“In September, Pakistan will have the highest textile orders of 2021,” says Khurrum Mukhtar, Patron in Chief of the Pakistan Textile Exporters Association while explaining that the shipping backlog in the United States is delaying placement of further orders.
Owing to the pandemic, labour shortages and holiday-buying surges, a record-breaking 44 freight ships are stuck awaiting entry into California’s two largest ports which account for about a third of US imports, says the Business Insider.
Despite the upheaval across the border, all stakeholders agree that Pakistan’s exports to the West are unlikely to be affected significantly. However, a range of trade levers may be used to pressurise Pakistan.
Levers of the West
“The US is not likely to take a knee-jerk reaction to the events in Afghanistan nor will GSP plus be impacted,” says Ehsan Malik, CEO of the Pakistan Business Council. These are the levers that the West uses as negotiation tactics, he explains.
And these may work in Pakistan’s favour. “The United States may encourage joint ventures between Pakistan and Afghanistan that offer export opportunities. Jordan and Egypt were offered incentives to partake in the Middle-East peace process though Israel was involved. If Taliban want to play a credible role globally, they will have to trade in the international market,” Mr Malik explained.
Wishful thinking of $50bn exports will remain dreams of the storybook simpleton Sheikh Chilli till the core of the economic infrastructure and outlook remains unchanged
However, Dr Manzoor Ahmad, a former ambassador to the World Trade Organisation opined that the restrictions of the Financial Action Task Force may be prolonged which are costing Pakistan losses to the tune of $10 billion annually.
Another prod that the West may use is changing the criteria to the GSP plus in the next review. Pakistan is hoping to get an extension from the European Union post-2022. While the United Kingdom has historically been inclined towards Pakistan, it is no longer part of the EU courtesy of Brexit. France and Germany are not so pro-Pakistan and Southern Europe limitedly competes with some of Pakistan’s exports, says Dr Ahmad, leaving Pakistan short of allies in Europe.
Briefly trending and soon forgotten the #sactionPakistan gained temporary traction in August.
In the mind of an average American, ‘Pakistan’, ‘Taliban’ and ‘terrorism’ are closely associated if not synonymous. Given the embarrassing debacle for the US in Afghanistan and the power of social media, could the average Joe shun Pakistani apparel on principle?
“I doubt Pakistani products will be boycotted,” says Mr Malik. “It is not an accident that the US is the largest market for Pakistan. People who buy do so because our products are competitive.”
Those who purchase Pakistani apparel are the ones who belong to the lower-income strata, are price conscious and least likely to be aware of or swayed by foreign politics, concurs Dr Ahmad.
The cost of not trading with India Trade with India appears impossible, given political realities.
The United States of America is one of Pakistan’s top export destinations. According to International Trade Centre’s data, Pakistan’s exports to America were approximately 19 per cent in 2020. To put this number in context, let’s explore other well-established international enmities.
Regardless of the US-China trade, America’s imports have fluctuated around half a trillion dollars in the last five years, accounting for about 18pc of China’s exports in 2020 and nearly 20pc of the US’s imports last year. Similarly, notwithstanding the economic and political rivalry and border disputes between India and China, at $59 billion, India’s imports from China in 2020 were at 16pc.
Granted, China is so deeply entrenched in international supply chains and woven in the DNA of imports of most countries that trade with the exporting giant is a foregone conclusion. Pakistan and India on the other hand have many alternatives to resort to, but at what cost?
“Expensive energy, sourcing of import and tariffs, and lack of regional trade have bound Pakistan’s exports in the range of $22-25bn,” says Dr Ahmad. “Bangladesh imports cotton from India but we don’t. Instead, we source from expensive countries further away, which increases our costs of production. And it is the same for the pharmaceutical sector.”
“Pakistan is not part of any regional trading bloc. Whereas others benefit from trading with neighbours, the South Asia Free Trade Area is defunct with our regional trade no more than 5pc,” he said adding the age-old lament.
The crux of the current political climate is the same as it always was: no Hail Mary pass will boost exports regardless of the regional hegemonic changes. Wishful thinking of $50bn exports will remain dreams of the storybook simpleton Sheikh Chilli till the core of the economic infrastructure and outlook remains unchanged.
Published in Dawn, The Business and Finance Weekly, September 6th, 2021