Tiago Fioreze
World News /03 Feb 2014
02.03.14

Trade in Kashmir: Removal of Barriers the Key to Transforming the Region

Relations between Pakistan and India have traditionally been marked by hostilities. In particular, jostling over Jammu and Kashmir has been highlighted by a series of armed conflicts. However, how the two neighbors deal with Jammu and Kashmir could potentially yield cooperation and a shared understanding between each country and there are signs that reduced tensions over the region are in the offering. This is apparent at the margins only, though trade across the line of control (LoC), the line dividing Jammu and Kashmir into two parts controlled by India and Pakistan, respectively. However, its impact is being felt elsewhere.

Emboldened by this initiative, Delhi and Islamabad have finally decided to resume their bilateral trade relations after years of suspension. The Wagah-Attari border has been opened for round-the-clock movement of goods, with a non-discriminatory access to markets in place on a reciprocal basis. Can the two countries now take a step forward and allow divided families in Jammu and Kashmir to trade with each other freely which would pave the way for the peaceful settlement of the Kashmir conflict?

In fact, the future of this region revolves around this proposition. The decision to initiate trade across the LoC was discussed in a meeting between the foreign ministers of India and Pakistan in Islamabad in 2008 which was formalized by the prime ministers of the two countries on the sidelines of the UN General Assembly session in New York in September of last year.

Trade across the LoC is widely deemed as the most daring confidence building measures (CBMs) taken by the two sides so far to create the ambiance of mutual trust. With just 21 items on the mutually agreed list, the trade from two crossing points at LoC has reached $89 million per annum in just a few years. Onion, spices, pulses and coconuts are amongst the key food items exported from Pakistani controlled Kashmir to the Indian Kashmir while imports include fruit and carpets, amongst other items.

The initiative is progressing steadily, defying a myriad of odds including, but not limited to, exchange of goods on the basis of a barter system, lack of communication, non- existence of banking channels, deficient legal contract enforcement, limit on tradable goods and structural difficulties in free movement. Notwithstanding these inherent limitations, trade connections have strongly impacted the socio-economic landscape of Jammu and Kashmir. Apart from reuniting people after more than six decades, it has created an opening for them to integrate their interests at the business level as well. As intended, it has also given birth to the possibility of a peaceful settlement of the Kashmir issue. It has created huge employment opportunities for locals, especially to the residents of border areas. A number of ex-militants are also involved and more and more trade unions and chambers of commerce are coming into being.

However, India and Pakistan have yet to take this process forward in order to harness its full economic and peace building potential. Steps like unbridled traveling of registered traders across the LoC and opening of trade to services and hospitality sectors can bring dividends beyond imagination. Furthermore, opening all land routes including Sakardu-Kargil can go a long way to improve the economic lot of people living on border areas in particular. Diversification of trade which would include service sectors like tourism, forestry, waterways, power generation, information technology, education, anti-poverty programs and disaster management could further improve the Kashmir situation.

To address logistic and handling issues, Pakistan and India ought to adopt a liberal policy to allow traders to hold weekly meetings at the Trade Facilitation Centre (TFO) to thrash out their bilateral issues. Yet another possible arrangement could be the providing of special passes to move across the LoC on a weekly bases using local bus service. Delhi and Islamabad have yet to agree on the demilitarization of the region, including de-mining to eliminate the no-man’s land along the LoC. Currently, the LoC is the most heavily deployed border in the world where even a minor miscalculation and overture can result in hostilities, resulting in the killing and displacement of Kashmiris. Many such steps can be taken to make LoC trade not just a limited exercise but an opening to nurture a new culture of bilateralism and mutual engagement. This integration over a period of time will ensure that cooperation rather than confrontation becomes the preferred option to bring peace to the region.

A close examination reveals that Indian controlled Kashmir, though not self-sufficient agriculturally, has industrial and service sectors that are well rooted to withstand any external pressure or competition. On the other hand, though the industrial base of Pakistani controlled Kashmir is quite modest, it can still cater to the needs of its counterpart by providing poultry, bakeries, flour, crushed stone and so forth. Moreover, it can become a conduit to Pakistan-made or produced items which are always in great demand on the other side of Kashmir.

Enhanced trade across the LoC can create an environment of mutual trust and interdependence that India and Pakistan will not be able to ignore and they can apply this model in their bilateral relations as well. History is witness to the fact that extended trade relations slowly but surely transform bilateral conflicts over time. The creation of the European Union and tri-lateral trade agreements between Canada, the United States and Mexico are just a few examples of cross border cooperation (CBC) that can transform, if not resolve, differences between neighbors. India and Pakistan must proceed and agree on free trade across the LoC.

One can also assume that enhanced trade can potentially pave the way for rendering borders irrelevant between Indian and Pakistani controlled parts of Kashmir, respectively, with a free and unrestricted movement of people, goods and services ensured. Without impinging upon the stated positions of India and Pakistan on the issue, soft, or for that matter, irrelevant borders, would offer a rare opportunity to the two countries to harness jointly the economic potential of Jammu and Kashmir which, apart from several others benefits, can single handedly fulfill the electricity demands of the two countries who are energy deficient. The hydro-electricity generation potential of Pakistan controlled Kashmir is estimated at 18,000MW while Islamabad is literally concerned as to how to add even a few hundred mega watts of electricity generating capacity to its national grid.

However, the two countries unfortunately cannot benefit from this option because of their rivalry on Jammu and Kashmir. In fact, they are at loggerheads over the use of the water of rivers originating from Jammu and Kashmir, resulting in litigation between them at international forums such as the World Bank and the International Court of Arbitration. Free trade between divided parts of Kashmir would finally create the conditions prerequisite to the peaceful settlement of the Kashmir quagmire which holds a key to lasting peace and security in the South Asian region. There is no other option but to create conditions first to move towards this end and increased trade can for sure do wonders in this regard.

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