Economic fear and insecurity seems to be the order of the day not just in Pakistan, but also in the most developed economies of the world. The high moral ground that once drove the richer nations towards a commitment to make this world a better living place for all inhabitants, by providing equal opportunities through a WTO rule-based framework of free and fair trading practices, seems to have taken a serious dent since the financial crisis of 2008. As the focus shifts more and more on internal economic challenges, the tune of ‘inclusiveness’ moves further into the background. Self-focused statements like, “without a solution to the Euro Zone crisis, the world economy will be swept into a downward spiral of collapsing confidence, weaker growth, and fewer jobs. We all have to help them resolve their problems, as we have a stake in their crisis” ~ Christine Lagarde, and “we cannot let our industry down at a time when we need to create jobs at home. Inward before Outward” ~ Banners at Republican Party primaries, raise alarm bells about the future of free trading practices in general and a visibly weakening foundation of WTO in particular. Ironically, the trouble is brewing in the very quarters that once championed the cause of turning the world into a large ‘global village’ and romanticised about eradication of poverty through enhanced trade and equal opportunity!

What we see today is an atmosphere where the larger WTO membership appears reconciled to the fact that the Doha Round will remain inconclusive for some time or at least till such time that (a) the world economy is less turbulent; (b) some significant members like the USA and EU are out of their present financial predicaments; (c) previous priorities are reinforced; (d) global issues and concerns are realigned; and (e) a global political climate is recreated that once again instils the spirit of enhanced trade and interdependence within the world economies, instead of the prevailing tilt towards protectionism. So, at a time when the Doha Round of the WTO has run into a virtual stalemate, one wonders what the future of the world trade will be like in the years to come.

More importantly, what path should a developing country, like Pakistan, take in this emerging scenario? Should we continue to steer our present course of patiently supporting the larger cause of a free-flowing global trade or, like our competitors, aggressively embark on the path of entering into bilateral and regional FTA (Free Trade Agreement) and PTA (Preferential Trade Agreement) arrangements to capitalise on any potential market access opportunities, which can be tapped through such initiatives?

Before we dwell on the recommended micro options for Pakistan, what we need to keep in mind is that owing to the growing divergence gap in various areas of negotiations in the Doha Round, the best available alternative at present available to the negotiators for concluding the single undertaking is perhaps to keep moving forward in areas where convergence exists. Pakistan also, being part of G-21, a bloc of developing countries at the WTO, should in general move lockstep with the collective thinking in this group. We will be well served this way, as by being a part of a larger influential group our interests will also remain protected.

However, while remaining aligned to the overall direction of the G-21, like others, we can also look at FTAs and PTAs that suit us and can help us grow our total trade. What we need to be careful on is that free trade agreements more often than not tend to benefit the country with the larger economy. Meaning, Pakistan due to the small size of its economy and narrow product range may gain in an FTA with a country like Sri Lanka, but will lose out from larger economies like China. However, some may argue that although the USA and EU are much bigger economies than ours, since they account for most of our textile exports (nearly 70 percent of Pak exports are textile based), it would still be in our interest to enter into an FTA with them. Yes, agreed that there is substance to this argument, but the thing is that given our low volumes of overall trade, a limited product range and a difficult home market, why would they, in turn, be interested in entering into such an agreement with us? In any case, what we need to bear in mind is that the key to signing any trade agreement is that it should provide us with a ‘definite’ gain and be strategically driven. Implying that in our present context, it would be a good strategy for us to somehow get into ASEAN and try to make SAARC an effective trading platform through SAFTA.

Now this takes us to the frequently asked question these days: Should we be granting India the MFN (Most Favoured Nation) status? On the one hand  are the visible gains of befriending India that point towards access to the huge Indian domestic market, stimulating opportunities and trade growth within SAARC and via SAFTA, and with India’s help to join the elite forum of ASEAN. On the other, loom the disappointments of not being able to make any real headway into the Indian markets, in spite of being granted the MFN status by India, since over a decade, failing to secure our due share in regional trade and resource sharing owing mainly to its negative manoeuvring against us, and then its stubborn resistance to allowing our entry into meaningful regional and global trading blocs for us. MFN status to India ostensibly entails providing them access to Pakistan’s current applied tariff regime, as enjoyed by other WTO members. This would mean doing away with the ‘positive’ list of items on which trade is taking place and introducing a negative list of items that are sensitive. Before we do all this, it is imperative for Pakistan to precisely determine two aspects:

l What sort of understanding needs to be legally cemented with India to remove their present non-tariff barriers (NTBs), which prevent the Pakistani goods from entering their market; and

l What reciprocity is being offered by them on key concerns of Pakistan vis-à-vis resource sharing (water, environment etc), regional trade and entry into trading blocs that are of significant importance to our economic needs?

From what one understands, there are three agreements that are likely to be signed soon between Pakistan and India on NTBs. These agreements are:

l The Customs Cooperation Agreement to avoid arbitrary stoppages of goods at each other’s ports;

l Mutual Recognition Agreement for acceptance of certificates of internationally accredited laboratories; and

l Redress of Grievances Agreement for resolving matters in case of any disagreements.

In addition, India will reduce the peak tariff line for Pakistani goods to 5 percent from the current 8 percent, and will also act quickly to put in place the necessary infrastructure on their side to allow Pakistani cement to enter India on 10 wheeler trucks. Still, for our sake, one hopes that our policymakers properly understand the long-term implications involved here for Pakistan and do a comprehensive job of not just reaching an understanding on the removal of NTBs, but also in areas where India needs to remove our doubts on fairness in mutual resource sharing and, importantly, in allowing us to become a part of the developed world.

Regardless of the pace of the Doha Round Talks and the direction it takes in the coming months, one thing is sure that the overall impact of the WTO multilateral trade agreements as signed in the Uruguay Round has been positive on Pakistan, since they integrated us into the global markets. And it is, in this context, important that we optimise the sort of ‘time-out’ we are, at present, getting due to a lull period in the Doha Round, to put our own house in order. To seek with prudence, the FTAs and PTAs that are in our interest, focus on regional trade, work out a well crafted arrangement with India on MFN, bilateral trade and mutual economic interests, and last but not least, upgrade, restructure and transform our industry to face the new upcoming challenges of multilateralism.

    The writer is an entrepreneur and economic analyst.