Pakistan Reconsiders Its Decision to Resume Trade Ties with India

In a surprising twist of tale, Pakistan’s Cabinet revokes the Economic Coordination Committee’s earlier decision of resuming trade with India after the ceasefire.

The Economic Coordination Committee (ECC) of the Cabinet had announced its decision to import sugar and cotton from India. A step that took nearly two years in the making was seen as a sign of easing tensions between the two neighbors. However, the federal cabinet has now rejected the ECC’s decision owing to the Kashmir issue.

Diplomatic ties between India and Pakistan were reduced in 2019 following the withdrawal of the autonomy of the disputed state of Jammu-Kashmir by Delhi. Thereafter, Pakistan also suspended trade ties with India.

The decision to resume trade came after the February ceasefire agreement between both militaries with regard to the line of control in Kashmir. Both countries have frequently accused each other of violation. There have been more than 7000 incidents of crossfire since August 2019.

The resumption of limited trade ties was supposed to come as a relief especially for the textile sector. The textile sector of Pakistan has been insisting the government to permit cotton imports from India. There has been an acute shortage of cotton in Pakistan, with production being down because of monsoon rains and pest attacks last year. The textile industry accounts for 60% of Pakistan’s export earnings. The pandemic has hit the Pakistani economy hard and allowing imports from India would have boosted the textile industry. However, some thought that the decision to import would hurt Pakistan’s own cotton farmers but largely it was seen as a positive move.

There was some cautious optimism that diplomatic ties might be resumed as well. The Pakistani Prime Minister Imran Khan had in response to his Indian counterpart’s letter requested for peaceful and cooperative relationship with India. However, it was maintained that peace depended on resolving outstanding issues such as Kashmir.

Now Pakistan has outrightly refused to resume the trade ties with India until it abrogates the semi-autonomous status of India-occupied-Kashmir.

With these latest developments, the diplomatic ties might be in for a blow yet again. The cabinet’s reconsideration of the decision of ECC has come as a shock to India who was ready to export sugar and cotton.

This might come as a major blow for the Pakistani government especially at a time when imports could have helped the Pakistani economy. The sudden flip-flop may turn out to be costly for the India-Pakistan relations. India is the largest supplier of cotton and the second-largest exporter of sugar, and Pakistan is in dire need of both these commodities. The textile industry is struggling due to limited production of cotton and cause of growing concern for the exports of the country. On the other hand, the sugar industry is also not in the best position. The limited supply of sugar in the country has led to increased prices of the item.