Strengthening Trade Relations between Pakistan and Afghanistan: Opportunities and Challenges

Abstract

This paper delves into the complex dynamics of trade relations between Pakistan and Afghanistan, two countries with shared cultural heritage and geographic proximity. Despite these inherent advantages, bilateral trade volumes have remained notably low, hindered by historical, geopolitical, and economic factors. Utilizing a mixed-methods approach including secondary data analysis and interviews with stakeholders, the research identifies and analyzes key obstacles impeding optimal trade relations. The analysis reveals several challenges, including the stalled negotiations on the Preferential Trade Agreement (PTA), non-tariff barriers, and issues in transit trade operations. Afghanistan's ban on Pakistani meat imports, non-tariff barriers on pharmaceutical products, and imposition of export taxes on coal are among the hurdles examined. Furthermore, Pakistan's unilateral measures to enhance trade, such as the Barter Trade Mechanism, are scrutinized alongside issues in transit trade operations, including delays, smuggling, and bureaucratic inefficiencies. The study emphasizes the need for both countries to adopt a cooperative approach, address mutual concerns, and streamline trade procedures to unlock the untapped potential of their economic partnership. Short-to-medium-term recommendations include finalizing the APTTA, improving border crossing points, and enhancing customs cooperation. In the medium-to-long term, the paper suggests pursuing regional transit trade agreements, investing in infrastructure projects like the Trans Afghan Railway, and advancing multilateral connectivity initiatives. Ultimately, the paper underscores the significance of economic cooperation between Pakistan and Afghanistan in fostering regional stability and prosperity. By addressing the identified challenges and implementing the recommended measures, both countries can bolster their trade relations, unlock economic opportunities, and contribute to broader regional connectivity and development goals.