Pakistan’s economic leadership and especially the Ministry of Commerce needs to realize that modern day global trade is changing course. Gone are the days where countries single-mindedly focused on expansion of trade or had blind faith to slip into the prescribed WTO straight jacket to become a part of the global trade order. Both, the 2008 Financial Crisis and a Noodle Bowl effect of FTAs (Free Trade Agreements), RTAs (Regional Trade Agreements), PTAs (Preferential Trade Agreements), etc have slowly but surely undermined the once unquestioned wisdom of multilateral functioning. Modern day thinking being that while expanding global markets is a worthy goal, history offers lessons that only fair and ‘constructive trade’ is what nations should be seeking - ‘Constructive’ referring to a realisation that only such trade is welcome which tangibly adds value to the home economy and ensures a gradual but clear development of its core national industries - Our trade equations with India and China thus far may tell a different story!
This mindset will be critical when formulating Pakistan’s trade vision, strategy and related policies going forward. Not only because we need to be mindful of our economic interests vis-à-vis regional and global trade, but also because there is this new found realisation in almost every country or within a common market block that while it will welcome enhanced cum new economic linkages the resulting development from the same must take place at home (meaning within its respective economy). For example, President Ashraf Ghani of Afghanistan made this very clear to the visiting Pak business delegations in recent months that while his government will fully support Pakistani entrepreneurs to tap business opportunities in Afghanistan the resultant activities must ensure development and employment generation in Afghanistan and that these activities should fall in the purview of his country’s formal/documented economy. And this sentiment is in fact gripping all (developing and developed) economies alike. Once the champions of out-sourcing and of trade without barriers, US and Japan, are these days busy doing the very opposite by encouraging their core industries to relocate back home. In the US there is a distinct revival in textile manufacturing, which is overtly facilitated by the US Government and in Japan owing to a combination of controlled labor costs, a devalued Yen and conscious policies unleashed by the Japanese Government to boost home manufacturing, leading Japanese firms like Panasonic, Sharp, TDK, Canon, Daikin and MUJI Corporations are busy relocating significant parts of their overseas production back to Japan.
In general, countries looking for increased market share in the total global trade are pushing to expand their manufacturing innovation hubs, invest in federally funded research centers that disseminate advanced manufacturing knowledge and willing to provide subsidies that are expressly contingent on exportation. In other words: The Great Trade Game is on! And in this game, new mega regional and cross-region trade deals are under negotiation and fresh trading blocs are evolving - The original Asian tigers (ASEAN) are re-writing trade facilitation laws to give a renewed impetus to their already huge quantum of intra-regional trade, while the new tigers, India and China, are endeavouring to not only further enhance bilateral trade but to also collectively form a Regional Economic Partnership bloc that places trade in the forefront and puts political disputes on the backburner. To counter China’s influence and pivot itself as the dominant power in the region, the U.S. just concluded a far from perfect deal on (Tuesday morning, October 06, 2015) the Trans Pacific Partnership (TPP) with select Asia Pacific and South American countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. Still, for Mr. Obama the accord could be a legacy-making achievement, drawing together countries representing two-fifths of the global economy, from Canada and Chile to Japan and Australia, into a web of common rules governing trans-Pacific commerce. It is the capstone both of his economic agenda to expand exports and of his foreign policy “rebalance” toward closer relations with fast-growing eastern Asia, after years of American preoccupation with the Middle East and North Africa. Also, per the increasing trend these days in global trade, Mr. Obama’s defense to TPP conclusion tended to be more political in nature than economic: in a post-deal statement he said: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.” This argument — that the Pacific pact would be a bulwark against China’s power and a standard-setter for global commerce — will incidentally also be central to the president’s hard sell ahead to Congress.
As these new trading blocs emerge, Pakistan’s competition stiffens further. For example, as the TPP becomes a reality Vietnam will be able to export footwear and textiles duty free to the U.S. and make inroads into the present U.S. market share of Pakistan in these items. To counter this Pakistan must also strive to optimise its trade potential both regionally and with countries where it feels it has natural economic linkages, but they have largely remained untapped owing to various constraints, e.g. access to Central Asian Republics (CAR) leading all the way to Caucasus and Eurasia. And in doing so, we need to recognise that just like in South Asia, resolving the log-jam between Pakistan and India holds the key to SAARC’s success, likewise, successfully ironing out bottlenecks in the Pak-Afghan relationship will ultimately be the determining factor of the success rate of our efforts in Central Asia and beyond.
Also, when re-strategising our trade vision amidst changing global trading realities, it will be good to “always” be mindful of the fact that a focus on the western side of our borders by no means signifies an ‘either/or’ approach to our eastern side. Trade and linkage on the western side will entail a significantly different kind of push where market penetration will be slow and returns even slower. The Government of Pakistan will have to invest funds and resources – be prepared for the long haul - because regardless of who thus far has successfully penetrated these markets, their models of engagement have invariably been identical:
- Government to Government (mainly raw materials)
- Big Businesses backed by respective governments to local CAR business houses in-turn connected into the CAR government/ruling elite.
- Private-Public Partnerships facilitated through government-to-government patronage.
Finally, when expanding economic linkages with our western frontiers and beyond, the Government of Pakistan should remain clear that it is not primarily exports that it seeks, but instead the real gains will accrue from sustainable reductions in its import bill through substitution of cheaper energy inputs and by linking us into alternate solutions to our prevalent energy sector woes. And this is precisely what one refers to as the modern day evolving trading culture: finding specific advantages and not just indulging in trade for the sake of trade. The strength of countries on our western side lies in their wealth of natural resources like gas, coal, high-grade carbons and hydrocarbons, surplus electricity generation capacity, oil, uranium and gold and this is precisely where business will take place. The intangible benefits will accrue from promoting a soft image of Pakistan keen to help them in: the fields of education, exchange-able training programs in defense and security, setting-up of financial systems, stock exchange linkages, joint agriculture endeavours mainly in cotton, corn, animal breeding and fruits, healthcare, and last but not least, in tourism and cultural activities.

The writer is an entrepreneur and economic analyst.

kamal.monnoo@gmail.com