Pakistan's flip-flop on allowing Indian cotton imports points to an unresolved struggle between civilian and military power centres

PESHAWAR – Pakistan is blowing hot and cold on normalizing trade relations with India, an early setback to Prime Minister Imran Khan’s officially ballyhooed shift from a geostrategic to geo-economic foreign policy orientation.

Khan’s government, which announced the shift in February with a surprise renewed ceasefire with India, now faces resistance to the move from quarters of the powerful, autonomous military establishment that apparently view resumption of currently blocked trade with rival India as a strategic threat.

Khan’s announcement last month that his government would permit Indian imports of cotton and sugar was inexplicably reversed the following day, a flip-flop that some analysts and observers saw as a reflection of the premier’s weakness in implementing sensitive policies vis-à-vis the military top brass.

Energy Minister Hammad Azhar did not set out any conditions for the restoration of business activities with New Delhi upon the trade resumption announcement, which was rejected by the federal cabinet the next day.

Before the cabinet reversed the decision, Minister for Human Rights Shireen Mazari tweeted that unless India relaxes its hard stand on the Kashmir imbroglio, normal trade relations could not be restored.

Some believe the policy volte-face could ultimately be a ploy aimed to give Khan greater negotiating leverage on wider trade and strategic issues if and when he meets Indian Prime Minister Narendra Modi on the side line of a proposed SAARC summit likely to be held in Islamabad in coming months.

Pakistan’s Prime Minister Imran Khan delivers a speech during the Refugee Summit Islamabad to mark 40 years of hosting Afghan refugees, in Islamabad on February 17, 2020. Photo: AFP/Aamir Qureshi
Many hope for a new breakthrough between the two rivals over contested Kashmir, the hot core of the two nuclear powers’ long-running conflict. It’s not immediately clear how the trade flip-flop has been perceived in New Delhi, though the lurch has inevitably put a certain damper on the bilateral warming trend.

What is clear is that the reaffirmed ban on Indian cotton imports will put more pressure on Pakistan’s crucial garment industry, which employs around 40% of the national workforce, at a time of economic distress.

Pakistan’s own cotton production is in decline due to recent poor weather, pestilence and farmers’ recent transition to higher-margin crops. This year’s cotton crop is projected to be at its lowest level since 1992.

Imports have thus soared to keep garment factories running, nearly doubling to 3.68 million dales over the nine months to March year on year, official statistics indicate.

The surge in cotton imports has contributed to a recent deterioration of Pakistan’s current account, which this year has slipped back into deficit after recording a rare surplus from July to December last year.

The nation’s trade deficit skyrocketed by 120% to US$3.3 billion in March as Khan’s government struggles to tame inflation including in cotton prices.

Cheaper imports from India, some analysts suggest, would help to alleviate the budding cotton crisis and associated economic unravelling, but the military seems keener to squeeze strategic concessions from New Delhi before resuming imports.

Jan Achakzai, an ex-adviser to Pakistan’s Baluchistan provincial government, says Khan is in a tight, twin military and economic squeeze. He said that recent reports in local newspapers suggesting a dramatic rapprochement with India through so-called Track-2 diplomacy may have peeved the military establishment. Achakzai said that military chief General Qamar Javed Bajwa – or any other top brass chief for that matter – can not afford to show leniency towards India in the “perception domain”, which he says would undercut the army’s ability to galvanize public support in any hot conflict scenario.

“Logically no chief would shoot himself in the foot this way, including the current [commander] General Bajwa,” he added.

He said the prevailing ground realities, namely in Kashmir, show there has been no meaningful rapprochement between the two long-time rivals, which he claims are still stuck in their negative approaches towards each other via what he refers to as “hybrid war.”

“It is the government’s handling of India and Kashmir policy that has brought the PM [Khan] in a head-on collision with the military establishment,” he said.

Recent news that the United Arab Emirates (UAE) played a key behind-the-scenes mediating role in getting India and Pakistan to agree to the renewed ceasefire agreement announced in late February have added a hard-to-gauge wrinkle to the diplomatic equation.

Delhi and Islamabad have had a ceasefire in place since 2003, but both sides have regularly breached the agreement. In 2020, over 5,000 “Line of Control” violations were reported in Kashmir.

The UAE’s top envoy to Washington, Yousef Al Otaiba, confirmed in a virtual discussion last week with Stanford University’s Hoover Institution that his nation was mediating between India and Pakistan to help the nuclear-armed rivals reach a “healthy and functional” relationship. UAE apparently played a role in brokering February’s renewed ceasefire agreement.

News reports that covered the speech quoted the UAE diplomat as saying “top intelligence officers” of both countries had held secret talks in Dubai in January this year, in an attempt to calm heightening tensions in Kashmir.

In an apparently related development, Pakistan’s Foreign Minister Shah Mehmood Qureshi travelled to the UAE on April 17, marking Islamabad’s first official contact after the Emirati ambassador’s public disclosure at the Stanford University event.

India has not made any official comment over the now publicly reported UAE-brokered secret mediation.

The reconciliation process was apparently still on track when Pakistan’s army chief General Bajwa said at a security dialogue held in Islamabad late last month that “Stable Indo-Pak relations” were key to opening the untapped economic potential of South and Central Asia – a pronouncement consistent with Khan’s stated shift to “geo-economic” policies.

At the same event, Bajwa pleaded for the resolution of the Kashmir dispute with India through “peaceful means.” He also acknowledged that a rapprochement with India will always be susceptible to derailment by spoiler groups, not least his own armed forces.

“However, we feel that it is time to bury the past and move forward. But for resumption of the peace process or meaningful dialogue, our neighbour will have to create a conducive environment,” he added.