Tea and sympathy, businessmen hope they get a leg-up at Agra

HARI RAMACHANDRAN & AAMIR ASHRAF

New Delhi/Karachi: Pakistan is a big tea importer but buys hardly any from its longtime foe India, one of the world’s leading leaf exporters. India is saddled with vast sugar stocks and Pakistan has a sugar shortage but has banned Indian sugar imports. India, in turn, refuses to buy Pakistan cotton.

Pakistan and Indian business leaders say the bitter trade standoff is damaging both countries and they hope this month’s summit between Pakistan President Pervez Musharraf and Indian Prime Minister Atal Behari Vajpayee can help end it.

‘‘Pakistan and India have been deprived of numerous economic benefits due to lack of trade. We haven’t exploited the vast trading potential,’’ said Ilyas Ahmed Bilour, a leading member of the India-Pakistan Chamber of Commerce and Industry in Islamabad.

Pakistan in the past has said trade should be linked with progress on the ‘‘core issue of Kashmir’’ while India has favoured a broader approach.

The main aim of the July 14-16 summit is to defuse tensions over Kashmir, but trade and other issues will also be on the table. Two-way trade has the potential to hit $5 billion annually, up from the current $200 million, said Chirayu Amin, President of the Federation of Indian Chambers of Commerce and Industry.

Unofficial trade, smuggled or routed through third countries, is estimated at $1.0 billion annually. Third countries have long benefited from trade barriers between India and Pakistan which have lost out on higher transaction costs and customs revenue.

‘‘The pluses for trade are much more than the minuses. It’s a win-win situation for both,’’ said political analyst Mahesh Rangarajan.

India, which granted Pakistan most favoured nation trading status in 1995, plans to push Pakistan to reciprocate at the summit but says it will be satisfied if the two sides can agree to hold further talks on trade. Right now, bilateral trade is governed by a Pakistani restricted list of 600 importable items.

‘‘We should trade directly since we have such a long border with Pakistan,’’ said Minister of State for Commerce and Industry, Omar Abdullah.

Trade analysts in Pakistan say the country could import machinery, iron ore, sugar and other goods 25 to 40 percent cheaper from India than elsewhere because freight costs would be less. Pakistan could export cotton yarn and textile fabrics, leather products, surgical instruments and sports goods to India. ‘‘The business community is keen on both sides to improve trade,’’ Amin said.

Political analysts say the summit is unlikely to make big headway in finding a solution to the Kashmir dispute but say there could be a move to strengthen trade ties. ‘The economic sector is where one expects some positive movement. On trade they can set up working groups,’’ Rangarajan said.

Officials of the Indian Tea Association (ITA) say tea could be the easiest area in which to boost exports to Pakistan as it has hardly any domestic production. India, the world’s biggest tea producer, sent just three million kg of tea in 2000 to Pakistan, which imports nearly 140 million kg of tea, mainly from Kenya and Sri Lanka, said Gautam Bhalla, head of leading Indian tea producer Warren Tea.

Trade in sugar is another area of mutual potential benefit. S.L. Jain, secretary general of the Indian Sugar Mills Association, said Pakistan has a freight and time advantage in buying sugar from India instead of sourcing it elsewhere. ‘‘We can deliver sugar in 12 hours and Pakistan will get it $20-25 per tonnes cheaper than from other countries,’’ said Jain.

Traders are also hopeful the summit could pave the way for India to lift the ban on Pakistan cotton imports. ‘‘The ban was more of a political move than one guided byeconomic prudence,’’ said Manoj Gala, a leading Ahmedabad cotton trader. ‘‘The visit of General Musharraf would be the ideal time to lift the ban.’’