Boosting exports to China

That Pakistan can appreciably raise the level of exports to China is hardly much of a surprise. Trade watchers have been expecting this for some time now but not without trepidation. The latest projections by the Pakistan Business Council show that exports could be boosted by an additional $3.3 billion worth of goods provided of course the country is able to bring down tariffs to zero at least on some items. The council has so far singled out a total of 25 products for zero tariff ratings that could be negotiated with the Chinese government. Such input is useful especially since the second phase of the free trade agreement negotiations is already under way. In the near future, Pakistanis know they could perhaps increase rice, textiles, seafood, footwear and leather exports and in doing so secure greater market access to China. These steps could help Pakistan but not significantly narrow its overall trade imbalance with China.

In the dozen or so years that the friendly neighbours signed a free trade agreement, Pakistan’s trade deficit of $12 billion has been growing not merely because of the crucial imports needed for the China-Pakistan Economic Corridor projects but also other lesser known factors. The private sector has led the national chorus of calls for removing the existing trade imbalance with China. There are fears that the imbalance itself will fuel a shift from higher to lower productivity. To offset this, Pakistan is hoping to gain the same tariff concessions that China grants Asean states. Only then would Pakistani manufacturers be able to move away from lower productivity to higher productivity and export value-added goods to China.

The idea is to ensure that Chinese industrial initiatives yield the maximum economic benefits for Pakistani stakeholders. One obvious way is to devise industrial activities that have well-defined local stakeholders who help maximise benefits for firms. This is where joint ventures between Pakistani and Chinese companies come in handy. The government needs to take into account which sectors can most benefit from higher productivity and which have the most potential to boost exports.

Published in The Express Tribune, January 26^th, 2018.

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