The Importance of India-Pakistan Cross-LoC Trade : Daily Current Affairs

Relevance: GS-2: International Relations, Bilateral Relations;

Relevance: GS-3: Security, Terrorism, Money Laundering.

Key Phrases: India-Pakistan, Cross-LoC Trade, Line of Control (LoC), International Birder, Confidence Building Measures (CBMs), Jammu & Kashmir, Trade deficit, People to People Interaction.

Background

In 2019, the Indian government suspended cross-Line of Control trade: the barter exchange between India and PoK, which was initiated in the year 2008.
Thus, while India and Pakistan continue to trade through their officially recognized border, trade through the disputed part of the border, the Line of Control (LoC), is not allowed at the moment.

What is the significance of Cross LoC Trade?

As per experts this trade has been one of the most successful CBMS [Confidence Building Measures] between India and Pakistan.
It helped in creating a peace constituency and connecting Jammu and Kashmir through economic engagement.
In about 11 years it achieved a cumulative value of over $1.2 Billion which is a significant amount considering the nature of border economies in Jammu and Kashmir.
The engagement of multiple stakeholders like traders, labourers, transporters, etc., in this trade created employment opportunities for the people living in these areas.
It generated around 170,000 labour days, or $12 million, for labourers and freight of around $88 million.
It helped establish a strong economic dependency between the otherwise politically turbulent neighbours, India and Pakistan.
Apart from the economic and financial gains for the stakeholders in this trading ecosystem, the CBM emerged as a flagbearer of peace between India and Pakistan.
The initiation of this trade helped in bridging the trust deficit between the governments of India and Pakistan as well as between the government in New Delhi and the people of Jammu and Kashmir.
It changed the mindsets of the people in Jammu and Kashmir and the narrative of “blurring borders” could be observed.

What are the implications of reviving the cross-LOC trade?

The suspension of cross-LoC trade has had a profound impact on the border economies, both in terms of social and economic impact.
Resumption of cross-LoC trade will help these stakeholders to revive their livelihoods.
Cross-LoC connections can be used as an element of improving India-Pakistan relations. The economic priorities for peace implementation cannot be understated.

Can the trade be rerouted through India-Pakistan official border? What will be its impact?

Cross-LoC trade was initiated as a Jammu and Kashmir-centric Confidence Building Measure between India and Pakistan.
It was a barter trade that was focused on building economic connectivity and enhancing people-to-people contact through the two agreed routes in Jammu and Kashmir.
It developed itself as an additional layer of economic engagement between the two countries apart from the regular international trade.
There already exist international trade routes between India and Pakistan through land and sea. The land route is active through Punjab and international trade takes place through this route.
It may not be feasible to move the cross-LoC trade routes from Jammu and Kashmir as it will dilute the basis of this initiative.

What are the various concerns related to the cross LoC trade?

There are reports which raise concerns about the growth of illicit trade.
There are apprehensions that the cross-LoC trade could be misused to smuggle weapons or narcotics (thus presumably also strengthening terrorist groups) and this was also given as the official reason by the Indian government to suspend this trade in 2019.
For a few years prior to the suspension of cross-LoC trade, it became notoriously known for facilitating illicit trading and other irregularities.
However, it is also to be noted that the negative narratives pertaining to this trade also emanated from various security and operational concerns. Some of these concerns were linked to infrastructural and policy level deficiencies.
Given the barter nature of this trade, cross-LoC trade did not follow regular international trade practices and financial accounting protocols.
This resulted in scope for irregularities in the trade system, which was exploited as well.

What should be done to strengthen such CBMs?

Instead of suspending the trade, the regulatory and security agencies at these borders should strengthen the ecosystem to stop illegality in future.
This trade would not have survived the political disruptions for a decade if the cross-LoC trade had not created its own “emotional capital” through people-to-people connections and economic dividends on the border economies in Jammu and Kashmir.
The trade volumes may be minimal in the overall economic spectrum of India and Pakistan, but it needs to be looked at through the lens of the conflict and the benefits to the people living in these border areas.
That is when the result of this trade is magnified and one appreciates the positive impact.

What are the steps that can be taken to address the loopholes for the fool-proof resumption of the trade?

They need to keep in mind the security and policy concerns that have been raised over the last decade.
The revised protocols for this trade should address any loophole that exists for misuse of this trade.
Infrastructure upgradation, both physical and digital, will need to be put in place to ensure transparency while also looking at policy gaps in the areas of product identification through HS codes, implementation of digital platforms, clarity of tax regulations and “rule of origin,” etc.

Source: The Diplomat

Mains Question:

Q. Critically analyse the role of suspended cross LoC trade as flagbearer of peace between India and Pakistan?