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
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
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