November 11, 2004

American voters have given George Bush a second term and the Pakistani leadership hopes for a stable US-Pakistan relationship. Republicans have been closer to Islamabad than Democrats have been, though the evolving strategic relationship between the two countries seems to be turning bipartisan. Durable relationships between the countries are governed by common interests.

The personal understanding between Bush and Musharraf may facilitate in building upon what has been achieved by the march of events since 9/11. Both countries share some major objectives but not necessarily a common approach to tackle related problems.

Both Pakistan and the USA are concerned over growing militancy and extremism. Both have stakes in Afghanistan’s stability and in regional peace. And the war on terror, that will shape the 21st century, if not the US interests in oil-rich Central Asia, is likely to keep the Americans engaged with Pakistan and in the region. Linked to militancy is the issue of Kashmir begging for a solution. Pakistan’s effort to modernize its economy requires secular outlook. Here the Washington has a role to play.

The bilateral ties would basically be governed not by the strategic goals alone but also US strategies evolved over time based on its experience of successes and failures. Bush has won a mandate from the electorate to stay on course and win peace and provide security to the US citizens. Failure is not an option. The problems facing Bush would not go away by his re-election for a second term.

The cost of unilateralism has been heavy. It has divided America and the world and has split the Atlantic Alliance between the US and Europe. The biggest challenge for Bush is to have few enemies and many friends to fulfill the American ambition for global leadership. Even in case of a major power, political isolation does not bring convincing victory.

Winning peace is a complex issue. Time has come for Bush to explore a wide range of options.In case of a review, Pakistan’s point of view may be given some weight. First, Musharraf’s call to the Americans to exercise moderation. Second, it is a prosperous Pakistan that can be a more effective deterrent to militancy and extremism than the barrel of a gun divorced from its political and economic context.

Pakistan wants America to reappraise its policies to add economic muscle to the evolving strategic relationship. It wants more aid and investments and what is by far most important, easier access to the US market for exports.

Islamabad’s wish list also includes duty concessions, no negative travel advisory, easy movement of labour, transfer of technology and collaboration in education and scientific research.

Currently, the two countries enjoy a low profile economic relationship in a high profile strategic political equation. This mismatch cannot ensure a durable relationship in a fast changing world dictated by political expediencies. American economic aid is a mere $300 million per annum. Annual exports to US are at $2,944 million and American direct investments at $225-260 million. Portfolio investment is in the range of $15-20 million.

Pakistan’s imports from the United States rose faster in fiscal 2004 than exports, up by $593 million to $ 1,328 million. Exports moved up slower from $2,616 million to $2,944 billion. A key problem facing the developing countries like Pakistan is that imports exceed exports and widen trade and current deficits. As the world’s largest and most developed market, the US has tremendous space to offer easier access to Pakistani goods and labour.

Perhaps, it also an opportune time to enhance collaboration. Bush has gained strength from re-election and the Republicans’ majorities in both Senate and Congress. Pakistan has completed its first generation of economic reforms that has opened the domestic market for foreign investment, goods and services. The trend would be strengthened in January 2005 under the WTO liberalized trade regime to which both the United States and Pakistan subscribe.

Under the market reforms, there is a free float of the rupee, low and flexible interest rates, maximum customs tariff at 25 per cent and averaging 14 per cent. Corporate taxes on commercial banks and private companies are also being cut gradually.

Militancy and extremism may go through ups and downs but would persist till such time the root causes are removed.It cannot be resolved by a tunnel view or by a blinkers’ vision. The evolving strategic ties between the two countries need economic muscle more of substance than political shadows.

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