TRADE-PAKISTAN: Cotton Import Row Worsens Relations With India

By IPS Correspondents Reprint | | Print |

Muddassir Rizvi

ISLAMABAD, Jan 24 2000 (IPS) - As skirmishes on the border between India and Pakistan intensify, with both sides claiming to have inflicted serious losses on the other over the weekend, a new front is set to open at the World Trade Organisation (WTO).

Islamabad intends to file a complaint against India with the WTO for restricting market access — cotton imports from Pakistan were suddenly banned by the Indian government earlier this month.

Trade ties have been a casualty to bilateral relations, worsening since the Dec. 24 hijacking of an Indian Airlines plane which Indian Prime Minister Atal Bihari Vajpayee has blamed on Pakistan.

On Jan. 11, India stopped cotton imports from Pakistan, alleging that the shipments were infected with exotic strains of destructive bacterial, viral and fungal organisms — a charge Pakistan has vehemently denied.

“Pakistan has not received any such complaint from importers of any other country in the last 50 years of crop history,” said the country’s Cotton Commissioner, Dr Zakir Hussain.

“We have decided to lodge a complaint with the WTO against India for banning cotton import and damaging our reputation in the world trade market,” he said.

The country’s premier Pakistan Agricultural Research Council and its Crop Disease Research Institute have dismissed the Indian charge.

“Raw cotton does not contain leaf curl virus as this plant pathogen spreads only through the whitefly insect. Moreover, raw cotton is fumigated before export, therefore, the question of bacterial fungal or virus disease does not arise at all,” said a spokesperson.

Instead, scientists point out that their Indian counterparts, who are battling leaf curl virus, have made requests for help from this country to control the virus. “Our cotton is virus resistant,” the Cotton Commissioner said.

Officials of the Ministry of Commerce said a complaint could even be raised at the WTO Dispute Settlement Body (DSB). “Right now we’re only filing a complaint… we reserve the right to take India to the Dispute Settlement Body,” said a senior research officer at the ministry.

Pakistani officials said taking action against India is a difficult decision because the two countries have cooperated on various trade issues of mutual interest such as export of shrimp to the United States.

But they were not prepared to compromise on cotton — a mainstay of the cash-strapped Pakistani economy and a major source of much-needed foreign exchange.

After an emergency meeting of the agriculture, commerce and finance ministries, last week, the Cotton Commissioner announced that “Pakistan will also request the WTO Secretariat to take punitive action against India as it has hurt Pakistan’s cotton trade.”

In 1997-98, Pakistan earned around 9 billion dollars from exports, with raw cotton and textiles accounting for more than 64 percent of the total exports.

Officials said the Indian ban was a political decision, aimed at opening Pakistan’s cotton exports — the bulk of which are to the quality-conscious developed countries — to strict testing.

The Indian move has infuriated the usually cordial Lahore Chambers of Commerce and Industry, which in a hard-hitting reaction urged the government to “thwart New Delhi’s designs to malign Pakistani bumper crop in the international market”.

Mian Muhammad Ilyas, secretary general of the Kissan (farmer) Board, Pakistan calls the ban politically motivated. “The only objective was to harm Pakistan’s commercial interests in a year when we have more than two million bales of exportable surplus,” he said.

The crop, this year, of 11.5 million bales, one of the highest annual yields recorded, has followed three years of successive crop failures. The highest recorded is 12.8 million bales in 1991-92.

While an estimated 8 million bales are meant for domestic consumption, the rest is available for export.

As many as 10 Indian buyers were in Karachi on the day India slapped the ban on Pakistan cotton, to finalise the contracts for more than 0.5 million bales.

“The state-run Trade Corporation of Pakistan was also negotiating with its Indian counterpart a sale of 0.5 million bales,” said an official of the Export Promotion Board who did not want to be identified.

According to figures given out by the Export Promotion Bureau, Indian importers had up to Jan. 12 purchased about 0.280 million bales out of the total of 0.373 million bales signed for.

The powerful Karachi Cotton Association, said the Indian government’s decision would annul all import agreements signed by Indian importers before the Jan. 11 announcement. Exporters here have to find new buyers.

“The Indian ban has created a serious situation,” said a spokesperson, pointing out that Indian importers have started withdrawing letters of credit drawn in favour of Pakistani exporters.

What governments need to do is initiate confidence building measures and strengthen trade ties, advises an Islamabad-based economist. “Robust trade relations could go a long way in dissipating the widespread tensions.”