Practical barriers to exports have spurned unofficial trade between India & Pakistan to £6.4 billion
COSMETICS are smuggled by donkey through Afghanistan, chemicals and medicines track through Dubai. But only a fraction of legal trade travels directly from India to Pakistan.
A baffling array of legal and practical barriers to exports between the suspicious neighbours has spurned unofficial trade worth up to $10 billion (£6.4 bn), dwarfing official exchanges of $2.7 billion (£1.7 bn).
But a recent rapprochement that looks to normalise trading relations between India and Pakistan could end a decades-old system that stifles business and saps profits through networks of middlemen, money changers and smugglers.
A booklet of 1,945 items lists trade allowed to run from India to Pakistan but only 108 can be trafficked directly by road through the border post at Wagah, near the eastern border city of Lahore.
At old markets in Lahore, traders peddle whitening creams and hair dyes that have journeyed from India to Karachi by sea bound for Afghanistan before being reloaded and smuggled along the Taliban-hit Hindu Kush to re-enter Pakistan.
Tonnes of industrial chemicals and drugs travel into Dubai, where their port of origin is relabelled to hide their Indian provenance before being sent on to Pakistan. The process entails a mark-up of 15- 20 per cent, say importers.
But 15 years after India granted Pakistan "Most Favoured Nation" status in line with World Trade Organisation rules, Pakistan this month finally agreed to return suit, paving the way for a radical reorganisation of bilateral trade.
Pakistan has pledged to open its market to over 7,000 products from India over the next three months and says India should have MFN status by the end of 2012, a step to removing discriminatory higher pricing and duty tariffs.
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