If you go to the website of Sri Lanka's Board of Investment, you will read there that Sri Lanka has a free trade agreement with India, that the distance from Colombo to the southern parts of India is much shorter than from Delhi, and that you can profitably invest in Sri Lanka and use that as a base to access the much larger Indian market.

This is worth highlighting when India and Pakistan are going through another feel-good phase because of a new bus service between Srinagar and Muzaffarabad -- a deal that is more important for the people in the two parts of Kashmir than for the rest of India and Pakistan.

The much more important event would be starting a lorry and train service to carry goods between Amritsar and Lahore.

In the South Asian tradition of putting politics before economics, Pakistan says a trade deal should be predicated on progress on the Kashmir issue, and suggests thereby that opening up trade will be a favour that it does to India.

The truth, as should be obvious, is that Pakistan will be the bigger gainer -- as Sri Lanka has demonstrated through its trade deal with India.

Lankan exports to India trebled in two years after the two countries launched their free trade agreement in 2000, and negotiations are now on for deeper economic engagement.

Trade with Nepal has been equally open-ended, with duty-free access into India allowed for almost all goods made in Nepal -- and we know that Nepal too has attracted investment from people targeting the Indian market.

Even some Indian companies have found it profitable to invest in Nepal and reach India the roundabout way.

Even without these examples, it should be obvious that the smaller country gains more in a trade deal because it benefits from access to a much larger market.

Thus, Mexico benefited more from the North American Free Trade Agreement than the US did (Americans, in contrast, feared that their jobs would go across the border).

The Indo-Pak situation is not comparable in many ways, but the truth remains: Pakistan has less to offer India than vice versa. So why would India be interested in a trade deal? For the same reason, I think, that the US was interested in Nafta: it has a stake in the other country's prosperity.

The irony today is that official Indo-Pak trade (less than half a billion dollars) is smaller than India's trade with any of its sizeable South Asian neighbours.

Trade with even Myanmar will have grown to $1 billion by next year. A free trade agreement is being negotiated with Bangladesh, while Bhutan has benefited from joint hydro-electric projects, with India funding works that deliver power to the Indian market -- at a price that puts the Bhutanese government's finances in much better shape than New Delhi's.

What is interesting is that India has accepted non-reciprocity as a principle in its trade deals with Nepal, Bhutan, and Sri Lanka, and will almost certainly do so with Bangladesh.

In other words, while Pakistan sees India as some kind of regional bully, the fact is that India has given more in trade negotiations than it has taken.

It is not that no trade takes place between India and Pakistan. Since official trade is discouraged, rampant smuggling is said to equal official trade (governments on both sides lose customs revenue as a result).

And there is much larger trade (estimates go up to $2 billion) through third countries like Dubai. This is an expensive way to get goods across.

The loser is the consumer in both countries, and no one can be the gainer in this game.

The greater irony is that Pakistan is busy negotiating free trade agreements with China and Sri Lanka, and wants one with even Singapore -- just as India has done with Thailand and is negotiating with Singapore as well as with Asean.

But for Pakistan all other deals will have only peripheral value compared to a deal with India. Is there a way around this ludicrous situation? The breakthrough could come via Saarc, since Saarc members agreed a year ago to introduce a South Asian free trade area in stages from January 2006.

Indeed, this might be a way for Pakistan to do the sensible thing without giving the appearance of having given up its bilateral priorities.