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Musharraf’s visit to China boosts chances of free trade accord

Gulf News - 06/18/2006

Musharraf’s visit to China boosts chances of free trade accord

By Farhan Bokhari, Special to Gulf News

Islamabad: Last week’s visit to China by General Pervez Musharraf, Pakistan’s military ruler, has led to the renewal of calls for a free trade agreement between the two countries.

This follows discussions between the two sides, spanning over the past three years, where Pakistan has been anxious to sign a free trade deal which allows the unrestricted flow of goods across its border with China.

Pakistan’s interest not-withstanding, there are many who believe that a free trade deal with China would adversely affect the south Asian country’s economic prospects.

Fears of the unrestricted flow of Chinese goods in to Pakistan’s market at an unprecedented pace have prompted many in the business community to express reservations about the deal.

The government however is driven by the classical view of free trade which essentially argues that opening up the borders between two countries are always beneficial for consumers and producers in the long run, in spite of some disruptions along the way through inefficient companies and industries shutting down or being forced to become more competitive. In spite of such arguments, the issue of the consequence of free trade is a complex one.

Ideally, when trade opens up without the fetters of tariff driven barriers, the best run producers are meant to survive while the consumers receive the best possible deal.

Many of Pakistan’s best run companies are often criticised for flourishing under the support of protection offered by the government over an extended period of time.

New budget

This has ranged from preferences by way of the issuance of licences for the simple matter of allowing a new factory to be established, which was the norm till the late 1980s, to past support by way of loans at reduced rates, offered by government owned banks.

More recently, the new budget for the next financial year which begins in July has seen such measures as the government allowing the duty free import of tractors to benefit large parts of Pakistan across its rural areas.

The measure has been followed by an intense reaction from businessmen with an interest in the tractor manufacturing businesses. Such businessmen oppose the government’s decision on the grounds that this would adversely affect local tractor producers who have so far overseen a largely protected business atmosphere.

Powerful reminder

Other more recent examples include the opposition of some Pakistani businessmen to suggestions of opening up their market to engineering goods imported free of any duties, and import of equipment for industries already produced in Pakistan, under a zero tariff regime.

For many Pakistani businessmen, such ideas are a powerful reminder of their own deficiencies. But rather than improving internal efficiency to tackle the challenge, businessmen instead choose to agitate for blocking a more liberalised trading regime.

The proposal for free trade between Pakistan and China therefore comes together at a difficult time when the business community is not fully on board. To make matters worse, the rising flow of Chinese goods entering Pakistan including fruits and vegetables, have only increased opposition to a more liberalised trading regime. "We can’t even produce the best quality fruit and have to get that from China" is one popular phrase which is often heard from the opponents of a Sino-Pak free trade agreement.

On the contrary, Pakistani consumers have all the reason in the world to favour such an opening up with China, essentially driven by the belief that the flow of trade and economic relations must be driven primarily by the needs and comforts of consumers.

Such agitation which fundamentally seeks to promote the public’s interest can progress even further, once backed by politicians from across the board. The central point of emphasis in this activism has to be the view that opening up trade frontiers with China must a key cornerstone for the government’s policies, as its likely to bring more prosperity for the average and relatively low income Pakistanis, than at any other time in the history of these two nations.

The writer is a journalist based in Pakistan.

 source: Gulf News