Patriotism vs commercial interests | AA NEWS NETWORK
AA NEWS NETWORK |
Patriotism vs commercial
interests
New Delhi’s
actions in India-held Kashmir are despicable. There can be no two opinions
about it. Short of war, it behoves Pakistan to take every action possible to
show solidarity with struggling Kashmiris.
But does it
follow that those actions are practical?
Bilateral trade
is heavily tilted in favour of India with our imports five times more than our
exports. And that is without accounting for informal trade that is estimated to
be about twice that of formal trade. On the face of it, it appears that the ban
on trade with India makes as much economic sense as political sense, especially
given Pakistan’s beleaguered trade balance.
But the reality
is far more convoluted than simple trade numbers or knee-jerk emotional
responses.
The real
picture
“The tops of many bottles, such as paint or medicine, have a
polymer-based material, which is on the list of items not importable from
India. Practically speaking, however, almost all that is available in the
market is sourced from India,” said a trader on condition of anonymity.
“Indian companies have set up shop in Dubai, which they show as
Chinese. When an order is booked and processed, its paper work indicates that
the product’s origin is China. It’s a fairly open secret all along the chain.
And this is not the only product, there are many others on the banned list that
are imported in a similar manner,” he said.
Another
importer explained the use of switch bill of lading in importing from India
through Dubai. “It is only paper,” he said candidly. “The original bill of
lading is for some party in Dubai. Through a switch bill of lading, the
consignment shifts to our name with the country of origin no longer India.”
When it comes
to small-scale firms that cannot shift vendors or absorb extra costs,
commercial interests may supplant patriotism
“We will shift imports to China,” said a third importer with
patriotic fervour. However, he too conceded that while he supported the trade
ban and would opt to source materials from elsewhere, there were some raw
materials he would have to import from India via the United Arab Emirates.
Talking about
the practicality of the ban, he pointed out that several Indian companies had
plants all across the world. One could be importing from Africa or Germany, but
the company manufacturing the consignment would have its headquarters in India.
“We import from three different companies in India. Since the trade
ban, six to seven of our orders have been cancelled,” narrated an importer and
distributor. Imports from India include reactive textile dyes, 80pc of which
are coming from New Delhi as they cost less and have easy raw material
availability. Other imports consist of food flavours since the Indian taste
profile is similar to ours and their technology is more advanced, he explained.
Import breakdown
However, he was
completely in favour of the trade ban. “Yes, the cost of importing from
elsewhere is higher but the difference in most cases is about 10 per cent. We
can absorb this cost or adjust our prices rather than import from India. I do
not regret my cancelled orders, I will simply import from elsewhere,” he said.
Walking into a
branded store in a posh mall in Karachi, one can see packs of over-priced baby
rompers bearing the made-in-India tag. Not only do imports of such consumer
goods put unnecessary pressure on the import bill, it is galling to one’s pride
to find products that could easily be made in Pakistan to be flaunting our
hostile neighbour’s tag.
But these
imports do not consist of the bulk of formal trade with India.
Amongst what is
sourced from India are raw materials and intermediate goods that are used by
Pakistan’s key export sector — textiles. An analysis of numbers from
International Trade Centre (ITC) indicates that cotton has been amongst the top
import items since 2007 and accounted for a third of Pakistan’s total cotton
imports in 2018.
As the
illustration shows, dyes (textiles and others), cotton yarn and textile
spinning machines, all used by Pakistan’s vital textile industry, constitute a
hefty portion of the country’s total imports of those goods at the HS Code
6-digit level.
Should Pakistan
be growing cotton rather than importing from India? Most definitely. Similarly,
cotton yarn and dyes are products that should be manufactured domestically
irrespective of the trade ban.
However, these
arguments have been made since time immemorial. It does not change the ground
reality that in the short-to-medium term at least the cost of doing business
will rise because of the trade ban.
As an importer
and small-scale manufacturer pointed out, switching over to alternatives
requires experiments. For example, in case of dyes the manufacturer would have
to test strength, tone, particle size, level of dispersion in water and so on
before finalising a new vendor. Many would opt to remain with Indian suppliers
even if they condemn its actions in India-held Kashmir.
Despite the
picture painted by the numbers, various business leaders and association
representatives downplay the impact of the trade ban, holding the view that
geo-political issues supersede economic interests.
Calling the
government’s action a political and principled, Pakistan-India CEOs’ Business
Forum Founder Amin Hashwani went on to speak about honour amongst thieves.
“Even smuggling from India under the guise of the
Afghanistan-Pakistan Transit Trade may reduce because even thieves have rules,”
he said.
The export
impact
In terms of
numbers, Pakistan’s exports to India are negligible and dispersed over several
tariff lines. Not only para-tariffs and non-tariff barriers made it difficult
to export what was permitted, at times anti-Pakistan nationalist sentiments
made Indians opt for local alternatives.
However, as Mr
Hashwani pointed out, dry dates from Sindh are exported primarily to India.
While the
dollar value of exports is not significant, it does affect that section of date
growers and exporters substantially.
In 2018, India
accounted for 31pc of Pakistan’s cement exports. An analyst covering the cement
sector asserted that Pakistan-India relations have already impacted cement
players, especially those that are situated near the border.
Solidarity with
Kashmiris may be the common rhetoric among all businessmen. But when it comes
to business interests, especially of small-scale firms that may be unable to
shift vendors or absorb extra costs, commercial interests may supplant
patriotism. Those who have the scale and the availability of alternate avenues
can afford nationalistic sentiments.
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