Dawn | 18 May 2014
Trade experts see nothing concrete in Pak-US action plan
Afshan Subohi
KARACHI: The Joint Action Plan signed last week by Pakistan and the US in Washington under Trade and Investment Framework Agreement (Tifa) is more of a goodwill gesture than anything concrete that can benefit this country by boosting the quantum of trade, according to experts.
“There is no point in looking for something that is not there. It was more of a routine exchange of pleasantries between economic diplomats of the two countries. If you insist on imagining apple falling in your lap that’s your wish, but it has little to do with the reality.
“The relationship between the US and Pakistan is more complicated than its perception,” a trade expert, currently in Brussels, told Dawn over telephone.
“The US Congress is hostile to the idea of patronising Pakistan as the majority of its members judge the South Asian nation as ‘irresponsible and unpredictable’. It did not reauthorise GSP scheme that expired in December 2013.”
Another economic diplomacy watcher in Islamabad observed: “It even shot down its own government’s proposal of reconstruction opportunity zones (ROZs) in troubled Northern Areas of Pakistan in 2012. I see no reason why would it concede trade concessions for a greater market access to Pakistan,”
The idea of ROZs was floated by the US to fight extremism in Northern Areas of Pakistan with economic development. It was argued that the trade concession to companies operating from Fata and adjoining regions will raise the opportunity cost of joining the ranks of militants for youths of the region.
“The proposal was a non-starter from the word go. It is not rocket science. When investors are shy to invest in Karachi and Lahore who in his right mind would climb mountains to invest in the war zone?” a CEO of a star Pakistani company commented at a joint business meeting in Karachi at one point.
Some executives heading US companies in Pakistan rejected what they termed a ‘subjective view’ of doomsayers. “The business circles saw the inking of agreement positively. The corporate Pakistan pins great value to warmer relations between Pakistan and the US. They consider it crucial for stability and progress,” a business leader told Dawn.
“It is not just the future of democracy that hinges on economic development but the fortunes of Afghanistan will also rise and fall with Pakistan. The danger of Afghanistan slipping back to civil war is real and Pakistan’s role in achieving peace and stability can’t be overlooked,” commented a political scientist in Lahore.
“Pakistan’s role is critical in preserving the gains of US intervention and in rebuilding and reconstruction process,” he explained.
“Instead of finger pointing and focusing on finding faults in the government’s initiatives we need to learn to appreciate. Khurram Dastagir is a motivated commerce minister keen to deliver development through export promotion,” a retired bureaucrat who moves in power circles in Islamabad defended Nawaz’s choice.
Shahid Javed Burki, currently in Washington, expressed skepticism about the government’s approach towards the issue of trade with the US. “The slogan of ‘trade not aid’ does not appeal to economic reasoning in case of cash-strapped Pakistan. A dollar earned through export is not worth more than a dollar a country gets in aid. The insistence of Pakistan for greater market access in the US may not yield expected results,” he argued.
“Top five items of exports from Pakistan to the US belong to leather and textile group where demand is currently stagnant and expected to fall in future. There is a limit to number of shirts and shoes an aging US population can consume.”
He believes that US may respond more warmly if Pakistan curbs intellectual property rights violations.
“Finally, the ‘gravity model of trade’ suggests thrust towards intra-regional trade. It would perhaps be more fruitful if Pakistan consolidates its trade ties in Asia, instead of eying distant markets,” he concluded.
On May 13, Commerce Minister Khurram Dastagir Khan and US Trade Representative Ambassador Michael Froman at a meeting of Tifa signed a mutually agreed action plan to enhance trade and investment flows over the next five years.
Following areas have been identified for cooperative efforts in the plan: 1. diversifying agricultural production; 2. enhancing intellectual property protection; 3. implementing the World Trade Organisation Trade Facilitation Agreement; 4. engaging on Pakistan’s accession to the WTO Government Procurement Agreement; 5. increasing trade in services; 6. outreach to US State and Local Governments; 7. promoting entrepreneurship; and 8. increasing dialogue between the respective private sectors.
According to the official data, total volume of trade between the US and Pakistan in calendar year 2013 was $5.3 billion. The balance was in favour of Pakistan that exports $3.7bn worth of merchandise and the value of imports from the US totals $1.6 bn. The foreign direct investment has declined to a fraction of what it was in mid-2000. In 2005 it was over $1.5bn whereas last year it was around $200 million.