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Cover Story

Textile and clothing being the main products continue to suffer due to slower pace of quota phase-out programme and imposition of non-tariff barriers

By SHABBIR H. KAZMI
Mar 27 - Apr 02, 2000

If one looks at the historical data of trade between the two countries, it is established that the US is the largest trading partner of Pakistan. The US has been the main source of wheat, fertilizer, raw cotton, chemical compounds, plant and machinery, aircraft and their parts and iron and steel. Cotton based products have a lion's share in Pakistan's exports to the US. There is tremendous potential for the export of higher value added textile products to the US.

The trade between the two countries was over US$ 2.1 billion during the year 1999 as against a volume of US$ 2.4 billion for the previous year. The reduction was mainly due to lesser imports by Pakistan which came down from US$ 720 million to US$ 426 million while there was also a decline in exports during this period. The two countries traded goods worth about US$ 2.7 billion in the year 1997. However, the reduction in export proceeds was due to depreciation of Pak rupee along with lower imports of industrial inputs.

The larger imports from the US in the past was due to many reasons including concessional financing and guarantees by the US government. However, with the drying up of sources of low cost financing and shift of import of plant and machinery from other sources there is further decline expected in imports from the US. Some analysts say that reduction in imports from the US is due to a fact that goods of US origin are expensive as compared to the similar goods available from other Asian countries, i.e. Japan, Korea and Taiwan. They also say that some of the US companies have also established manufacturing facilities in Asian countries and prefer to export from these countries to save on freight charges.

Lately the US has once again emerged to have the largest share in foreign direct investment in Pakistan and therefore, the imports of goods of US origin may increase. The US had the largest share in the past but with the massive investment from other countries, i.e. the UK and Japan, in power and automobile assembly sectors the US slid down to the second position. Some analysts say that the reduced inflow of investment was affected due to the shift in US foreign and investment policy towards Pakistan.

The trade links between the US and Pakistan are not only decades old but the volume has constantly increased despite increase in imports, by Pakistan, from other countries. Over the years the US has emerged to be the largest buyer of made in Pakistan goods — mainly textiles and clothing. Though, there has been regular and substantial increase in the quota allocations for Pakistan, the slower pace of quota phase-out programme has become a hurdle in expanding the trade between the two countries.

The recent imposition of quantitative restriction on imports of cotton yarn from Pakistan may be termed as a non-tariff barrier. Though, the yarn imported from Pakistan does not fall under 'identical products' definition, the US has imposed unilateral quantitative restriction. Pakistani exporters still believe that further consultation in this regard are necessary as the world is moving towards free trade and equal opportunities for all the countries.

With reference to enhancing import of higher value-added textiles and clothing from Pakistan it is surprising that the US has made hardly any investment in the sector. The US investors have two options, either to enter into joint ventures with units located in tariff area or in the Karachi Export Processing Zone. This can help in producing products according to their own specifications and also maintaining the quality standards.

There are opportunities for the US-based companies to develop their Pakistan operations as a source of supply for the regional markets. Pakistan, itself, is a big market comprising of 140 million people and if Central Asian and Middle Eastern markets are added to this it become 'too big a market'. Another very special attraction for the US companies is import of computer software from Pakistan. Therefore, there is a need to maintain close liaison with the local manufacturers as well the government of Pakistan to boost trade between the two countries — the potential is enormous.

 

Pak - US Trade

Years Exports Imports Balance
1999 426.5 1,740.4 -1,313.9
1998 720.4 1,691.7 -971.3
1997 1,240.1 1,442.2 -202.1
1996 1,271.4 1,265.7 5.7
1995 941.2 1,197.1 -255.9
1994 718.3 1,011.6 -293.3
1993 811.3 897.2 -85.9
1992 880.5 865.8 14.7
1991 950.3 662.5 287.8
1990 1,142.8 609.6 533.2
1989 1,134.3 522.7 611.6
1988 1,090.4 458.7 631.7
1987 733.2 404.5 328.7
1986 830.2 325 505.2
1985 1,041.6 273.8 767.8