The challenges and potential of Pakistan-India trade

This volume on the challenges and potential of Pakistan-India trade is based on background papers prepared for the Pakistan Trade Policy Notes during FY2004-2006. The volume draws upon the contributions from the authors of eight background papers. It deals with the impact of the end of textile quotas on Pakistan, and the possible implications of SAFTA. This edited volume has thematically linked the background papers on regional and Pakistan-India bilateral trade, condensed them to get their essence out, and compiled them in an edited volume to be available for a wide audience. The volume is organized around the three areas of trade integration, political relations, and economic competitiveness. Chapter 2 lays out the broader context of trade integration and draws lessons for SAFTA from global experiences with regional trade agreements (RTAs). Chapter 3 investigates one aspect of the political dimension. It quantifies the trade cost of bilateral animosities through a standard gravity model that predicts Pakistan-India trade flows under the scenario of cordial political relations. The remaining chapters focus on the economic dimension of Pakistan-India trade. Chapter 4 gives a broad overview of bilateral trade from the Indian side; Chapter 5 looks at issues of informal bilateral trade and estimates its size and composition; and Chapters 6 to 9 study the welfare implications of bilateral trade and free trade in the context of SAFTA in sub-sectors of agriculture, textiles, light engineering, and chemicals.