Experts weigh impact on economy

Expect Biden’s victory to help Pakistan improve trade ties with Iran

KARACHI:

With the Democratic candidate for the top slot of US President, Joe Biden, leading the race to the White House, businessmen in Pakistan see almost no change in Washington’s economic policies for Islamabad, but they advise caution.

Pentagon and State Department policies and Congress appropriations will remain almost unchanged for Pakistan, meaning they will be favourable irrespective of whoever comes to power. “Traditionally, Republicans are more inclined towards Pakistan than the Democrats,” leading businessman and exporter Majyd Aziz said while talking to The Express Tribune.

During Republican President Donald Trump’s first term (2016-2020), Aziz pointed out, Pakistan continued to make exports to the US under the favourable GSP status. Besides, Pakistan got a new International Monetary Fund (IMF) loan programme worth $6 billion in May 2019 and Islamabad was also praised for showing remarkable progress on the Financial Action Task Force’s (FATF) action plan.

To the contrary, during the rule of democrat Barack Obama, Pakistan faced stiff opposition to Beijing’s multibillion-dollar investment in the country under the banner of China-Pakistan Economic Corridor. The country also had to face drone attacks against militants in tribal areas.

However, the Trump administration did not speak against Pakistan’s strategic nuclear assets, as opposed to the Obama administration. More importantly, Trump acknowledged Pakistan’s role in Afghanistan peace talks and praised Islamabad unlike the Obama administration, which kept blaming Pakistan for terrorism in Afghanistan. “No significant change is expected in trade and investment (policies of the US),” remarked Pakistan Business Council (PBC) CEO Ehsan Malik, while anticipating that Biden would most likely be the next US President, as the latest vote count indicated. Biden was leading the contest with at least 264 of the votes by the time of filing this report, while Trump had 214 votes.

It may take another couple of days to get full results of the election. Malik, however, believes that Biden’s win over Trump will help in normalising Pakistan’s trade ties with Iran as Biden had spoken about normalising US relations with Iran during the election campaign. Apart from that, Biden’s win would provide “some more time for a gradual pullout (of US forces) from Afghanistan. That will be good for Pakistan,” he said. World commodities’ (stocks, gold, oil and currencies) expert Adnan Agar said Pakistan should take full benefit of Biden’s policy of normalising relationship with Iran.

Islamabad and Tehran have been in favour of developing strong trade linkages, but have failed to do so due to US sanctions on Iran. Pakistan and Iran have been working for quite a long time to open bank branches in each other’s country. They can implement the strategy under the next US president, he added. “Pakistan needs to have friendly relationship with all the countries, including China and the US,” Aziz said. Pakistan has a strategic location in the South Asian region.

It is the neighbour of Iran, India, China and Afghanistan. Besides, CPEC projects have given an additional advantage to Pakistan over other countries in the region. In a commentary, AHL Research pointed to a few pertinent points in Pakistan’s relations with the US. US is one of the major consumer markets of Pakistan’s export goods, which fetched an average of $3.8 billion annually (17.5% of total exports between FY06 and FY20). On the other hand, Pakistan imported on average goods worth $1.4 billion from the US annually (3.6% of total imports between FY06 and FY20).

“Since President Trump came to office, our trade balance with the US came down to $1.8 billion per annum (FY16-FY20) versus $2.7 billion (FY06-FY15) in the Obama tenure. In addition, workers’ remittances from the US averaged $2.5 billion in the past 10 years - 14% of the total (FY11-FY20). Meanwhile, foreign direct investment (FDI) from the US during the outgoing decade averaged $185 million - 12%of the total FDI during FY11-FY20.”

International experts, however, said in their commentaries that Trump’s policies had put world economies into a recession due to the intensification of the US trade war with China. If Trump secured a second term in office, then there were chances that he would begin a trade war with Europe as well and would not let world economies come out of the recession anytime soon, they said. To the contrary, Biden’s win would help ease trade tensions with China and he would grow more friendly relationship with Europe and the rest of the world, they said. Biden advocates a free trade economy unlike Trump’s protectionist stance.