Don’t be my favourite friend, be my most favoured nation

With time we come to realize that the only reliable pleasures in life are the smaller ones. The big sources of happiness--success, fame, marriage and religion—often fail us. Among the smaller enjoyments are things like friendship and humour. What is true for individuals can also apply to nations. Instead of nationalism and military grandeur, a modest delight in trade is more dependable, and this was underscored by a happy piece of news on February 29th.

Prime Minister Yousuf Raza Gilani told Pakistani reporters, "People have not understood MFN. It means ‘most favoured nation’, not ‘most favourite friend'. Pakistan will now merely treat India as it treats a hundred other countries.” Gilani was defending his cabinet’s historic decision to open up trade with India. Having thrown its doors open to 6850 products, it will remove all restrictions to trade by year end, and pave the way for granting India Most Favoured Nation status. Although there was no risk of India becoming most favourite friend, ‘sabse pasand mulk’ as the Urdu press put it, there were 6850 reasons to be happy in both countries.

This beleaguered civilian government in Pakistan continues to amaze us. Not only is it battling on all fronts--war in Afghanistan, hounded by its Supreme Court, hostility of its own army, grave problems with the United States—it has gone and asserted a fine civilian conception of its national interest. By not insisting on Kashmir as a pre-condition of trade liberalization, it has proved gutsy, reminiscent of Narasimha Rao’s bold liberalization in 1991 when he was pushed against the wall.

It is better not to be euphoric when it comes to Pakistan. Still, the announcement was a healing balm for an India which has suffered unending bad economic news—much of it self-inflicted—over the past twelve months. The strategic significance of this opening is huge—it will energize free trade area in South Asia via SAFTA, which has suffered so far through Pakistan’s intransigence. If the experience of North American Free Trade Area (NAFTA) is any guide, SAFTA could transform millions of lives on the sub-continent.

Presently India-Pakistan trade is a paltry $2.6 billion, less than one per cent of their respective global trade. It should quickly climb to $ 10 billion by 2015, still modest compared to $ 60 billion trade between China and India. To make the deal a success, India will have to buy more from Pakistan; presently the trade is heavily skewed in our favour--Indian exports are $ 2.3 billion to Pakistan’s $ 0.3 billion. India has 80 per cent of South Asia’s GDP, which makes our neighbors suspicious. Dominance brings responsibility and India will have to be more generous— as Germany is in Europe today; large-heartedness should replace our traditional policy of reciprocity if we want a peaceful South Asia.

In this case India has played its cards well. It gave Pakistan MFN status way back in 1996, without insisting on reciprocity. Unilateral liberalisation works because lower trade barriers help one’s own people. Besides, a government’s first duty is to its consumers; afterwards, to its producers. As one of the world’s more productive economies, India like Germany has only to gain from free trade. The major threats to trade liberalization are Pakistani extremists, who are dead set against this deal; the other is bureaucracy and red tape, which could easily stall this reform by keeping a tight lid on visas, for example.

Much credit goes to Prime Minister Manmohan Singh, who has persisted in engaging patiently with Pakistan’s weak civilian government. He took a lot of flak for his moderate stand at Sharm-al-Sheikh. By assuming that Pakistan’s civilian government was as much surprised by 26/11, he reposed faith in Gilani, whom he saw as a moderate, modern Pakistani and strengthened his hand against the army and the extremists. There is a clear lesson here: do not see a nation as a monolith and look for opportunities in unlikely places.

For the moment, India and Pakistan do not have to be favourite friends. They should be content to be good neighbours and trade with mutual respect. They will be rewarded in the end for trade multiplies connections between human beings and brings prosperity, stability, and peace.