Pakistan shifts away from Indian goods import
Saleem Samad of DOT
Trade linkages with India and Pakistan faced a backlash due to the Pulwama attack. India retracted the most favored nation (MFN) status awarded to Pakistan, imposed additional tariffs on goods imported from Pakistan, cancelled export orders from Pakistan and banned the export of certain products to Pakistan such as tomatoes.
According to the data extracted from Trademap.org, Pakistan exported $335 million of goods to India in 2017, which was approximately 1.5 per cent of total exports from Pakistan. The range of products exported to India was limited, mostly comprising cement, gypsum and dried dates.
Pakistan exported $90 million worth of fresh or dried dates, $65 million of cement, $14.4 million of medium oils and preparations, $13.9 million of gypsum and $13.6 million of tanned leather.
Pakistan is by far the largest source of cement and fresh or dried dates into India. In essence, exports from Pakistan to India are limited to a few products in which Pakistan has relative advantage in the global market, according to Aadil Nakhoda, Assistant Professor of Economics and Research Fellow at Center for Business and Economic Research (CBER), IBA, Pakistan.
Furthermore, cement and dates contributed only 1.4 per cent of total exports from Pakistan to all its trading partners in 2017. On the other hand, out of $1.7 billion of goods imported by Pakistan from India in 2017, $555 million was paid for chemicals or allied products, $203 million for raw cotton, $141 million for cotton yarn and $68 million for polymers of propylene in primary form. In essence, India supplied mainly raw material and intermediate goods to Pakistan.
Pakistan reduced imports of vegetables from India in 2017. For instance, it imported more than $100 million worth of fresh or chilled tomatoes from India in 2016, approximately 86 per cent of total import of the commodity from all partners. However, in 2017, it stopped the import of tomatoes.
Similarly, more than 50 per cent of the total raw cotton imported into Pakistan was sourced from India in 2014 and 2015. In 2017, the share of Indian raw cotton fell below 27 per cent.
The United States replaced India as the largest source of raw cotton as $279 million worth of the commodity was imported from it.
Saudi Arabia has been a major source of polymers of propylene. In essence, Pakistan has shifted away from Indian imports, replacing it with other sources.
According to the World Bank’s “Glass Half Full: The Promise of Regional Trade in South Asia”, trade potential between Pakistan and India is estimated at $37 billion. Uncertainties in the relationship between the two countries not only impede trade but have rather led to trade diversion in recent years.