Pakistan holds hundreds of Afghanistan-bound containers at Karachi port amid escalating trade row

In this picture taken on January 11, 2023, shipping containers are seen placed under cranes at the Karachi sea port. (AFP/File)

• Afghan traders are likely to suffer financial losses due to the measures taken by the Pakistani authorities to curb smuggling
• Government imposed trade restrictions after transit trade items were sold into Pakistani markets, weakening the economy

ISLAMABAD: Pakistani authorities have stopped hundreds of Afghanistan-bound containers under transit trade at Karachi port to curb smuggling and ensure proper taxation, causing losses of millions of dollars to Afghan traders, local businessmen said on Saturday.
The development comes days after the country imposed a 10 percent processing fee on several items under the Afghan transit trade agreement in a step that was viewed as an attempt to stop illegal entry of goods into the country from the neighboring state.
The commerce ministry in Islamabad subsequently banned the export of 212 items to Afghanistan under the transit trade agreement that included confectioneries, chocolates, footwear, machinery, blankets, tires, home textiles and garments.
“Hundreds of Afghanistan-bound containers are stuck at Karachi port after the authorities refused to clear the items banned by the commerce ministry,” Qazi Zahid Hussain, former president of Pakistan-Afghanistan Joint Chamber of Commerce and Industry, told Arab News.
“It is obvious the Afghan traders will have to bear millions of dollars of losses due to the change in Pakistan’s policy,” he continued, though he lauded the move and said it would curb smuggling that was taking place under the transit trade arrangement.
“The authorities will now allow Afghan traders to reexport their goods from Pakistani ports instead of clearing them for Afghanistan,” he added.
The Afghanistan-Pakistan Transit Trade Agreement aims to facilitate the transit of goods exported from and imported to Afghanistan using the Pakistani ports in Karachi and Gwadar. The pact also envisages the use of Afghan territory for trade between Pakistan and the Central Asian countries.
Hussain said the volume of Afghan transit trade swelled to around $8 billion from $4.5 billion in recent months, adding this alerted the authorities that many of the items destined for Afghanistan were secretly flowing into the Pakistani market.
“This means the volume of smuggling had increased significantly putting pressure on our currency, closure of local industry, loss of jobs and weakening of the economy,” he explained, adding that recent measures of the government against the smuggling through the Afghan transit trade had resulted in appreciation of rupee against the US dollar and stabilization of the economy.
Hussain, however, said that Pakistan being signatory of the World Trade Organization (WTO) was bound to allow the transit trade through its sea and land routes to landlocked Afghanistan.
“Pakistan cannot unilaterally shut the Afghan transit trade but can regulate it to some extent to stop the smuggling and boost its tax revenue,” he continued.
Afghan officials have objected to these developments while pointing out it is putting the commercial activities between the two countries under undue pressure.
“In addition to imposing 10 percent processing fee on some transit goods, the government of Pakistan has asked Afghan traders for 100 percent bank guarantee on transit cargo, which is beyond the ability of the traders,” Afghan embassy in Islamabad said this week.
The embassy added that its officials had tried to resolve trade-related issues by taking them up with the Pakistani authorities, but they had only exacerbated.
It urged the government in Islamabad “to remove these obstacles in the Afghan transit sector, so as not to have a negative impact on the commercial and bilateral relations of the two countries.”
Jawaid Bilwani, a member of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry, said that Pakistan should revive the railway route to Afghanistan to boost its exports to the Central Asian states under the agreement.
“Our total export to the Central Asian countries at the moment is just $1 million per annum which can be significantly boosted through Afghanistan which is the shortest route to these nations,” he told Arab News.
“Pakistani authorities should work out viable plans to use the transit trade agreement in our favor,” he said, adding that Pakistan was earning millions of US dollars in taxation and fees for the utilization of its ports for transit trade.