Pakistan has escalated the tariff taxes on Afghan fruits from 15,000 PKR to an unprecedented 60,000 PKR per ton, marking a sixfold increase. This sharp rise in tariffs coincides with the peak export season for Afghanistan’s fresh fruits, including watermelon, melon, grapes, and pomegranates, which are currently being harvested.

Simultaneously, Pakistan has denied entry to approximately 300 trucks loaded with Afghan fruits and vegetables at the Afghanistan-Pakistan border due to the lack of a temporary permit, a document issued by Pakistani consulates in Afghanistan. This dual blow has severely disrupted the flow of fresh produce to Pakistani markets, leading to substantial losses for Afghan farmers and traders, and further aggravating the economic situation in Afghanistan.

Pakistan’s Tariff Hike

The sudden and drastic increase in tariffs on Afghan fruits is a significant departure from previous trade practices between the two countries. For Afghan farmers and traders, this escalation has turned an already challenging trade environment into a nearly insurmountable obstacle. The increase in tariffs means that many Afghan exporters will now face prohibitive costs when trying to access the Pakistani market, traditionally a key destination for Afghan agricultural products.

For years, Afghan farmers have relied on Pakistan as a primary export market due to its proximity and the established trade routes that connect the two countries. However, the new tariffs have created a situation where the cost of exporting fruits to Pakistan may outweigh the potential profits, effectively cutting off Afghan farmers from one of their main sources of income. This move comes at a critical time when Afghanistan’s economy is struggling under the weight of international sanctions and the withdrawal of foreign aid following the Taliban’s takeover in August 2021.

The disruption in trade due to these increased tariffs not only impacts Afghan farmers and traders but also has broader implications for the Afghan economy. Agriculture is a significant sector in Afghanistan, employing a large portion of the population and contributing substantially to the country’s GDP. With the export of fresh fruits stalled, the ripple effects will be felt across the economy, exacerbating the already dire economic conditions in the country.

Transit and Trade Challenges: APTTA Agreement in Jeopardy

The Afghanistan-Pakistan Transit Trade Agreement (APTTA), signed in 2010, was designed to facilitate and promote bilateral trade between the two countries by addressing various challenges related to transit, customs, and tariffs. The agreement was seen as a cornerstone for enhancing economic ties between Afghanistan and Pakistan, providing Afghan traders with a reliable transit route for their goods to international markets, especially through Pakistani ports.

However, the recent actions by Pakistan suggest a departure from the spirit of the APTTA agreement. Over the years, there have been numerous instances where Pakistan has imposed restrictions or created obstacles that hinder the smooth flow of goods between the two countries. These measures have included the closure of border crossings, delays in issuing transit documents, and now, a significant increase in tariffs.

The frequent imposition of such barriers by Pakistan has undermined the trust between the two nations and has cast doubt on the effectiveness of the APTTA agreement. For Afghanistan, the challenges posed by these trade restrictions are compounded by the country’s limited access to alternative trade routes. While the APTTA agreement was supposed to ease these challenges, the current situation indicates that Pakistan is using its leverage over Afghanistan’s transit routes to pursue its own strategic interests.

The relationship between Afghanistan and Pakistan has always been complex and fraught with tensions. These tensions have been exacerbated since the rise of the Afghan Taliban in 2021. One of the major points of contention between the two countries has been the presence of the Tehrik-e-Taliban Pakistan (TTP), an outlawed militant group in Pakistan that has been launching attacks on Pakistani security forces from within Afghan territory. Pakistan has repeatedly accused Afghanistan of harboring TTP militants, which has further strained bilateral relations.

In addition to security concerns, Pakistan has historically used trade and refugee issues as tools to exert pressure on Afghanistan. Islamabad’s policies towards Kabul have often been shaped by its strategic objectives in the region, with trade being one of the key areas where this leverage has been applied. During the US-backed Afghan republic government, particularly under President Mohammad Ashraf Ghani, trade relations with Pakistan were heavily influenced by political factors, resulting in a significant reduction in bilateral trade. At its lowest point, trade between the two countries dwindled to just $1.2 million, as Afghanistan sought to diversify its trade partnerships by increasing its commercial ties with its northern neighbors in Central Asia.

Trade Routes: Reducing Dependency on Pakistan

Given the current trade challenges with Pakistan, it is imperative for Afghanistan to explore alternative trade routes and diversify its export markets. One of the significant issues facing Afghan farmers and traders is the lack of adequate cold storage facilities for fresh fruits and vegetables. Despite the establishment of over 3,000 cold storage units in Afghanistan, the country still requires an additional capacity of 290,000 metric tons to meet its needs. Without sufficient cold storage, Afghan farmers are forced to sell their produce quickly, often at lower prices, or risk spoilage.

To address this issue, the Taliban-led Afghan government must allocate funds in its annual budget for the construction of additional cold storage facilities. This initiative should also involve partnerships with the private sector, donor organizations, and other countries willing to invest in Afghanistan’s agricultural infrastructure. By enhancing cold storage capacity, Afghanistan can extend the shelf life of its fruits and vegetables, allowing for year-round availability in domestic markets and reducing the need for imports from countries like Iran and Pakistan.

In addition to improving domestic infrastructure, Afghanistan should focus on expanding its bilateral trade with neighboring countries and beyond. Afghanistan’s strategic location provides it with access to several important markets, including China, Russia, and India. The completion of the Wakhan road, which links Afghanistan directly to China, is a significant development that could transform bilateral trade between the two countries. By leveraging this new trade route, Afghanistan can reduce its dependency on Pakistan and establish direct trade relations with China.

Furthermore, Afghanistan enjoys strong trade relations with Central Asian countries and Russia. In 2023, Afghanistan exported goods worth $100 million and imported $1.4 billion from the five Central Asian countries, including Russia. By further developing these trade partnerships, Afghanistan can diversify its trade routes and reduce its reliance on Pakistan.

Chabahar Port: Strategic Alternative

India has been a key player in promoting regional connectivity, particularly through the development of Iran’s Chabahar port. Afghanistan, which has plans to invest $35 million in Chabahar, can use this port as a strategic alternative to the Pakistani transit routes. Chabahar provides Afghanistan with direct access to the Indian Ocean, facilitating trade with India and other international markets without having to rely on Pakistan.

The operationalization of Chabahar port could significantly boost Afghanistan’s trade prospects. By bypassing Pakistan, Afghanistan can engage in direct trade with India, one of its major trading partners. India has already shown its commitment to the development of Chabahar by signing an agreement with Iran to invest $120 million in the port. For Afghanistan, this presents an opportunity to establish a reliable trade route that is less susceptible to the political and security challenges associated with transit through Pakistan.

Air Corridors: Enhancing Export Capabilities

In addition to developing alternative land and sea routes, Afghanistan should also prioritize the revival of air corridors that were established during the previous government. The air corridor initiative, which began in 2017 with India and later expanded to other countries, played a crucial role in enhancing Afghanistan’s export capabilities. The volume of exports through this corridor increased from 1,720 metric tons in 2017 to 7,500 metric tons in 2020, demonstrating its effectiveness in facilitating trade.

By reviving these air corridors, Afghanistan can ensure the regular transfer of its products, particularly high-value items like dry fruits, to international markets. Air corridors provide a faster and more reliable means of export, especially for perishable goods that require quick delivery to maintain quality. Moreover, by connecting with regional and Western countries through air corridors, Afghanistan can further reduce its dependency on Pakistan and enhance its global trade footprint.

Strategic Approach to Economic Resilience

To mitigate the impact of Pakistan’s tariff hike and other trade restrictions, Afghanistan must adopt a strategic approach that focuses on improving domestic facilities, developing new trade channels, and fostering regional partnerships. By investing in cold storage infrastructure, Afghanistan can better manage its agricultural produce, ensuring a consistent supply to both domestic and international markets. Expanding trade routes through the Wakhan corridor, Chabahar port, and air corridors will not only reduce Afghanistan’s dependency on Pakistan but also enhance the country’s global competitiveness.

Moreover, by strengthening trade relations with Central Asian countries, China, and India, Afghanistan can create a diversified trade network that is less vulnerable to the geopolitical challenges posed by its neighbors. This approach will not only boost Afghanistan’s economy but also promote political stability in the region by fostering mutually beneficial trade partnerships.

The current trade challenges underscore the need for Afghanistan to take proactive measures to secure its economic future. By reducing reliance on a single transit route and expanding its trade horizons, Afghanistan can build a more resilient economy that is capable of withstanding external pressures. In the long term, this strategy will contribute to the sustainable growth of Afghanistan’s economy, improving the livelihoods of its people and strengthening its position in the global market.

The sixfold increase in tariff taxes by Pakistan on Afghan fruits and the simultaneous blockade of Afghan trucks at the border have created a significant crisis for Afghanistan’s agricultural sector and economy. These actions not only disrupt the traditional trade flow between the two countries but also highlight the vulnerabilities in Afghanistan’s reliance on Pakistan as a primary transit route. In response, Afghanistan must explore alternative trade routes, invest in domestic infrastructure, and strengthen regional trade partnerships to reduce its dependency on Pakistan and secure its economic future.

By focusing on domestic initiatives such as expanding cold storage capacity and reviving air corridors, Afghanistan can enhance its export capabilities and maintain a consistent supply of agricultural products to international markets. Additionally, developing new trade routes through the Wakhan corridor, Chabahar port, and Central Asian transit routes will diversify Afghanistan’s trade options, reducing its exposure to the geopolitical challenges associated with transit through Pakistan. Ultimately, by adopting a comprehensive and strategic approach to trade and economic development, Afghanistan can build a more resilient economy that is better equipped to navigate the complex regional dynamics and ensure sustainable growth in the years to come.