PAK-U.S. RELATIONSHIP & WEAK TRADE TIES

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Aug 29 - Sep 11, 2011

There is a fear that economic slowdown in U.S. would render an impact over the exports from Pakistan this financial year. To the least, it seems, an issue of reconstruction opportunity zones may further be delayed because of the prevailing debt crisis in U.S. Too, hard-hearted and unfair tariffs on textile will elongate the dream of fair access to US market of several textile companies operating in Pakistan.

Pipedream reconstruction opportunity zones (RoZs) were envisaged back in 2006 to support the war-devastated economies of Pakistan and Afghanistan in creating job opportunities and giving major boost to their economic developments. Exports from RoZs are to enjoy duty-free access to U.S. market.

Just as the legislation in U.S. related to RoZs is long awaited so duty-free access to or tariff concessions on textiles from Pakistan has been facing the apparent oppositions from U.S. textile industrialists whose purported fears of impact of trade concessions to Pakistan on them are widely purveyed in the international media.

Consider the size of American total imports of over $2.5 trillion compared to Pakistan's overall exports of $4.1 billion (in 2010-11) to it, don't these media reports smack some kind of spin doctoring by Pakistan's foreign trade rivals?

Pakistan exports mainly cotton yarn, woven fabrics, textiles, rice, and leather, surgical, and sports goods to U.S. while imports include boiler machinery, wheat, petroleum products, and telecom and electrical appliances.

Americans absorb 20 to 30 per cent of Pakistan's exports major being textile. Pakistan's total textile exports stand at over $10 billion, a quarter of which is destined to retailers and traders in the North American nation.

Textile sector plays very important role in the economy of Pakistan, employing 40 per cent of the industrial labours and earning more than 50 per cent of national export revenue.

The withdrawal of heavy tariffs on textiles will certainly result in multibillion dollars upswing in exports. According to an estimate, textile exports from Pakistan will go up by at least three billion dollar following lifts of trade restrictions.

"Because textile products are taxed heavily, Pakistan pays disproportionate tariff rates in comparison with more diversified economies," Washington Post reported as saying Ed Gresser, president of the Democratic Leadership Council and a trade policy analyst.

U.S. slapped $315 million penalty on exports from Pakistan in 2009. "US trade policy treats Pakistan quite badly," Gresser conceded.

For the economy like US, the reduction in imports from Pakistan would not help the world's largest economy to protect its local industries since the volume form minuscule of its imports, yet this would deal a severe below to Pakistan's exporting sector.

The anticipation was however ruled out by the government officials who for long have been focussing on diversification of export basket as well as destinations.

Pakistan's dependence on U.S. market is waning year on year, it is learnt, as the country is exploring other markets in North America including Mexico and Canada.

Analysts said exports are driven by Pak-US relationship. When good relations prevail upon the atmosphere, exports increase and just as relation goes sour, so bilateral trade suffers.

However, in the present situation when US has opened up its strongbox for Pakistan, bilateral trade is not showing any significant jump. It is not that there is no capacity of export expansion. There can be an unimaginable rise in exports to the world's largest consumer market provided fair trade.

It is worthwhile to mention that EU's concessions to Pakistan exports have not been materialized for want of WTO's ratification. The intention of world trade organization (WTO) in promoting free market mechanism in its member countries evokes doubts as it keeps silence on heavy taxes-conceded by US trade analyst-imposed by U.S. on Pakistan's textile exports.

Pak-US relationship dated back to 50s. US interest in the South Asian nation is because of the latter's strategic location lapped by mostly mineral-resources-rich countries as well as world's populace economies of India and China.

This long relationship does not reflect in the trade ties between the two nations. U.S. has not faltered in doling out money to Pakistan since especially 9/11 most of which ended up in bolstering latter's military capabilities making the country world's second largest recipient of U.S. aids. An estimate puts the number at more than $15 billion since the partition of subcontinent.

Undoubtedly, funds pouring from the platform of for example U.S. Agency for International Development (USAID) helped the national economy to bring some improvements in its income generating sectors.

Pakistan Ambassador to U.S., Husain Haqqani is hopeful of improving U.S.-Pakistan bilateral trade ties. Speaking at a gathering to witness the debut arrival of Pak mangoes at the Chicagoan port, he reportedly said, it had taken two long years to get entry visa for Pakistani fruits to U.S. market.

"The United States and Pakistan have worked closely to open this new market to mango growers in Pakistan and make additional choices available to U.S. consumers," said Agriculture Secretary Tom Vilsack in a press release. "Irradiation treatments allow us to facilitate the safe importation of mangoes from Pakistan while protecting U.S. agriculture from harmful pests and diseases."

Installed with the financial assistance of USAID, mango-processing facility is aimed at to upgrade the quality and improve productivity of Pakistani fruits. The first installation in Multan was one of the15 processing plants to be introduced at various farms by yearend, according to South Asian News Agency (SANA).

"Through projects such as this, USAID is helping Pakistanis to adopt new technologies, develop work force, find new markets, and ultimately, earn more revenues," Sana cited USAID Director for Pakistan Andrew Sisson as saying. "The United States government is strongly committed to encouraging economic growth and the creation of employment opportunities for the people of Pakistan."

US Congress has agreed to grant massive $7.5 billion aid to Pakistan for five years, but it is not ready to waive trade restrictions despite knowing that it would lead to sustainable economic growth in the country that is its key coalition partner in the war on terror.

Pakistan's economic betterment will prevent the susceptibility of people to the whirlpool of militancy or militants groups gaining space within the economically deprived masses. Only handouts will not seem to secure interest of United States in the region. It has to make people stand on their feet if it is sincere in its intention of winning hearts and minds of people of Pakistan and Afghanistan.