Trade Shutdown To Cause Shortages, High Prices In Pakistan

For local traders, the stakes are high from both the financial and market demand perspectives. Official data pegs India’s exports to Pakistan at US$ 447.7 crore (April 2024 to January 2025), but informal estimates say bilateral trade is around US$ 10 billion (mostly Indian exports). This is transported through re-export routes, with the United Arab Emirates and Singapore being the primary conduits.

On India’s decision to seal its borders and Pakistan’s similar and quick echo, the Global Trade Research Initiative (GTRI) says this may stop official trade, but will have little impact on demand. “Pakistan will source Indian goods indirectly through third countries, though at a higher cost.”

Data shows India’s exports to Pak included pharma products (US$ 110 million), active pharma generics (US$ 130 million), sugar (US$ 85 million), auto parts (US$ 13 million) and fertilisers (US$ 6 million). Pakistan exported goods worth US$ 0.42 million to India, predominantly agri-exotics and herbs like basil and rosemary. There’s also a case for straw and onions, but that is a story in itself.

Good Times Or Bad, Middlemen Are Always in Business

Let’s dwell on what keeps trade moving between India and Pakistan, come rain, sunshine, high-water or war — the middleman. These are people who ensure that trucks and ships filled with goods and products keep plying between the two countries. That supply chain is kept moving to ensure that in-demand goods are always available in stores or on street-corners.

Take Umesh Kumar (name changed). His conversation with The Secretariat was interspersed with more than a few phone calls. On these calls, he finalised an order for shipments of ‘third-country exports’ to Pakistan. In good humour, Kumar admitted that each shipment would be 10,000 tonnes of sugar at a sale value of Rs 44,000 per tonne. His 3-per cent commission from this order: A cool Rs 2.64 crore.

Kumar is one among dozens who have the ear of both the market and the suppliers on either side of the border. They deal in pharmaceuticals, chemicals, food items and consumer goods. They can also fulfil on-call demand for fruits and vegetables, as well as industrial goods like auto parts. The next time you see videos of India-made cars plying in Pakistan, you know how they surfaced across the border.

Timing Of Blockade Is Inopportune For Pakistan

Given this set scheme of things, the timing of the latest blockade is not good for Pakistan. With India and the world questioning Pakistan’s role in the Pahalgam attack, the spotlight is on every fleet movement on or near the border. That makes goods movements susceptible to surprise checks and inspections, which isn’t something that people doing clandestine deals are too thrilled about.

If we speak of above-board deals alone, the United Nations cites numbers higher than those quoted by trade bodies such as GTRI. Pakistan’s imports from India reached a five-year high of US$ 1.21 billion in 2024, from US$ 530.91 million in 2023, UN Trade and Development (UNCTAD) and UN Comtrade said. The last time India’s exports to Pakistan were higher was in 2018, at US$ 2.35 billion, they added.

Living memory tells us that Pakistan has been aid-dependent for long. For decades, it took turns playing overbearing and subservient with the Soviet Union. The two nations became temporary allies in the late-1960s, with then Soviet Premier Alexei Kosygin granted aid for steel mills, a nuclear power plant and infrastructure projects. An arms deal was signed too, but things went downhill from there.

Pakistan shifted allegiance to the United States in 2002, with the latter coming to its rescue when the Afghanistan face-off was at its peak. Again, aid flowed in and kept Pakistan afloat.

Subsequently, an alliance was inked with China, but it was short-lived. Ironically, it fell through because terrorists ran amok and targeted the Chinese allies themselves.

This makes the latest standoff with India very awkward for Pakistan.

Demystifying Third-Country Exports, Its Intricacies

Typically, third-country (or ‘third-party’) exports refer to those goods and commodities that enter one country for value-adds or ‘embellishments’, before being despatched to final destination markets. Examples are gold and gemstones, or industrial products and parts, which come to one nation, are ‘re-engineered’ as finished goods for final consumption, and sent across to the ‘customer nation’.

In complex and price-sensitive markets, third-party exports are also used to avoid entering nations with higher tariffs, ‘exploit’ those with ‘tariff-free’ or ‘special trade’ status, and cut down on shipping time-lines. For example, India may import commodities like gold from Africa, refine and design them, and then re-export the finished product to other countries — this route is faster and economical.

Third-nation exports are also used surreptitiously — to avoid official channels or to enable availability of hard-to-procure goods in some geographies. For instance, a company sourcing goods from China may ask the supplier to ship them directly to a customer in the UK or any other nation, depending on prevalent business, diplomatic and even ‘emotionally-correct’ winds.

The winds buffeting Pakistan aren’t favourable. The country has been gripped by internal crises since the onset of the COVID pandemic, which fanned inflation to unmanageable levels and led to social unrest and public outcry. As recently as in in 2024, street protests turned violent and left many officials dead or injured. Since then, to a great extent, Pakistan has been living on hope and bluster.

With India downing shutters and even threatening to cut off river waters, pressure is growing on Pakistan’s power dispensation. The International Monetary Fund (IMF) has cut the country’s growth forecast to 2.6 per cent, citing US tariffs and the India faceoff. The world’s ‘will’ is on the wall — the problem is that Pakistan’s powerful may be too focussed on their microphones to read the fine print.

(The writer is a veteran journalist and communications specialist. Views are personal)