Still waiting for the ROZs

US heightens its pitch for economic assistance to Pakistan, policymakers should seize moment for meaningful gains.

The war discourse between the US and Pakistan is generally dominated by the ‘do more’ mantra, with the US calling for military action in the northern areas. But more recently, there has been a shift of emphasis from the military to the economic arena. This became abundantly evident in US Vice President Biden’s remarks on the importance of the “developmental needs” of Pakistan. His words were echoed by the State Department spokesperson, Philip Cowley, reiterating that Pakistan’s economic growth is “vitally important” for the US. What could have caused this change of heart and tone?

The US security assistance to Pakistan, no matter how meagre, could not be expected to continue indefinitely. There is also a growing realisation that rising poverty levels and a deteriorating economic situation in Pakistan and Afghanistan may jeopardise military gains. The US also needs assurance that the Kerry-Lugar aid of $7.5 billion will be spent on meaningful developmental projects. But foremost, the US wants peace and stability in the region.

Towards providing economic support, two long-standing issues, having immense trade and industrial significance for Pakistan, have been raised by the US government: duty-free market access to Pakistani textiles and establishment of the long-promised ‘reconstruction opportunity zones’ (ROZs) in Pakistan and Afghanistan.

The US government initially announced the opening of the ROZs in Pakistan in 2006. These industrial zones were to be established in the tribal areas of Khyber-Pakhtunkhwa, including Peshawar, areas of Balochistan bordering Afghanistan and the earthquake-affected northern areas. The entire area of Afghanistan was declared an ROZ. Exports from industries in the ROZs would have duty-free access to the US. These export zones were envisaged to help build infrastructure and industry in the war-ravaged areas of Pakistan and Afghanistan. They were expected to provide livelihood to thousands of unemployed locals who had no better option than to join the ranks of the terrorists.

Economic interdependence has the power to prevent conflicts, so say the proponents of globalisation and free trade. Pakistan should, therefore, press on the US for an early legislation of the ROZs, not just to bolster the economy, but to create a reason for security and order to prevail in the region.

As for the issue of duty-free market access, the World Trade Organization (WTO) prevents preferential treatment among members. A waiver seems highly unlikely given that the EU’s waiver request for recently granted tariff concessions to Pakistan still remains blocked in the WTO, hence the efforts for the Generalized System of Trade Preferences (GSP), which allows preferential treatment to exports from developing countries under special conditions. The GSP route may perhaps be adopted for US concessions as well. The GSP concessions are, however, time bound and can be terminated.

A Free Trade Agreement with the US, though difficult to achieve, seems to be a better option. Pakistan has been trying hard for it in the past, but with little success. The moment calls for renewed efforts to eke out a bilateral trade agreement from the existing ‘strategic partnership’. The establishment of the ROZs can also help Pakistan to move forward in this direction once a trade pattern is established between the two countries.

As the US government heightens its pitch for economic assistance to Pakistan, policymakers should seize the moment for meaningful gains. If a price tag has to be placed on the war, it had better be in quantifiable terms.

Published in The Express Tribune, January 29^th,  2011.