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Despite Skepticism Over India-Pakistan Relations, Trade Provides Hope


FILE - An Indian bus carrying passengers who arrived from the Pakistani side of Kashmir leaves the border at Chakka Da Bagh in Poonch district, 250 kilometers northwest of Jammu, India.

FILE - An Indian bus carrying passengers who arrived from the Pakistani side of Kashmir leaves the border at Chakka Da Bagh in Poonch district, 250 kilometers northwest of Jammu, India.

Less than a year after the prime ministers of India and Pakistan shook hands in New Delhi, analysts believe relations between the two countries have deteriorated with a political compromise unlikely anytime soon.

“The two countries are [not] talking, the diplomatic talks have crashed,” said Raza Ahmad Rumi, a senior expert at the Washington-based United States Institute of Peace.

A decision last week to suspend a bus service across the disputed region of Kashmir between the two countries, highlights how ties between the neighbors have plunged in the last year. Foreign policy experts say it primarily is because of decades-old conflict, internal politics in each country and the preconditions to improving relations.

Despite the pessimism surrounding India-Pakistan ties, some analysts believe improving trade between the two could help repair some of the damage and allow for a slow move towards a diplomatic settlement.

Poor diplomatic relations

Even though the Indian prime minister called his Pakistani counterpart last week in the hope of improving ties, Bilateral relations between India and Pakistan took a hit early last year because of cross border attacks that killed soldiers and civilians on both sides of the border.

Diplomatic relations were practically frozen in August 2014 after the Indian government canceled high-level talks with Pakistan. The Indian government said it was a response to the Pakistani high commissioner in India meeting with separatist leaders from Kashmir. Kashmir is a disputed territory between Pakistan and India and historically has been one of the main sources of conflict between the two.

While the Kashmir dispute has been the cornerstone of poor relations for decades, Rumi said a new impediment, on the Pakistani side, is the weakness of Prime Minister Nawaz Sharif’s government.

Rumi, who is also a consulting editor at the Friday Times, an English language newspaper in Pakistan, said Sharif had not been able to build a political consensus within the country.

Sharif’s second year in power recently was tested by street protests around the country, primarily in the capital Islamabad, with protestors camped near the parliament and the prime minister’s house for four months.

In addition, Rumi said the military had reasserted itself in the foreign policy and national security arena, an area it traditionally has managed.

Rumi said Sharif had caught the attention of the military by putting the former president and head of the military, Pervez Musharraf, on trial. Giving voice to a theory commonly heard in Pakistan, Rumi said Sharif had given way to the military in the foreign policy arena to ensure that his government survived; unlike the previous two times he was prime minister.

“In both his tenures he tried to take a divergent line and he was fired by the military,” said Rumi. “This time he is choosing the safe option of not annoying the military and going along with what they consider Pakistan’s correct foreign policy goals.”

Internal politics within India are also having a negative effect on India-Pakistan relations.

While Prime Minister Narendra Modi was elected to help improve a struggling Indian economy, his rhetoric of restoring Indian pride resonated with the Indian electorate, said Sadanand Dhume, a fellow at the American Enterprise Institute, a Washington-based think tank.

Seen as more of a nationalist leader, Dhume said Modi’s foreign policy can be described as an “eye for an eye,” while his predecessor’s outlook was more of a “turn the other cheek” policy.

“You have a kind of suspicion and a kind of hostility towards Pakistan that I, for one, had not seen earlier,” said Dhume, concerning the recent public opinion of India towards Pakistan.

Special economic zone

However, a potential for improving relations exists in increasing trade between the neighboring countries.

Exports from India to Pakistan reached almost $2.3 billion while exports from Pakistan to India were only $430 million from 2013 to 2014, according to the Indian Department of Commerce.

These numbers are much lower than the potential for trade between the two, something analysts believe can help improve overall relations.

According to Dana Marshall, president of Transnational Strategy Group, a Washington-based consultancy group, a new approach to improving trade between the two countries is creating a special economic zone.

The zone potentially would be along the Punjab border, and would include industries from both countries that could help remove some of the trade barriers. The textile, automotive and pharmaceutical industries would be the most likely to benefit from such an economic zone, according to the report published in 2014.

While this was a “novel approach,” Marshall said that similar zones had cut through cross-border politics before, such as the Kaesong Industrial Region between North and South Korea.

However, Rumi, from the Friday Times, cautioned that it would be difficult for trade to move forward because Pakistan links an improvement in trade to resolving the Kashmir issue, while India ties trade to Pakistan’s seriousness in combating terror and reigning in “anti-India Jihad groups.”

“It’s a wonderful idea, but without a political understanding of some sort in Pakistan and in India, that zone is not going to be materialized,” said Rumi.

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