Pakistan, India to normalize trade by year's end

ISLAMABAD (AP) — Pakistan will normalize trade with India by the end of this year, the government said Wednesday, indicating its resolve to improve relations with its regional rival despite opposition from Islamist groups and some domestic industries.

The neighboring, nuclear-armed countries have fought three wars since 1947, and much hostility remains. The push to remove trade barriers between them has led to hopes of closer political ties and, eventually, resolution to their long-standing disputes.

A government statement said Pakistan would phase out restrictions on imports from India by December, part of a commitment it made last year to liberalize trade with New Delhi. Pakistan currently severely restricts imports on a wide range of goods, including textiles and sugar.

The statement said that once the "negative list" of goods had been eliminated by Dec. 2012 then "the process of trade normalization between the two countries would be completed."

Estimates of the value of annual trade between India and Pakistan are around $2 billion, and there has been little change over the last five years. The World Bank estimates trade could grow to as much as $9 billion if barriers are lifted.

Right wing and Islamist groups in Pakistan have protested closer trade ties with India, saying Islamabad should not be cooperating with New Delhi until it gives up its claim to the disputed region of Kashmir, the mountainous area that is at the heart of the nations' dispute.

There has also opposition by some local manufacturers, who fear Indian imports will harm their business.

Pakistani Information Minister Firdous Ashiq Awan said, "We want to normalize trade ties with India, but we will not do it by compromising on the issue of Kashmir." She said the decision was supported by all "stakeholders," a reference to the powerful army, which has the final say on India policy.

Even if limitations are lifted, obstacles remain to increased trade, .

Visa restrictions make it difficult for travel between the two countries, and there are no banking ties. Also, another major terrorist incident like the 2008 attacks on Mumbai, blamed on Pakistani militants, could halt the process.

More than 160 people were killed over three days in the assault on the Indian city of Mumbai, freezing all peace efforts. Last year talks resumed, and the two prime ministers have met. While the leaders have spoken about the need for better ties, there is no immediate prospect of a breakthrough.