2. 1
Contents
1. Background ...........................................................................................................................................2
2. Overall Bilateral Trade (2008-2012)......................................................................................................3
3. Bilateral Trade in Agriculture Items (2007-2012) .................................................................................6
4. Non-Tariff Barriers (NTBs) in India: Case of Agriculture .......................................................................9
5. Agriculture Trade: SAARC’s Perspective .............................................................................................10
6. Food Security through Agriculture Trade ...........................................................................................11
3. 2
1. Background
Despite of substantial liberalization in sensitive lists of India and Pakistan, the decision to
grant India, Most Favorite Nation (MFN) status by Pakistan has still not been put into
effect.1 While several of the previously constrained tariff lines have been opened, however
the tariffs applied on Indian imports still remain above that applied to imports from MFN
countries.
Both countries, fortunately though, have been moving in the right direction as far as
bilateral trade is concerned. Recent agreements signed between India and Pakistan saw the
abolishing of the Positive List by Pakistan, and New Delhi allowing Foreign Direct
Investment into India. India also committed to a reduction of 30% of the SAFTA Sensitive
List that applies to Pakistan, and both countries committed to reduce their Sensitive Lists
to 100 items only. Three agreements were also signed to address the issue of non-tariff
barriers. Furthermore, Pakistan also committed to phase out the restricted list of imports
at Wagah, and India inaugurated its Integrated Check Post (ICP) at the Wagah-Attari border
to boost the flow of goods that can pass through the particular land route. Finally, a Visa
Liberalization agreement was also implemented as scheduled, despite skirmishes on the
Line of Control in Kashmir. During the recent past, these above mentioned achievements
have been implemented in a stop-go cycle.
One of the key hurdles in the way of Pakistan granting MFN to India has been the concerns
of farmers lobby in Pakistan. While this lobby feels that they will benefit from the import of
agricultural machinery from India, however in case of import of final product the view is
that Pakistan may not be able to compete as India subsidizes it agricultural inputs
relatively more than Pakistan2.
Contrary to the above the agricultural trader’s lobby has been advocating greater gains
from grant of MFN to India in terms of competitiveness and consumer surplus. All Pakistan
Fruit and Vegetable Exporters Importers and Merchant Association was of the view that
increased trade with India will help raise competitiveness of Pakistani farmers and force
them to adopt modern production techniques.
1 This discussion brief was presented by Dr. Abid Q. Suleri and Dr. Vaqar Ahmed at the Canadian High
Commission in June 2013. Saad Rajput at SDPI provided data support. Email for feedback: vaqar@sdpi.org
2 Farmers Association of Pakistan is reported to have been saying in December 2012 that liberalized trade in
agriculture (with India) may be possible only under two conditions. Either federal government should
provide subsidy of PKR 12,000 per acre to growers on various inputs or PKR 400 per 40 kilogram regulatory
duty may be imposed on Indian imports
4. 3
Similarly various consumer associations and civil society organizations have been of the
view that grant of MFN to India could result in bringing down food inflation via two
channels namely: i) relatively cheaper agricultural machinery, raw material and related
inputs, and ii) time and cost effective import of staple items from India in times of
shortages in Pakistan.
In the next section we look at the bilateral trade trends between India and Pakistan across
5 year period (2008-12). This is followed by an analysis of agriculture specific trade
between both countries. Section 3 then analyses general and agriculture specific non tariff
barriers in India. Finally we briefly comment on concerns of those quarters who are still
skeptic about Pakistan’s grant of MFN status to India.
2. Overall Bilateral Trade (2008-2012)
Since 2008 Pakistan’s exports of fruits have been a leading item of export to India (Table
1). Pakistan’s high quality of food has strong demand with Indian consumers. Since 2008
the exports of fruits to India has grown by 89.7 percent. Key products include dates,
mangoes and guavas. This is followed by cotton whose exports to India have grown by 446
percent during 2008-12. Cement which was the leading item in 2008 was at third position
in 2012. However the demand for Pakistan’s cement in India is expected to growth once
construction sector in regions neighboring Pakistan fully realizes its potential. These items
were followed by strong demand for Pakistan’s copper, gypsum, woven cotton fabrics, and
electro-medical equipment.
5. 4
Table 1: Top 10 Pakistan’s Exports to India (USD Thousands)
Product
code
Product label
Pakistan's exports to India
2008 2009 2010 2011 2012
All products
35463
7
23532
3
2749
83
27286
4
3479
94
'0804 Dates, figs,pineapples, mangoes, avocadoes, guavas 35384 44638
4416
5 47186
6712
9
'5201 Cotton, not carded or combed 11664 6182 0 2054
6371
3
'2523 Cements, Portland, aluminous, slag, supersulfate 64511 30859
3048
4 39506
3409
2
'7404 Copper waste and scrap 1096 2692 4259 8811
1863
3
'2520 Gypsum; anhydrite; plasters 0 0 184 6387
1579
7
'7204
Ferrous waste and scrap; remelting scrap ingots or iron
or steel 1461 14 2494 6382
1152
6
'5209
Woven cotton fabrics, 85% or more cotton,weight over
200 g/m2 18019 15189
1383
1 8721
1043
1
'9018
Electro-medical apparatus (electro-cardiographs, infra-
red ray app, sy 3037 2817 4345 6709 8283
'7801 Unwrought lead 1062 3400 8746 9129 7665
'4107
Leather of other animals, o/t leather of hd no
41.08/41.09 4093 4571 9621 9051 7499
Source: UNCOMTRADE Database
Table 2 below shows India’s top ten exports to Pakistan. One can readily notice the
potential opportunity these items present for value addition sectors in Pakistan.
Substantial increase has been seen in items such as yarn, staple fibers, dried
vegetables and soya bean. The only non-agricultural item that appears to be in the
top 10 list is rubber tires (which in fact also have a backward linkage with
agriculture sector). The possibility of getting relatively more economical
agricultural inputs from India can substantially boost Pakistan’s food processing
sector.
6. 5
Table 2: Top 10 India’s Exports to Pakistan (USD Thousands)
Product
code
Product label
India's exports to Pakistan
2008 2009 2010 2011 2012
All products 1772775 1455772 2235788 1678131 1633348
'5201 Cotton, not carded or combed 299043 128907 300325 272797 205441
'2304 Soya-bean oil-cake and other solid residues 102886 82611 75520 168320 175257
'2902 Cyclic hydrocarbons 355323 216790 177729 180556 172587
'5407
Woven fabrics of synth. filam yarn (incl. hd
no 54.04) 108446 413199 299095 66399 99273
'0713 Dried vegetables, shelled 20412 17238 58397 41809 52715
'3204
Synthetic organic coloring matter
&preperations 27401 27921 32373 35610 40457
'0902 Tea 16011 15598 23419 37664 38971
'4011 New pneumatic tires, of rubber 35707 24113 36876 52827 38294
'5504 Artificial staple fibres, not carded 2525 4175 12809 25424 34770
'5205
Cotton yarn (not sewing thread) 85% or
more cotton, not retail 4565 3532 15887 13012 33618
Source: UNCOMTRADEDatabase
7. 6
3. Bilateral Trade in Agriculture Items (2007-2012)
Apart from the above mentioned Pakistan has strong demand for Indian tomatoes, nuts,
and seeds (Table 3). However some types of rice have also now been available in Pakistani
markets. The import of rice by Pakistan (from India) has grown from USD 0.7 to 6.4 million
between 2008-2012. During the same period the imports of onions and garlics doubled.
Items which have seen a decrease during this period include maize and oats. We will see in
the next section that both countries are losing on their agricultural exports potential due to
distortive usage of negative list.
Table 3: India’s Agricultural Exports to Pakistan (USD Thousands)
Product
code
Product label
India’s Exports to Pakistan
2008 2009 2010 2011 2012
'5201 Cotton, not carded or combed
29904
3
12890
7
3003
25
27279
7
2054
41
'0713 Dried vegetables, shelled 20412 17238
5839
7 41809
5271
5
'0902 Tea 16011 15598
2341
9 37664
3897
1
'0702 Tomatoes 29953 24225 758 65211
3092
9
'0904 Pepper, peppers and capsicum 32424 583
2552
0 35548
2168
2
'0801 Brazil nuts, cashew nuts & coconuts 376 1010 3933 13668
2122
9
'1209 Seeds, fruit and spores, for sowing 6196 7509
1283
2 14662
1541
5
'1202 Ground-nuts, not roasted 1761 10582
1815
6 15264
1325
3
'0703 Onions, garlic and leeks, fresh or chilled 4599 51705
1511
3 12894 9154
'1006 Rice 722 1 1878 584 6395
'1008 Buckwheat, millet and canary seed 1755 3283 3548 9471 3668
'1206 Sunflower seeds, whether or not broken 587 336 224 1282 3121
'1302 Vegetable saps & extracts 451 1166 3458 2413 3100
'1404 Vegetable products, nes 2595 1608 2377 2323 3076
'0810 Fruits nes, fresh 20 68 13 4014 2032
'0803 Bananas and plantains, fresh or dried 0 0 0 0 1945
'0709 Vegetables nes, fresh or chilled 515 586 108 3913 1881
'1005 Maize (corn) 29303 4950 1485 1645 1817
'0910 Ginger,saffron,turmeric, thyme, bay leaves & curry 982 1120 1544 2202 1322
8. 7
'0806 Grapes, fresh or dried 0 23 0 0 752
'0813 Dried fruit 26 33 51 6223 715
'1003 Barley 0 0 0 0 409
'1004 Oats 565 0 0 0 342
'1104 Cereal grain, worked post hulling, excluding rice 0 0 93 15 280
'1106 Flour and meal of vegetables, roots and tubers or fruits 9 22 6 14 244
Source:UNComtrade Database
Items which are on Pakistan’s negative list may be seen at Annex-I. It can be observed in
Figure 1 that according to (TDAP 2013), Agriculture sector comprises 23 percent of India’s
sensitive list while the same number for Pakistan is only 6 percent. If Pakistan is to engage
in trade dialogue with India, the liberalization of India’s agricultural trade should be a
foremost agenda point. Pakistan along with other SAARC member countries should remind
India that South Asia as a region carries immense vertical and horizontal supply chain and
trade opportunities if India slashes number of agricultural lines on the sensitive list.
Countries such as Pakistan have already liberalized these lines substantially.
Figure 1: Sectoral Share in Sensitive Lists of India and Pakistan (%)
Source: Trade Development Authority of Pakistan (2013)
9. 8
Table 4 below shows Pakistan’s key agricultural exports to India. Apart from those
mentioned in Table 1, Pakistan’s exports have grown for items such as oil seeds,
cane or beet sugar, vegetable saps, leguminous vegetables, ginger, saffron, and
various seeds for fruits and vegetables. Items that show some decline during this
period include medicinal plants and dried fruits. While Pakistan needs to negotiate a
more liberalized negative list (for agricultural items) with India, however an equal
emphasis should be laid on Pakistan’s own supply side constraints. In a recent study
by Sustainable Development Policy Institute, it was revealed by traders in Amritsar
that they wanted to increase the import orders of dates, mangoes, cotton and
vegetables from Pakistan, however on several occasions exporters in Pakistan
regretted to meet this demand.
Table 4: Pakistan’s Agricultural Exports to India (USD Thousands)
Product
code
Product label
Pakistan’s Exports to India
2008 2009 2010 2011 2012
'0804
Dates, figs,pineapples, mangoes, avocadoes,
guavas 35384 44638 44165 47186
6712
9
'5201 Cotton, not carded or combed 11664 6182 0 2054
6371
3
'1207 Oil seeds 141 4430 209 223 4086
'1211 Medicinal plants 3303 4082 3720 3319 2703
'1701
Cane or beet sugar and chemically pure sucrose,
in solid form 0 0 0 0 1505
'1302 Vegetable saps & extracts 5 1 15 66 1057
'0708
Leguminous vegetables, shelled or unshelled,
fresh or chilled 0 0 0 0 730
'0910 Ginger,saffron,turmeric, thyme, bay leaves & curry 341 252 449 744 442
'0713 Dried vegetables, shelled 0 0 0 0 157
'0813 Dried fruit 899 77 469 481 51
'0909
Seeds of anise, badian,fennel,coriander, cumin,
etc. 386 1103 645 554 45
'1209 Seeds, fruit and spores, for sowing 156 1011 223 333 26
'1206 Sunflower seeds, whether or not broken 0 0 0 0 16
'0810 Fruits nes, fresh 0 0 11 21 4
Source: UNComtrade database
10. 9
4. Non-Tariff Barriers (NTBs) in India: Case of Agriculture
In a recent study by SDPI, Pakistani exporters revealed that there are four general barriers
they face while exporting to India, namely: customs valuation, standards applied by Bureau
of Indian Standards (BIS), import licencing regime in India, and Pakistan-specific financial
measures.
While Indian government remains of the view that customs valuation and standards by BIS
remain the same for all exporting countries to India, however the argument of Pakistani
exporters has been that these valuation measures and standards are applied more strictly
on Pakistani consignments. Pakistani exporters have faced arbitrariness in valuation and
extraordinary delays.
In the case of product standards, BIS has 18,592 standards for various product categories,
however substantial number of them are not equivalent to international standards. It is
difficult for exporters to find recent data on which standards are currently enforced.
Usually, ISO standards are sufficient but in case of imports from Pakistan, discretionary
powers are used.
Under trade preventing financial measures, Indian banks do not honor L/Cs opened by
Pakistani banks beyond $10,000. Thus, shipments isreleased in parts resulting in
extraordinary delays. Furthermore Indian banks usually request for an extension in
maturity date of L/C up to 60 days. The absence of direct courier services between the two
countries is another cause of delayed shipments.
We can also discuss some agriculture-specific NTBs in India. Agricultural sector is heavily
subsidized in India, making imported goods uncompetitive. Total subsidies in 2010
amounted to $28.9bn (2.2% of GDP). The minimum support prices, credit and insurance
schemes, fertilizers, irrigation water, electricity, diesel are also allowed at subsidized rates.
All foreign agricultural products require import license, SPS certificate and import
permission from Plant Quarantine Authorities. Challenges have also been faced in
completing SPS requirements. The SPS and Bill of Lading are required by issuing bank to
initiate L/C.
All food products are tested by Port Health Authority. Officials are absent at times and
samples are sent to other labs. Consignments with pending reports are sent to warehouses,
not equipped to store perishable items. The results of lab authorities cannot be challenged.
The certificates from Pakistani labs are also not accepted and those from other
international labs are accepted.
11. 10
Trade over the land route e.g. Wagah-Attari border is nearing its full capacity and the
existing integrated check post is not sufficient to meet growing demand for bilateral trade.
Therefore if supply is to meet demand the next step should be containerization via
railways, trucking agreement, opening up of other 9 land routes between India and
Pakistan.
5. Agriculture Trade: SAARC’s Perspective
The SAARC Initiatives for Agriculture Cooperation include establishment of regional food bank and
a project on ‘Control of Trans-boundary Animal Diseases’. Currently, SAARC Agriculture Centre is
preparing the SAARC Agricultural Vision 2020. Further work needs to be done for ensuring food
security in the region and promoting commercial agriculture and building competitiveness.
Regional trade in agriculture will still require further lowering of tariffs in the region. According to
a study by Sapkota (2011) average tariff on agricultural goods was 29 per cent in South Asia
compared to 9 per cent in ASEAN region. A substantial share of the sensitive list items in South Asia
are agricultural products. Even the India-Sri Lanka and Pakistan-Sri Lanka FTAs include very few
agricultural products.3
The regional trade in agriculture across South Asia can build on country-specific comparative
advantages. For example, Afghanistan and Bhutan have export concentration in edible fruits,
Maldives exports fish crustaceans, Sri Lanka exports coffee, tea and spices and Pakistan and India
have export concentration in cereals.
Trade arrangements for food security: Restrictions over agriculture exports in South Asian
countries are unjustified in a time of high inflation and large domestic demand. National policies
can still be structured in such a way that restriction/ban would have marginal impact on
neighbouring importing countries. Further development towards the food bank in the region will
require expanded analysis on various aspects related to national level preparedness. Research on
developing new varieties of crops resilient to climate change needs to be expedited. For sustained
agriculture sector growth, a common strategy for water use at the regional level is required.
Regional agricultural projects will also require a South Asian Agriculture Bank to finance future
initiatives.
Building Competitiveness: The starting point may be pruning the agricultural products that are in
the SAFTA sensitive list (short and medium term approach). This may be supplemented with
raising input use efficiency in the region, supplying quality seed (development of competitive and
deregulated seed industry), changing and upgrading quality and standard of agricultural products,
strengthening research-extension-farmer linkages, better technologies and efficient ways of
3In case of India 23% products in India's sensitive list for NLDCs are agricultural. For LDCs 25 products are in
India's sensitive list. While all these are agricultural, they are non-merit products such as alcohol and tobacco.
12. 11
managing water and modern farm inputs, and exchanging of technology and knowledge between
South Asian countries, contract farming, encouraging MNCs to invest in the bio-technology, FDI in
fertilizers, agro-chemicals etc., development of regional value chain, identification of products,
creation of ‘regional hub’ for using scale of economies to export in the global market (e.g.
Bangladesh could be a ‘hub’ for exporting agricultural products produced in the Eastern part of
India, Bhutan and Nepal).
SAARC Initiatives: SAARC secretariat has undertaken initiative to prepare ‘SAARC Vision on
Agriculture 2020’. Main objective of the vision document as set: joint response to menace,
challenges and opportunities and global shocks, based on existing realities of SAARC countries. A
number of issues related to challenges of agriculture development in South Asia have been
discussed. These include: slow growth rate of agriculture, increasing gap between agriculture and
non-agriculture’s growth; scope for bio-tech crops: drought-tolerant varieties, consumption of less
inputs and water; rapid development of Information & Communication Technology (ICT) and
Telecommunication Network; scope of dissemination of new agricultural technology, products and
marketing of products; investment in infrastructure, Research & Development (R&D); and
institutional approach to facilitate the process needs to be cleared out. The private sector
representatives and bodies such as the SAARC Chamber of Commerce should press national
governments for forward looking policies so that agricultural trade can benefit the region and
ensure food security.
6. Food Security through Agriculture Trade
Several collective regional actions are required for ensuring food security in South Asia.
Currently, SAFTA does not mention any collective measure for food security. However, an
agreement on establishing SAARC Food Bank was signed in 2007 with the objective of:
acting as a regional food security reserve for the SAARC member countries, providing
regional support to national food security efforts, fostering inter-country partnerships and
regional integration and tackling regional food shortages through collective action. Several
proposals (mentioned below) were offered at the 5th South Asia Economic Summit in order
to strengthen the above-mentioned intent.
The current practice under SAFTA should factor in food and agriculture products
which dominate the sensitive lists of SAARC member countries
The operational requirements of the SAARC Food Bank need to be rationalized so
that conditions for its use may be simplified. Its activities need to be broadened so
as to take up more active monitoring of climate and crops in order to avoid panic
13. 12
stocking and speculative trading. The ASEAN initiatives in this regard are worth
noting.
The existing stock levels need to be augmented taking account of each countries’
production and export capability.
Efforts also need to be expedited towards formation of SAARC Seed Bank, which could
ensure vital seed supplies to the member countries in crisis periods following natural
disasters. Ensuring supply of quality seeds should be an agenda of top priority at the
SAARC Agriculture Centre. This in turn could help ensure food security as well as increase
productivity.
14. 13
Annex-I: Agriculture Items on India’s Sensitive List
070110 Potatoes Seeds
070190 Others
070200 Tomatoes, fresh or dried
070310 Onions (Fresh)
070320 Garlic
070410 Cauliflowers and headed broccoli
070420 Brussels sprouts
070490 Others
070511 Cabbage Lettuce
070519 Others
070610 Carrots and trumips
070690 Others
070700 Cucumbers and Gherkins, fresh or chilled
070810 Peas
070820 Beans (Vigna spp., Phaseolus spp.)
070890 Other reguminous vegetables
070930 Aubergines
070960 Fruits of the Genus Capsicum
070970 Spinach
070990 Other Spinach
071010 Potatoes
071021 Peas
071022 Beans (Vigna spp., Phaseolus spp.)
071029 Other
071030 New Zealand Spinach and orache spinach
071040 Sweet Corn
071080 Other Vegetables
071090 Mixtures of Vegetables
071120 Preserved Olives
071130 Preserved Capers
071140 Cucumbers and Gherkins
071151 Mushrooms
071220 Dried Onions
071231 Dried Mushrooms
071290 Dried Vegetables
071310 Peas (PisumSativum)
071320 Chick Peas Beans
071332 Small Red Beans
071333 Kidney Beans
071340 Lentils
071350 Broad Beans and Horse Beans
080119 Coconuts
15. 14
080120 Brazil Nuts
080132 Cashew Nuts
080231 Walnuts in shell
080300 Bananas, fresh or dried
080430 Pineapples
080440 Avocadoes
080450 Fresh Mangoes
080510 Oranges
080520 Mandarins, Clementines, Wikings and similar citrus hybrids
080540 Grape Fruits
080550 Lemons
080590 Other citrus fruit fresh or dried
080610 Fresh Grapes
080620 Dry Grapes
080711 Water Melon
080720 Papayas
080810 Apples
080820 Pears
080930 Peaches
080940 Plums and sloes
081210 Cherries
081310 Appricots
081320 Prunes
081330 Apples
081340 Tamarind
090410 Pepper
090420 Chilly
090500 Vanilla
090610 Cinnamon Bark
090700 Clove
090810 Nutmeg
090830 Cadamom
090920 Seeds of coriander
090930 Cumin
090940 Seeds of Carrway
091010 Ginger
091020 Saffron
091030 Tumeric
091040 Thyme; bay leaves
091091 Mixture of spices
091099 Poppy
100110 Durum Wheat
100190 Wheat
100510 Maize Seeds