The ongoing trade war between China and the United States can boost the prospects of Pakistani exports to the American market and encourage Chinese producers to relocate to Pakistan to avoid punitive tariffs on their US shipments and take advantage of cheaper labour.
On top of that, business leaders say it may afford Islamabad an opportunity to renegotiate the terms of China’s future investments in and trade with Pakistan.
Abdul Razzak Dawood, adviser to the prime minister on trade, industry and investment, was quoted last week to have told a gathering of textile manufacturers in Karachi that the trade war between the world’s two largest economies could be beneficial for Pakistan.
See: What’s on everyone’s mind in China-US trade war
“The trade war between China and the United States is getting bigger and bigger by the day… and the demand for goods is not declining (in the US market). Pakistan needs to explore ways so that it can benefit from this war.”
Chinese manufacturers can ward off punitive tariffs on their exports to the United States by relocating their labour-intensive industries to Pakistan, according to PBC CEO Ehsan Malik
Pakistan is already seeking the same market access for its exports that Beijing has given to the Association of South East Asian Nations (Asean), New Zealand and Australia under the 2006 Free Trade Agreement (FTA) that is responsible for heavily tilting the trade balance in favour of China.
Islamabad has also asked China to share complete information of its exports, both under and outside the FTA, with Islamabad in order to help it eliminate under-invoicing by Pakistani importers.
Moreover, efforts are on to convince Beijing to encourage its manufacturers to relocate their industry to Pakistan.
The adviser had also told a Senate panel on industries and production that China-US tensions over trade tariffs was a good sign for Pakistan as it would place the country in a better negotiating position (with China).
“The China-US trade war has put Pakistan in an advantageous position and we have become more competitive than China in some areas like textiles. It offers an opportunity for Pakistan to boost its exports to the United States as well as revive the closed manufacturing capacity (mostly in Punjab),” Pakistan Business Council CEO Ehsan Malik told this correspondent.
He says Chinese manufacturers can also ward off punitive tariffs on their exports to the United States by relocating their labour-intensive industries to Pakistan.
“They (Chinese companies) can bring semi-finished goods and convert them into value-added goods for export to the United States. Then there are products that are made in China but not in Pakistan.
Such industries can also be relocated to Pakistan to avert higher US tariffs on Chinese exports.”
A Lahore-based textile exporter, who requested anonymity, was not too optimistic. “In theory, we can take advantage of the American action against China. But we are not ready to benefit from it. We do not have enough capacity to fill the gap. Nor do we have developed our value-added textiles to replace China in the US market. I think countries like India and Bangladesh will have captured the US market by the time we are ready to even start thinking about benefitting from this opportunity.”
By far, China has shown a rather favourable view of most of Islamabad’s demands. It has expressed willingness to take steps to boost its imports from Pakistan in view of the geopolitical advantages it will draw from the completion of the China-Pakistan Economic Corridor (CPEC), a part of the Belt and Road Initiative around which it has pledged to invest more than $60 billion in energy and transport infrastructure.
“The immediate benefit Pakistan can expect from China because of its worsening trade relations with the United States is improvement in trade terms and extension in the repayment period of loans taken for power projects under the CPEC initiative,” the anonymous textile exporter contended.
“It can be followed up with softer terms for future CPEC investments, relocation of Chinese textiles industry to Pakistan and transfer of technology and skills. My advice for the government will be to focus on these items.”
Published in Dawn, The Business and Finance Weekly, October 8th, 2018
Comments (23) Closed
So basically Chinese companies would come to Pakistan, set up shop, employ their own workers (and some Pakistani workers too) and export to Us and then take their profits to China. Very nice concept. Some ancillary work might be given to some Pakistani sub vendors, this would boost the economy to a large extent.
Be wary of Chinese manufacturers setting up shop in Pakistan. The working conditions of factory workers in China is horrible. Tales of workers at Foxconn and other companies committing suicide are a horror story.
"I think countries like India and Bangladesh will have captured the US market by the time we are ready to even start thinking about benefitting from this opportunity.” Sums it up.
“Islamabad has also asked China to share complete information of its exports, both under and outside the FTA, with Islamabad in order to help it eliminate under-invoicing by Pakistani importers.”
Importers are probably over invoicing to send money abroad. This also allows them to show higher expenses and hence reduced profits and hence reduced tax liability. I cannot see one reason why importers would resort to underinvoicing.
There are many countries on earth like Vietnam, Thailand, Egypt, India, BD that have same or better condition as Pakistan. Need to be very quick in grabbing opportunities.
"Making the most of China-US trade tiff": : Before Chinese economy collapses? Chinese central bank just injected $100 Billion into the economy to stay afloat.
India has the most to gain, with the worlds fastest growing economy and 1.2 billion people, both China and US are keen to have access to her market.
Both China and US are desperate to have access to worlds fastest growing economy. India has the world at its feet.
An excellent article and should be immediately acted upon.
Pakistan being a brother country of China should not try to exploit the situation.. We should offer as much support as possible..
india has already offered many items to usa which they sourced from china, once usa indias tarrif issue are sorted mutually india will take advantge we will not get all of chinese export market to usa, but say 20% , the other 30 % 2ill be bangladesh, vietnam, phillipines thaiand srilanka ect will fill, china will still export 50% as it has advntge in certain industries
if pakistan really worked hard textile is their for the taking along with leather , sports goods ect
if india pakistan collaborate will wil take 50% of chines export to usa
india leather pakistan skills in converting them into goods, same textile pakistan cotton india refining them into high end cloth, the pakistan converin them into garments ect same with other product like IT, gems, spices, certain agricultural products like basmati, mangoes ect ect only high end electronic we will lag behind china bec of cost factor , quality in india is better, but with maybe cheap pakistani labour we may even give china a run for their money
and the greates of all will be tourism bet india and pakistan and also foreigners, they fly to tamiland and go all the way to khyber pass in pakistan witout visa and security issue if it happen atleast a 100 million tourist will visit india pakistn the jobs created by that will be phenomenal
but does imran hs that vision???????
@Qureshi although India is fastest growing economy, here she is at loss b/c India has not much productivity as compare to China to fill US market(vacancies due to China) so other countries can also get good share of US market and secondly China farm is also open as it heavily depend on US
Fools, US already knows this! Even amrecans going to stop even IMP money if you pay it to Chinese?
@eric Get real and forget India & Pakistan joint exports. The real winners of this trade war are going to be countries which have already been competing with China for their products in western markets. It's too optimistic, simplistic, impractical, and nieve to assume that you can set up the industry today and compete with global competitors tomorrow.
When I read the headline, I thought the article would be about how Pakistan could get some of the share of Chinese exports to the US by exporting those products themselves. Instead the article is about how China can use Pakistan further to its own advantage. This shows a subservient mentality which is a bad sign for Pakistan.
"A Lahore-based textile exporter was not too optimistic “I think countries like India and Bangladesh will have captured the US market by the time we are ready to even start thinking about benefiting from this opportunity.”
This says it all.
Most of the textile trade will either go to Bangladesh or Vietnam. Maybe Cambodia. It is interesting too see Indians are over hyped regarding tariff against china in reality Indian textile exporter losing big time to Bangladesh and Vietnam. Last few years over 50,000 textile factory shut down in India because of back dated labor laws and in efficiency. Indonesia now becoming biggest car manufacturer which India was suppose to but lose the opportunity lack of infrastructure i will say and Vietnam export is 300 billion dollar while India country of 1.3 billion is also 300 billion despite its almost 20 times higher in population then Vietnam. Philippines already capture most of the IT outsource business from India and eastern European countries will capture rest. Why indian rupee is worst performing currency in Asia because India failed miserably increase exports.
Don't think American hawks are that fool. They have tightened the noose on China in North America by inserting a clause in new agreement "Non-market economy" which essentially means China by which no country can trade with China without approval of two other countries, So If Pakistan help China Cheat, U.S tariffs, They can come hard on Pakistan as well. Remember U.S.A has lot of leverage on IMF. Be careful what you wish for.
Good thinking B2.
The greatest contribution Pakistan can bring to world peace is to help China and USA, the 1st and 2nd economies, to bridge their differences, trade and otherwise.
After all it was us that brought them together in 1971 in the first place.
This is truly in favour of Pakistan. PM must avail this opportunity and seal a deal with China. China itself now is more willing to establish their industries in Pakistan rather than Bangladesh and India.
Chinese manufacturers have been re-locating their facilities in other countries to take advantage of lower costs. Lower costs are not just comprised of lower wages. Ease of doing business plays a larger role.
Thus, the countries of choice have been Vietnam, Cambodia, Thailand, Ethiopia and few more. Pakistan, like India, is a difficult place to do business in.