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1- TASK FORCE FOR POWER TARIFF  
2-
TIFA: ENHANCED MARKET ACCESS
3- THE STATE OF ECONOMY

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TIFA: ENHANCED MARKET ACCESS

 

Greater market access will boost Pakistanís export to USA


By SHABBIR H. KAZMI

July 07 - 13, 2003
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During 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.

The 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.

The 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.

Many 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?

No 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.

While 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.

 

 

Saying 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.

To 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.

MAJOR TEXTILE EXPORTS
(US$ IN MILLION)

  (July-April)
Cotton Yarn 791.9
Cotton Cloth 1,057.0
Knitwear 875.3
Bedwear 1,010.9
Towels 279.3
Made-ups 880,2


 

PAKISTAN'S MAJOR MARKETS
(PERCENTAGE SHARE IN 2001-02)

USA 24.7
Germany 4.9
UK 7.2
Hong Kong 4.8
Dubai 7.9
Saudi Arabia 3.6