the recent visit of President General Pervez Musharrf to the United
States of America (USA) the two countries signed Trade and Investment
Framework Agreement (TIFA). This agreement is aimed at providing greater
access to Pakistani products in the US market, leading to free trade
agreement between the two countries. It will also help in increasing the
flow of foreign direct investment from the US to Pakistan. It may take
about three years to complete the formalities. However, the process can
be expedited if entrepreneurs from both the sides in general and
Pakistan side in particular show their determination.
efforts of Pakistan's economic managers for achieving greater access in
the US market must be applauded. It is on record that the GoP has been
persistently asking the US authorities to provide greater market access
to Pakistan rather than writing off loans and providing fresh aid and
grants. The demand was based on the premise that aid and grants may
increase forex inflow but greater access would help in not only
increasing exports from Pakistan to the US but would have a positive
impact on country's economy.
former Commerce Minister, Razzak Dawood, was the ardent persuader of
this policy. Though, he was not able to make it a reality but managed to
put a convincing argument, which has finally led to signing of TIFA.
critics of present regime are trying to undermine the importance of TIFA
by putting the argument that Pakistan would have got the similar
benefits, in any case, under the WTO regime. However, they completely
ignore the benefits of entering into free trade agreement. Besides,
phasing out of textile quota regime does not necessarily mean withdrawal
of the applicable duties etc. Most of the analysts are looking at TIFA
only with reference to export of textiles and clothing to the US. Does
it have all that importance?
doubt textiles and clothing is very crucial for Pakistan. Pakistan's
economy and exports are largely dependent on textile industry. Textile
exports contribute around 60% towards total exports of the country. The
industry has made very large investment for achieving higher value
addition lately. According to the Pakistan Economic Survey 2002-03 the
country exported goods worth US$ 8,849.7 million during first ten months
of just concluded financial year, Out of this US$ 5,644.8 million was
earned from export of textiles and clothing only. Pakistan has
tremendous potential for increasing its export of textile and clothing.
It is not simply and expression but well supported by the data. During
this period the country earned additional US$ 1,525.6 million. Out of
this US$ 983 million was contributed by textiles and clothing.
it may be said that the investment for value addition has helped the
local manufacturers to attain higher exports, no one can deny the fact
that greater access provided by the European Union (EU) helped in
boosting exports. The EU increased Pakistan's quota by 15% and also
reduced duty on products of Pakistan origin. The greater access to the
US market will also help in boosting exports. The US, as a country, is
the largest buyer of the made in Pakistan products. Around 25% of
Pakistan's total exports are destined to the US.
this one must keep a fact in mind that as a result of greater access
offered by the EU, Pakistan had a potential to earn extra US$ 120
million. However, it is regrettable that out of this only US$ 30 million
was realized. According to textile sector experts, local manufacturers
do not take pain in finding out the changing trends as well as catering
to the buyers of superior quality products. They say that there are two
extreme ends, only a small number of exporters produce products that can
fetch premium. Whereas, bulk of Pakistan's export fall in the category
of low cost and low quality products.
substantiate their point they refer to category 338. This covers 100
percent cotton T-shirts. The difference is prices in this category are
mind boggling. Some exporters are selling their products at a rate as
high as US$ 40 per dozen, whereas rest of them are selling at less than
US$ 20 per dozen. Selling at such a throwaway price is lost opportunity
and the worst use of quota ceiling. Local exporters must remember that
once the textile quota regime is over, they will not be able to sell
"stock lots". For their survival they must improve quality of
their finished products. They must remember that umbrella of textile
quota will not be available beyond December 31, 2004.
(US$ IN MILLION)
PAKISTAN'S MAJOR MARKETS
(PERCENTAGE SHARE IN 2001-02)