Pak-US investment treaty in doldrums

The News (Pakistan) | 17 May 2007

Pak-US investment treaty in doldrums

By Israr Khan

ISLAMABAD: The proposed Pak-US Bilateral Investment Treaty (BIT) is in the doldrums as the two sides have differences in certain areas and are showing no flexibility in their stances.

A number of differences persist on issues of considerable importance to Islamabad. The United States wants Pakistan to include in the draft treaty some aspects which the latter is not ready to accept. As a result, both have failed to strike a compromise formula.

The Bush administration is asking Islamabad to accept its version on major issues, including reinvestment, arbitration mechanism, intellectual property rights and grant of MFN status.

Negotiations on Pak-US bilateral investment treaty, as a stepping stone towards an FTA, have been quite problematic.

During President George Bush’s visit to Pakistan in March 2006, it was anticipated that the BIT would be sealed, but it did not, and to-date lies in cold storage.

Following this visit, two ministerial-level meetings took place: United States Trade Representative (USTR) Susan Schwab met Pakistan’s Commerce Minister Humayun Akhtar Khan in August 2006, and again in Cairns (Australia) in September 2006 in this regard.

Then in October 2006, Assistant United States Trade Representative (AUSTR) Douglas A. Hartwick co-chaired the second meeting of the US-Pakistan Trade and Investment Framework Agreement (TIFA) Council in Islamabad with Pakistan’s Commerce Secretary Syed Asif Shah.

It focused on a number of issues, including Reconstruction Opportunity Zones (ROZs), Generalized System of Preferences (GSP), textiles, workers rights, services, facilitation of Pakistan-Afghan Transit Trade and agriculture.

But no negotiations have taken place ever since, nor an exchange of delegations occurred. Progress on the treaty is at a standstill, a well-placed source told The News on Wednesday.

The US wants hard conditionalities to be attached to the treaty, which effectively means it has no intention of entering into a deal, an official remarked.

Under Pakistan’s liberal investment policy, all economic sectors are open to foreign direct investment, 100 per cent foreign equity is allowed, with foreign investment fully protected in the country.

Conditionalities under the treaty were not in the best interest of Pakistan, however; Islamabad wants a treaty which promotes its interests.

A BIT is set to open the door for Free Trade Agreement (FTA) between the two countries. It promises to enhance trade volume, generate more employment and spur business activities.

Since restructuring its investment ties with the entire world, the United States has so far inked BIT with only one state - Paraguay (a banana state).

Despite the fact Pakistan became a US ally in 2001 in its so-called war on terror, it has failed to attract sizeable investment from the US. It could not even gain easy access to the US markets. In contrast, the country suffered a lot in terms of lost investment opportunities and social unrest.

The US also questions Pakistan’s commitment to providing adequate protection to intellectual property. It has concerns about book piracy, weak trademark enforcement, and pharmaceutical patent protection. These issues remain serious barriers to trade and investment.

However, it still praises Islamabad for taking significant steps to shut down optical disc production and export of pirated optical discs over the last two years, and for creating the Intellectual Property Rights Organization (IPO).