 Pakistani markets are full of smuggled Indian goods |
Paan Gulley is a lane tucked away in a corner of Lahore's famous Anarkali (Pomegranate Blossom) market.
On a cool winter afternoon a couple of buyers examine bottles of hair oil, face cream and betel leaves.
Everything on sale here has been smuggled in from across the border, from Pakistan's long-time rival India.
"Spices, betel nuts and leaves and cosmetics made in India are very popular here," says one shopkeeper, Hassan.
It is this illegal trade in a range of commodities that South Asia's leaders are hoping to end with the signing of a free trade agreement. Automobile parts, medicines and jewellery are some of the other Indian products which are smuggled into Pakistan.
Prices 'will drop'
Hassan says the deal should help curb smugglers who operate along the lengthy land border with India and who also bring goods in from Dubai and Afghanistan.
"If smuggling is stopped and we have legal trade, prices will come down - right now there is a massive mark-up," he adds. Under the South Asia Free Trade Area (Safta) signed in Pakistan this week, seven South Asian countries will scale down their tariffs to 5% and below.
This is welcome news to a majority of Pakistani traders and retailers.
"It will benefit us tremendously," says Arshad Bhatti, president of the Lahore Traders' Association.
"Cars, bicycles, medicines and other such commodities cost a lot more in Pakistan than they do in India.
"Safta will bring prices down and help increase demand. Right now we are in an economic slump and this could be just the incentive we need."
Pakistani hopes and fears
An economic boost is what many Pakistani businessmen are looking for with increased South Asian trade.
Mansoor Akhtar owns a fleet of yellow taxis in Lahore. He says he's delighted with the news that free trade is on the way. His business partners nod in agreement.
"We need to follow the example set by the European Union.
"We have more than a billion people. That represents real opportunity. It is completely futile to let political differences stand in the way of that," he says.
It's not just one-way traffic.
 Pakistanis hope prices will come down |
"There is so much demand for our textiles and clothes in India," says Rashid, who owns an upmarket fashion store. Many Pakistani traders lament that hostilities between the two countries have hurt their economic opportunities.
"There was a time when Pakistan was at the cutting edge of fashion, particularly in traditional clothes," says Rashid.
"Now the Indian fashion industry has leaped ahead and we have been left behind."
That is the one reason why some in Pakistan are not rejoicing at the thought of open trade.
"Our manufacturing industry has fallen way behind India," says Arshad Bhatti. "We are just not competitive anymore."
Delhi dream
Pakistani industrialists say an unsympathetic government, which is under pressure from lending agencies such as the World Bank and the International Monetary Fund, has not helped.
"Our power tariffs are the highest in the region, interest rates are high and we have the most stubborn and non-productive labour," says business leader Pervez Hanif, a former chairman of the Lahore Chambers of Commerce and Industry.
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"It will be impossible to stay competitive in the region." But analysts say a clause in the Safta agreement - providing for "sensitive lists" to keep some goods off the free trade list - will help protect business interests.
"The list is likely to be so long that I don't think it will hurt anyone," says economic analyst Farhan Bokhari.
Back in Anarkali market Rashid is hopeful as he unfolds a shimmering silk dress in front of a prospective customer.
"I dream of the day when I can go across to Delhi without any fuss to sell my clothes and also exchange design tips.
"We have so much talent - together we can take on the world."
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Our manufacturing industry has fallen way behind India 
