Afghanistan, Pakistan Move Ahead on 'Transit Trade' Deal

14 July 2010

Despite reaching a deadlock during their seventh round of talks last week, Afghanistan and Pakistan are still pushing ahead on a transit trade deal. The pact would give landlocked Afghanistan sea access and provide Pakistan with a direct link to other Central Asian economies.

Another beneficiary of this treaty would likely be India, which would have access through Pakistan to the Afghan market. India and Afghanistan are already major trade partners, yet their lack of a common border limits that relationship. Afghanistan wants access to the sea for exports to India, along with land access through the Wagah land route through Pakistan.

However, the prospect of India benefiting from the agreement is currently stalling the negotiations, as Pakistan does not believe that India should fall under the pact's scope. Afghanistan has refused to sign the agreement without a land access provision, but Pakistan is only willing to concede air-to-air access, according to The Express Tribune, a Pakistan-based affiliate of The International Herald Tribune.

Alongside its concern that India would benefit from the pact, Pakistan has also alleged that Afghanistan has refused to a series of measures that would target illegal smuggling.

India and Pakistan have long been seen as competing for influence in war-torn Afghanistan. The Council on Foreign Relations -- a think tank based in both New York and Washington -- noted in an article recently that India's increasing clout in Afghanistan is perceived by Pakistan as a threat to its own regional interests.

The estimated worth of official bilateral trade between Afghanistan and Pakistan is over US$1 billion; the World Bank credits most of this to Pakistani imports. Black-market trade is estimated to be several times greater. Should the pact pass, however, negotiators hope that the deal would help rein in some of that illegal trade, given that traders would have more legal options.

Afghanistan's lack of sea access has made it dependent on transit countries for foreign trade. In theory, this treaty could turn Afghanistan into a regional trade hub, while allowing Pakistan to serve as a gateway through which Central Asia could transfer some of its excess energy to India, which lacks energy resources. However, freer trade with India could also put Central Asian products at a disadvantage relative to more competitive Indian products.

Negotiations on this treaty - known as the Afghanistan-Pakistan Transit Trade Agreement, or APTTA -- have been underway for the past two years; the original Memorandum of Understanding regarding this pact was signed in May 2009, with the goal of finalising the agreement by the end of that year.

Despite the slow rate of negotiations since the MOU's signing and the current disagreements on the treaty's provisions, Afghanistan remains optimistic. Afghanistan Chamber of Commerce director Abdul Qadir, speaking to Reuters, referred to recent discussions that gave him "strong hopes" that differences have been overcome.

The eighth round of talks will be held in advance of an international conference in Kabul later this month.

ICTSD reporting; "India-Afghanistan Relations," COUNCIL ON FOREIGN RELATIONS, 22 June 2009; "Pak refuses trade route to India," EXPRESS INDIA, 8 July 2010; "Pak-Afghan transit trade agreement consensus: Round 7." THE EXPRESS TRIBUNE, 6 July 2010; "Pakistan, Afghanistan fail to sign new transit trade treaty," THE EXPRESS TRIBUNE, 8 July 2010; "Afghanistan sees Pakistan border trade deal in weeks," REUTERS, 10 July 2010.

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