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Afraid of free trade

Indian Express, India

Afraid of free trade

By Khaled Ahmed

25 April 2014

Diplomacy in South Asia is given over to give-no-quarter bureaucrats, who cleave to a nationalism that continues to trump economics.

Pakistan and India signed a South Asian Free Trade Area (SAFTA) agreement long ago and were expected to move to the free trade regime by April 1, 2013. Pakistan hemmed and hawed throughout that year under Prime Minister Nawaz Sharif, who won at the polls promising an “opening up” with India. He was supported overwhelmingly by all chambers of commerce and industry in Pakistan.

In the year 2014 too, he has held back the award of the Most Favoured Nation (MFN) status, which India granted to Pakistan long ago. The latest news is that MFN will be granted to the new government after the elections in India. If the excuse was that the Manmohan Singh government was lame-duck, it was quite feeble. There were other reasons, the same that cropped up when the more “pro-India” Pakistan People’s Party was ruling.

Pakistan’s non-state actors don’t want trade with India; they also have a pre-modern view of the economic function as such, and look at trade as a dangerous alternative to the sacred duty of war. Punjab Chief Minister Shahbaz Sharif, through a massive slip of the tongue, had said the army didn’t want trade with India.

The army has a slightly different view, related to geopolitics and Pakistan’s status as a crucial “median” state. Free trade with India would not only mean allowing Indian goods to conquer Pakistan but also allowing India to conquer Central Asia through a transport corridor that would run across Pakistan.

There are two ways of looking at “geopolitical importance”, or two ways of deriving benefit from it. One is the “civilian” approach, which means that the geographically important state has to develop its roadways and railways and other infrastructure, such as hotels, to facilitate those who wish to pass through. Once the geographically “connective” state has become an effective corridor of passage, its “strategic” importance no doubt increases. And the dividend of this importance comes in economic terms and through an absence of war.

The other way is the “military” approach, which relies on geography as “hindrance” rather than “connection”. The military mind says: We are in the middle and we will not let you pass unless you agree to our terms. (To India, Pakistan says let’s talk Kashmir before we talk free trade.) This is a warrior’s approach and signals his opposition to economic activity, concealing the real doctrine of economic development through conquest. In the case of Pakistan, it is the military view of geopolitical importance that has held sway.

But is India more wedded to the idea of free trade? Does it realise that South Asia doesn’t trade at all within itself compared, let’s say, to the states of the Association of Southeast Asian Nations (ASEAN)? Free trade destroys many orders. It destroys the “self-sufficient” or socialist state fearing international finance. It also destroys boundaries that maintain separated identities and destroys ideologies that work only under insulation. It destroys the internal dominance of the state, too. Are India and Pakistan prepared to destroy some of their most cherished tenets?

Tribal societies, based on delimited food-scarce territories, are undermined by trade. Warriors don’t like trade and traders, but are partial to smuggling. The national security state, with a backlog of just wars to be fought for national honour, is aghast at the prospect of becoming “feminine” through accepting the “insertion” of enemy exports. Alas, both India and Pakistan are internationally rated as “non-exporting” countries.

The SAFTA agreement that both signed contains Article 8, which refers to the “removal of intra-SAARC barriers to investment” while making it possible for the weaker economies to seek protection through the “rules of fair competition”. India is arousing global ire because of its trade barriers, but it is getting away with its introversion after the world economy itself succumbed to being more and more “gated” after the recent collapse of international finance.

Who wants trade more, India or Pakistan? Pakistan wants it more, but its motive is “hidden” and therefore, paradoxically, noble: it wants to get rid of external war to which it contributes proxy warriors. India, on the other hand, is suspicious of Pakistani motives and, less honourably, mixes electoral politics with the question of trade. The Indian voter is angry with Pakistan, all right, but how can one remove the cause of it unless both states trade freely and allow cross-border investments?

The economist of today is the most subversive philosopher in history since Socrates. Imagine India using trade routes that spread like arteries across Pakistan’s sacred territory and the two-nation doctrine succumbing to the self-seeking passions of the non-warrior. Pakistan is a corridor of nothing, unless India violates it with its manufactures. How humiliating!

Pakistan is fast losing territory and culture to a creed that can only be compared to medieval Muslim conquests. It doesn’t feel it is being conquered because it is ideologically prepared for defeat. But, economically, this creeping transformation presages an end to the modern state through a retreat into a Hobbesian purgatory, where Islam rewards the heroics of bank-looting and kidnapping. This is the scenario after the Taliban succeed in setting up their emirate inside Pakistan.

The real death of Pakistan is coming gradually through the death of its culture. People make fun of “enlightenment” and “moderation” because they see the anti-cultural forces within and without the state winning territory on a daily basis. (Pervez Musharraf’s decree of 2006 to remove jihad from the textbooks was ignored by the provinces and the new textbooks actually made fun of “enlightenment” as an “alien doctrine”!)

Free trade and culture go hand in hand. The “monoculture” of free trade (read globalisation) is cakes and ale compared to the “monoculture” of Pakistani nationalism as interpreted by the clergy and the army. Those who are scared of it call it Talibanisation.

There is no honour in heroic isolation. The pinnacle of isolation is martyrdom. Free trade may be dishonourable but it avoids death and stops poverty. Nothing is more dishonourable than poverty.

My favourite economist-philosopher, Ijaz Nabi, recently wrote: “Critically, without normalising trade with India, the Indus Basin would be a T-junction circumscribing the welfare gains from regional integration rather than a crossroads of economic transactions. Recent studies show that bilateral trade could be as high as US $10 billion.”

The irony is that if you hate someone you become like him. There is nothing original in this; India’s Gandhi had a creed based on this dictum. If India starts thinking the same way as Pakistan and allows things to slide, then there will be the fallout of Pakistan’s implosion to cope with. Islamabad should go ahead with the MFN, sign and ratify free trade and free movement of people and finance, and leave the bilateral haggling over tariff and non-tariff barriers for the coming years.

But diplomacy is operated in South Asia by a give-no-quarter bunch of bureaucrats who cleave to a nationalism that continues to trump economics. Pakistan is under obligation to change its stance, make ground-breaking decisions and get them approved through statesmanship. But its diplomats stay close to the military, its sense of unrequited grievance and, without knowing it, the non-state actors. National interest rather than “reciprocity” should guide Pakistan’s decisions about trade with India.

The writer is consulting editor, ‘Newsweek Pakistan’