Asymmetric Trade Dependence: How India Gains from Pakistan Through Re-Export Channels

Abstract

The asymmetric trade interdependence between India and Pakistan is examined using the Theory of Complex Interdependence. Despite the political hostility and official trade prohibition, India has continued to be economically blessed by Pakistan via third-party re-exporter methods, which are the UAE, Qatar, and Singapore. Despite top-down bilateral trade falling to US$1.2 billion by 2024, compared to US$3 billion in 2018, trade experts believe the value of Indian-origin goods entering Pakistan through a backdoor channel is over US$10 billion annually. Since 2015, the trade balance has consistently been in India's favor, with Pakistan relying heavily on imports from India and having minimal potential for exports. Although this trade agreement brings some benefits to Pakistani consumers, i.e., the chance to have more inexpensive or a variety of goods, it also reveals a significant vulnerability in the Pakistani government's trade policy, which is sluggish and unnecessarily restrictive. The policy implications of the findings concern trade reform, regional interaction, and fostering economic sovereignty in Pakistan.