Afghan transit trade by Nauman Asghar

Pakistan and Afghanistan are renegotiating their transit trade agreement which was signed in 1965. The revision is not only with regard to Afghan goods’ transit to the Arabian Sea but also for the definition of the terms for Pakistan to secure routes to the Central Asian republics through Afghanistan.

During the meeting between President Hamid Karzai and President Zardari in Washington in May 2009, the two countries signed a memorandum of understanding to begin talks for renewing the agreement. Pakistan is the largest trading partner of Afghanistan and the two countries’ trade has grown from $170 million in 2000-01 to $1.49 billion in 2008-09.

India, which has transit trade agreements with Iran, Uzbekistan and Turkmenistan, seeks the shorter Wagah-Khyber transit route to Afghanistan for access to Central Asian markets.

The majority of imported products booked for Afghanistan are ultimately smuggled back into Pakistan, and this hurts government revenues and causes incalculable damage to the local industries. The government of Pakistan places 17 items on the prohibitive list in 1996. The prohibition proved to be a blessing for the domestic industry. It is estimated that over 90 per cent of Afghanistan’s imports through Pakistan’s ports travel back to Pakistan.

While Pakistan has agreed to provide facilities to Afghan importers, the Afghan government has refused to facilitate our exports to the Central Asian states. Tariff and non-tariff barriers are imposed on Pakistani exporters. Non-cooperation on the part of Afghanistan deprives our traders of the ability to export fruits, cement, pharmaceutical products, readymade garments and leather jackets to the Central Asian republics. Similarly, hurdles are created for importers who want to import steel aluminium, minerals, industrial raw materials, LPG, and fresh and dry fruits from Central Asia. The Central Asian republics carry out the bulk of their foreign trade through Iranian seaports despite the disadvantage of distance.

The new transit trade agreement, to be finalised after the completion of a review process, will allow Afghan trucks to carry export goods to the Wagah border for delivery to India. In order to check unauthorised trade the cargo will be allowed to be transported in accordance with internationally acceptable and verifiable standards of sealable trucks for a period of three years.

As a quid pro quo, Pakistan will be allowed to use Afghan territory for its exports to vital markets of Central Asia. The agreement stipulates that no Indian export to Afghanistan will be allowed through Wagah but India will be able to carry its goods to Afghanistan using Pakistan’s airspace. This is despite the fact that India has not extended Pakistan transit rights to landlocked Nepal.

While Kabul has hailed the agreement, the development has received mixed reaction from Pakistani businessmen because of the negative implications of smuggling for Pakistan’s economy. The problem of smuggling goes beyond Afghan transit trade and can be attributed largely to the corrupt custom authorities.

Pakistan also receives benefits from the traffic in transit to Afghanistan over its territory. The government of Pakistan provides various facilities for transit of goods to Afghanistan. These include storage, packing, repacking, loading, unloading at the Karachi port and the dry port at Peshawar. The provision of such facilities and services generates income and employment in Pakistan.

In order to overcome the practice of smuggling, the capacity of the border forces and custom authorities should be enhanced. Skeptics say that the agreement has been signed on the prodding of the US. But they overlook the fact that transit rights are already available to Afghanistan under the 1965 treaty.