Taiwan, not North Korea is the right example

Pakistan and India trade

Presently, many seem to believe that we should only do business with nations like China that are less prone than their American counterparts to adding contingencies to deals, and that we should makes side deals with militant groups and belligerently refuse to improve relations with India. This is a recipe for failure. And not just economic failure, utter and complete national failure.

First, this idea that American conditionalities are somehow unique to American policy is simply not true. Consider the argument over the Kerry-Lugar bill. The actual requirements were related to not funding terrorist groups and securing our nuclear weapons. Do we honestly believe that China has no problem with militancy and nuclear proliferation?

Let’s be realistic here, please. China is not going to let us do whatever we want and simply look the other way. India is positioning itself like South Korea. They are creating strong economic ties that are the glue that holds together the world community by reducing incentives for connected nations to act against each others interests. Also please remember that they did not react to 26/11 with retaliation, but urged the world community to take notice. This is similar to the way that South Korea is not threatening unilateral action after a North Korean torpedo sank one of the South’s navy ships. Rather they are building the trust of the world community so that when the line is finally crossed, no one will come to the aid of the North Koreans. We learned from the Wikileaks cables that China is even ready to abandon North Korea and accept reunification of the Korean peninsula under Seoul.

This actually makes sense for China. Even if China is not trying to export their ideology, it wants to export something else. Chinese trade with South Korea has been growing at a record pace, with South Korea importing $323.1 billion in goods from China, and China importing $365.3 billion from South Korea. Why would China be willing to sacrifice such economic progress for the North Koreans? Answer: They won’t.

So what does that have to do with us? Let me tell you.

Chinese Premier Wen Jiabao is not on a three-day visit to India to sample the panipoori. Actually, he is there to oversee the signing of billions of dollars in business deals. According to The Wall Street Journal, Wen expects companies from China and India to sign $16 billion worth of agreements during his trip – that’s more than double the total amount of trade between Pakistan and China, and eight times the amount of trade between India and Pakistan. He said he expects bilateral merchandise trade to surpass $60 billion for this year. India and China are moving beyond the Cold War mentality of East/West blocs and working within the 21st century framework that involves nations connected by shared economic and security interests. Nations that are not part of this framework include North Korea, Somalia, and Zimbabwe. I don’t want to be part of the second group.

Thankfully, there is an alternative. Raza Rumi made the point perfectly on his blog a few weeks ago that we can increase our own influence and improve our own country by taking the path not of North Korea, but Taiwan.

China and Taiwan are sworn enemies. In 2009, the total volume of their trade was 110 billion dollars. India’s trade is expanding with China, and the current volume is nearly 60 billion dollars per annum. On the other hand, the total volume of formal trade between India and Pakistan is around a billion dollars. What does this say about keeping rational economic interest over emotional narratives of nationalism and politics? The politics and troubled past has ruined South Asia’s present and potentially its future. It is time to review the situation and reverse this trend.

This makes sense for reasons related to both economics and security. The economic benefits are obvious. Again quoting Raza Rumi:

For centuries trade has taken place in the region. Today the routes between the two Punjab[s], between Karachi and Mumbai and from Rajasthan and Gujarat into rural Sindh are still valid. Asad Sayeed, a reputed economist based in Karachi states that if normal trade resumes, “regional economic benefits that can accrue on either side will have a multiplier effect.” In fact informal trade that takes place is unknown but quite significant. Yasir Khan writing for The News (July 10, 2010) also highlighted the World Bank estimates of 2002 whereby Indo-Pak trade could expand Pakistan’s Gross National Product by 1.8%. Khan also quoted a study by Peterson Institute of International Economics which estimated informal trade between two countries in the range of $3 billion per annum. The potential therefore is immense.

India will also gain as Pakistan will provide a viable land route for its trade with Central Asia. Most importantly, given India’s energy deficits, normal trade will meet its energy demands and Pakistan can make impressive gains in foreign revenues through rents. It has already been estimated some years ago by the State Bank of Pakistan that the proposed gas pipeline to India could make us earn upto 700 millions dollars per annum.

Now consider the security benefits. While some elements in India may retain outdated resentments and harbor designs on Pakistani sovereignty, belligerent behaviour only feeds them. North Korea may have nuclear weapons, but it has demonstrated that this is not enough to ensure that anyone treats you with respect. Look at what it has bought them – a starving population, crumbling infrastructure, political and diplomatic isolation…and even their so-called ‘friend’ China is ready to cut them loose.

Taiwan, on the other hand, has played its cards differently. Like Pakistan, Taiwan has a long history of colonial rule followed by nationalist martial law. It wasn’t until the 1990s that Taiwan shifted to a more stable democratic government. But once they did, things have looked up. By joining the world community of democratic nations, Taiwan earned protection from the Americans. But more importantly, they have developed trade agreements that benefit both countries economically, while also greatly reducing the chance of any aggression between the two states.

Trade between Pakistan and India is a mere $2 billion. That’s about the same as the amount of trade between China and North Korea. Though they have had a rough history filled with mutual suspicion and disrespect, trade between China and Taiwan today totals more than $110 billion each year and continues to grow.

When you do the math, the direction Pakistan should take is obvious.