be seen as a window of opportunity to address the concerns hitherto unaddressed. The cross-LOC trade should be revived in a stronger and more organised manner. In its new avatar, Cross-LoC trade could continue to prove the value of a peace-through-trade policy, and one that has stood the test of time globally.

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