Is cross-Line of Control trade on the new menu?

Concerns over transparency have plagued cross-LoC trade over the last decade. (Photo Source: IE)

By Nikita Singla

Related posts

EXCLUSIVE – Crypto giant Binance controlled ‘independent’ US affiliate’s bank accounts

June 5, 2023

Why investing just to save tax may be bad for you

June 5, 2023

Amid discussions around restoring statehood to Jammu & Kashmir and removing ‘dil ki doori and dilli ki doori’, former Chief Minister Mehbooba Mufti complimented the Prime Minister for engaging with Pakistan, for ensuring ceasefire along the Line of Control (LoC), and pressed for re-opening of cross-LoC trade and travel. Resuming cross-LoC trade could be an early harvest in the return to normalcy in Jammu and Kashmir.

Both cross-LoC trade and travel have survived more than a decade, despite the intermittent suspensions and ceasefire violations. While cross-LoC trade of INR 7500 crores from 2008-2019 speaks for itself, impact of such Confidence Building Measures (CBMs) go beyond standard metrics. The stories of thriving businesses and reunited families on both sides of the LoC are the true ambassadors of change.

Economic evidence has long demonstrated that trade not only increases prosperity in countries but also promotes peace – an idea that is attributed to several classical liberal thinkers. History shows that trade when combined with other CBMs could offer to build conflict resolution on principles of mutual trust and open communication. The OSCE (Organization for Security and Co-operation in Europe) Guide on Non-military CBMs cites examples where CBMs, developed as a tool of preventive diplomacy, evolved from being restricted to military based measures to areas of economic, social and cultural cooperation, most importantly trade. For example, in the case of Moldova and Transnistria, post the breakdown of official settlement talks in 2006, the two sides agreed to create a number of joint working groups to hold discussions on CBMs in areas which affect the daily life of people on both sides of the Dniester River. Opening of rail freight traffic and fixed line telephone communication was a part of the discussion.

The success of any CBM, as stated in the OSCE guide, is indicated by re-establishment of the talks between any two conflicting parties at a time when mistrust is deep and regular contact is scarce. Such was the case between India and Pakistan in 2008, when the two sides decided to further exploit the potential of existing transport routes by establishing cross-LoC trade, across two routes— Uri-Muzaffarabad and Poonch-Rawalakot. Traders on either side of the LoC were permitted to exchange 21 mutually-agreed items. On 21st October 2008, the first truck, carrying rice, turmeric and red chillies, reached Uri by crossing the Jhelum river via the Kaman Aman Setu bridge. A signboard at the bridge, across the LoC, echoed the people-to-people connectivity shared between locals on both sides, notably stating, ‘From home to home, we extend a very warm welcome to our Kashmiri brethren’ Cross-LoC trade would have died in its infancy if not for the spirit of the people involved. It is much more than a mere commodity exchange. This cross-LoC barter was not set up to be an isolated economic activity, but to open a new chapter of building bridges and (re)connecting communities. The sudden and indefinite suspension of cross-LoC trade on 18th April 2019 weakened the bridges gradually built through the exchange of goods and people to people contact.

“We were nudged by Jammu Chamber of Commerce and Industries (JCCI) and Kashmir Chamber of Commerce and Industries (KCCI) to trade across the LoC when cross-LoC trade began a decade ago, we were pushed to build confidence and we have now become victims of the same confidence building measure” – a trader in Uri. Visits to Uri and Poonch, and on-the-ground interactions with stakeholders reveal that about 4,229 families (~22000 people) that were all directly involved in the day-to-day trade operations across the LoC were most hit by the trade ban. In addition, there has been an indirect impact on: manufacturers and farmers that provided goods for this trade; end consumers, who now have to pay higher prices for same commodities; and shops, restaurants and mechanics in the border area that depended on this trade and transit.

When the two sides start looking at reviving the CBMs across the LoC, it will be crucial to address the concerns around transparency of this trade. A revised strategy will be needed to reinitiate cross-LoC trade, which should focus on:

 Infrastructural Reforms: The Trade Facilitation Centres on both sides are critical infrastructural investments, however more reforms are needed to increase security and transparency. For this, installation of full body truck scanners, x-ray machines and CCTV cameras is essential.

 Digitization of Trade: There is need to digitize procedural regulations through an online portal that can be used to access records submitted by traders, monitor invoicing of products, balance the commodity exchange and list the truck details.

 Verification of traders: A monitoring cell may be constituted, of officials from central and local agencies, to keep a check on merchants and trade practices associated with cross-LoC transactions.

 Establishing Trade Talks: A proper channel of communication is vital to ensure regular and uninterrupted trade exchanges across the LoC. Traders on the ground have proposed for formal telephone line connectivity which could be under the scrutiny of the governments.

 Dispute Settlement Mechanism: There is no legal document or forum of jurisdiction that has been entrusted to resolve disputes between traders. There is need for a functional dispute settlement mechanism.

 Inclusive and expansive participation: Data shows that there is minimal participation of women traders in cross-LoC trade. Through a process of regularising safety and security procedures, an ecosystem conducive for women participation can be systemised.

Concerns over transparency have plagued cross-LoC trade over the last decade. While some decisions can be taken unilaterally by one government, several others require participation of governments on both the sides. Digitization of trade facilities, introduction of banking systems, changes in standard operating procedure like modifying list of items that can be traded, etc. can be ascertained by mutual collaboration from both sides. Thus, establishing and maintaining regular talks amongst various stakeholders, between New Delhi and Islamabad, and between New Delhi and J&K, will be conducive to facilitate smooth operations of cross-LoC trade. And greater trust among stakeholders could just be a fringe benefit.

“Gar Firdaus bar-rue zamin ast, hami asto, hamin asto, hamin asto.” This is what the Mughal Emperor Jahangir said when he meant, ‘If there is heaven on earth, it is here, it is here, it is here’. While this became the tourism signature line for Jammu and Kashmir (J&K), the region remained marred by conflict. VUCA – Volatility, Uncertainty, Complexity and Ambiguity, though a recent phenomenon in the business world, could be applied timelessly to the situation in J&K. Dealing with this VUCA requires a series of CBMs and resuming cross-LoC trade should certainly be the first.

(The author is Associate Director at Bureau of Research on Industry and Economic Fundamentals (BRIEF), New Delhi. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)