Pakistan’s economy is at its lowest in terms of all the macroeconomic indicators, particularly its tax-to-GDP ratio, unsustainable debt portfolio and rising inflation and energy crisis adding insult to injury. The country has inherited its borders which spell uncertain security situation; Iran on its West, Afghanistan on North West and India on the East. India is a permanent enemy who has strategic partnership with Iran and is making huge investment in Afghanistan in order to have influence in this country which was always a backyard for Pakistan. India is trying hard to encircle Pakistan and fan and fuel insurgency in Balochistan and FATA. Pakistan’s economy in its present state not only cannot support its security needs, it is creating dissatisfaction and discord. This situation is a serious threat to Pakistan’s national security.
This situation is not a threat to Pakistan’s national security alone. A Report of the Task Force of Council on Foreign Relations on US Strategy for Pakistan and Afghanistan shows that people who matter in the US security calculations are equally concerned about its implications on US national security. The Report says that:
- Containing the terrorist threat from Pakistan would be challenging if Pakistani and U.S. governments were at odds, intelligence sharing was reduced, and U.S. officials were forced to operate from neighboring countries.
- NATO’s presence in Afghanistan would be jeopardized without a secure logistics route through Pakistan.
- At the same time, Pakistan’s fragile political and economic stability would be undermined by greater tensions with the United States. Pakistan’s military would suffer from the loss of U.S. assistance and restricted access to training, technology, and spare parts for American-made weapons and vehicles.
- In general, U.S. coercion and containment of Pakistan could accelerate dangerous economic, political, and social trends inside Pakistan. Americans must recognize that as frustrating and difficult as Pakistan’s situation may be today, it has the potential to get even worse.
Pakistan has been trying to expand its trade to USA and other countries. It is the foreign trade and not bilateral aid, which can solve Pakistan’s economic problems. Recognizing this, the Report makes a very vital recommendation that the Obama administration should propose—and the U.S. Congress should adopt—legislation liberalizing tariffs on textile imports from Pakistan. This would help stimulate Pakistan’s economy and reinforce a partnership between the American and Pakistani people. Pakistan’s leaders have long sought greater access to Western markets. The United States is Pakistan’s top export market.
The Report pursues the following line of arguments:
- One-quarter of Pakistan’s exports are bound for the United States, and one-third of foreign investment in Pakistan comes from U.S.-based investors. But Pakistan still faces substantial barriers to the U.S. market.
- Given that the textile industry accounts for 38 percent of Pakistan’s industrial employment, this could provide employment opportunities for millions of young Pakistanis, discouraging them from paths leading to militancy.
- Related industries that have suffered terrible setbacks from Pakistan’s floods, such as cotton farming, would also stand to benefit from the expansion of the textile sector.
- This would put more money in the pockets of Pakistani consumers. It is the single most effective step the United States could take to stimulate the Pakistani economy.
- Relaxing U.S. textile tariffs on imports from Pakistan would not put U.S. producers at risk. U.S. imports from Pakistan make up a small share (3 percent) of total U.S. imports; imports of cotton knit shirts and cotton trousers from Pakistan, for example, are 3.6 percent of total U.S. imports of those particular products. Instead, a trade agreement would reshape the proportion of U.S. imports from China and other low-cost exporters that currently dominate this sector of the market.
U.S. assistance programming should be used to maximize the benefits of this agreement for regions most threatened by extremist movements. Supporting infrastructure and training projects could help shape where new textile industries are located. Pakistan’s cotton producing regions, including southern Punjab, would stand to benefit most from the deal. Recent experience with U.S. legislation designed to facilitate greater trade and investment in Pakistan, including the Reconstruction Opportunity Zone initiative, has demonstrated the hurdles that block efforts to liberalize textile trade with Pakistan. Domestically, labor leaders, the U.S. textile industry, and members of Congress from cotton-producing regions would need reassurances that their core concerns can be met. Recognizing these challenges, the Task Force urges the Obama administration and Congress to treat this legislation as an important national security priority and a part of America’s generous response to Pakistan’s flood recovery effort. On a parallel track, Washington will also need a diplomatic campaign to address the inevitable objections of other textile-producing states, including China and India.