Pakistan is seeking a re-appraisal of US strategy to have a more widened and meaningful co-operation in trade and investment. It wants to forge a new relationship focused on common business interests.

In view of the implications of quota-free trade for the two countries from January 1, 2005, Pakistan is eyeing joint ventures in textiles to exploit the domestic advantage that each partner enjoys. Another key area for increased co-operation is the financial sector in which American expertize and global sway could help Pakistan's efforts to access international capital markets.

"Time has come for a re-appraisal of the existing strategy" Dr Ishrat Husain, governor of the State Bank told the American audience at a seminar on the role of the United States in the economic challenges facing Pakistan. He reiterated Pakistan's position that it" would prefer to have greater access to the US market compared to increased aid allocation."

Despite a billion dollar write-off and one billion dollar debt relief by Washington, Pakistan paid over a billion dollar more in repayments of principal amounts loans and debt servicing than the official financial assistance received during 2000-2004 (total public and public guaranteed loans plus the IMF credits). It also included debt relief and rescheduling by Paris Club and stepped up assistance by World Bank and Asian Development Bank. Traditionally, Pakistan's trade deficit has been funded by foreign loans and credits. As imports continued to outpace exports,the country landed into debt trap.

Pakistan has also suffered from an erratic ebb and flow of official financial aid. Bilateral and multilateral official assistance depends on political goodwill of the donors which was lost because of nuclear explosion in May 1998. The inflow has also been restrained by global focus on control of fiscal deficits in all states and the tax payers' resistance suffering from high rate of employment. Loans are extended on the repaying capacity of the recipient which suffers in case of mounting trade deficits. A balance of payment crisis chokes foreign trade.

The total trade with the United States recorded for fiscal 2003 was $3.3 billion and trade surplus in favour of Pakistan amounted to $1.9 billion. The United States has committed a $3 billion loan for a five-year period starting from US fiscal 2005.

Dr Ishrat says United States can play a critical role in helping Pakistan meet the daunting economic challenges by shifting its support from conventional aid to market access, investment, technology transfer, education and training, scientific research and infrastructural development.

First, Pakistan is looking for an even playing field in textile trade. It wants the United States to allow textiles and clothings to enter the US markets on the same terms and conditions as given to Mexico, Central America, Caribbean and Sub- Saharan Africa. Imports from these countries and regions is zero-rated while Pakistan textile goods are subject to around 10.5 per cent duty.

If this discrimination is removed, Pakistan's exports of textiles to the United States would get a great boost, said officials. The US response would be determined by the outcome of US presidential elections. If John Kerry wins, the going for Pakistan may be tougher, because he is generally seen as a protectionist. His running mate for vice-presidentship John Edwards once said that "free trade is a security risk."

Second, the potential for co-operation in textiles need to be fully realized. It is stated that the US firms to be hit hard by the new agreement on clothing and textiles effective from January 2005 can save some jobs by entering into joint ventures, strategic alliances, marketing partnerships and technical collaboration agreements with Pakistani firms.

As Pakistan produces at low costs compared to their counterparts in the US , the specifications, designs, marketing, partnerships, quality control, research and development can be assigned to US firms while production can take place in Pakistan.

The machinery in the US can be shipped to Pakistan in lieu of equity in the joint ventures. In this process, the American consumer will be buying clothes at lower prices and some of the American workers will be able to save their jobs. Pakistan will expand its output, exports, employment and reduce poverty. The US tax payers money going into aid, would be saved.

Economic managers have also been advising the local textile industry to make American investors joint venture partners.

The scope of investment by American firms was also highlighted by Dr Ishrat Husain in his speech. He said US firms could locate their investment in Pakistan for exports to third countries or exploit the domestic market. With a 30-million strong middle class enjoying per capita incomes (in purchasing power) of $8,000- $10,000, Pakistan offers an attractive market for US investors.

Besides, Pakistan's Public Sector Development Programme finances only one half of the annual requirements. The remaining requirement is to be filled in by the private sector.

Pakistan is, therefore, accessing international capital markets for meeting its external financing needs. US companies could invest in private equity and debt funds, pension funds, mutual funds which yield above-average returns on their investments. In the next five years,the State Bank would like the commercial banks to focus on liability products for the benefit of the 28 million depositors and savers.

The global trading pattern is changing with quick shifts in trade and investment flows from country to country and region to region.Just 2-3 years ago, the US was the largest recipient of foreign investment.It is now China. The export growth from South East Asia is sustained now by China and not by USA. Pakistan needs to look at all options excluding none.

And the mode of trading is also changing. There are companies operating within the parameters of the old economy, in which economies of scale are rewards for efforts to put in by a given unit. The giant companies are trimming and consolidating and do not have much appetite to expand fast except in selected markets and through mergers and alliances.

In the new economy, networking brings returns that are created and shared by the entire market. Here business co-operation is more pronounced though the spirit of competition is not lost.

China with one-third of the global output and $400 billion worth of imports today offers trade opportunities for Asians. It offers opportunity for setting up supply chains and integrated production networks that tend to locate each stage of production in one country, often export to another country for eventual sales in a third country market.

There is no single business model for participating in this chain and there can be many phases of transition and many modes of involvement. East Asia is a major participant in this global supply chain and produces parts and components for a variety of manufactures. Pakistan can draw upon a variety of experiences for its benefit.