Pakistan’s exports to China stand at $1.7 billion and imports at $15 billion. The gap between these exports and imports has decreased in the last few months, but understandably, the import-export gap is still gargantuan.
US imports from China amount to $540 billion, while Chinese imports from the US amount to $120 billion. The import-export gap for Pakistan to China is double the US-China gap. Yet the USA is worried; on May 14, it doubled customs duties on $200 billion worth of Chinese products. This did not go unreciprocated, and Beijing increased tariffs on $60 billion worth of American imports. With Pakistan it is different.
US, China and Germany are major destinations for Pakistani exports. Exporting to India depends on how Narendra Modi government wants to steer trade relations. Pakistan’s efforts should be geared towards Japan, Korea and Canada as potentially expanding exports markets. Pakistan’s request to Japan for reciprocal duty-free access on 20 selected items has fallen on deaf ears. Trading with Iran would be a choice with heavy economic repercussions for Pakistan due to US sanctions. That route needs to be taken with utmost care. Similarly, exporting to Turkey, despite the ever-friendly relations, will be a tough task since Turkey is an exports competitor at the international level. The last success for Pakistan in the exports arena was getting the GSP Plus status with the European Union. Pakistani exports to the EU greatly increased following the agreement EU. Overall, Pakistan’s strategy on exports seems to lack vision.
With half the import-export gap with China compared to Pakistan, the US is aiming for sanctions against Chinese exports. Pakistan is excited, meanwhile, to increase the imports since they come under the garb of investment. During the recent visit of the Chinese vice president to Pakistan, one of the four projects unveiled include the launching of the Huawei Technical Support Centre in Pakistan. Washington, on the other hand, has curbed the expansion of Huawei by requiring US-based firms to seek government approval for trading with the Chinese company.
One of the major reasons for trading partners being wary of Pakistan is its judicial system and inefficient contract enforcement
Despite allegations that this decision was taken due to concerns that the new 5G technology by Huawei may be used for spying and could breach American national security, critics still claim that this is just an excuse to impose non-tariff barriers on Chinese companies in the cold trade war between the two leading economies of the world. Not only has Pakistan welcomed Huawei, many Chinese technology companies are already operating in Pakistan. Finding their cushion as an essential part of the CPEC, these companies will only increase the import-export gap between China and Pakistan.
While China exports technology to Pakistan, and as export of technology increases all over the world with more than 50 percent of all exports being technological exports, Pakistan takes a backseat. It allows Chinese companies to overtake the technology market in Pakistan. The technology sector in Pakistan is full of potential. Other countries are trying to increase their exports through adoption of new technological breakthroughs, but we rely on Chinese technology that comes under the garb of investment vis-à-vis the CPEC.
This shoot-oneself-in-the-foot policy has led to the trade imbalance and the current account deficit for which we have to beg for grants and loans from China, Saudi Arabia and the IMF. Even in South Asia, Pakistani exports are way behind India and Bangladesh. The position is the same with regard to exports from Asia, with even Vietnam beating us at the exports game.
Pakistani exports are centred on a few countries, with large markets in Latin America, Africa and North Asia not being explored seriously. One of the major reasons for trading partners being wary of Pakistan is its judicial system, inefficient contract enforcement, lengthy delays in judicial decisions owing to huge caseloads and a long appeal system. We have to put our house in order.
When you play the game of exports, you win or you become poorer. There is no middle ground.
The writer is a freelancer