Pakistan’s trade policy in recent years seems rather confusing and purposeless, to put it mildly. With the global economy slowing down post 2008 and remaining so till today, and with commodity prices crashing – the bottom perhaps still to come – countries have suddenly become very careful about whom they trade with and what they trade in. Gone are the days when they 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. Today they instead choose to do business only where visible gains can be felt tangibly. 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 realization that only such trade is welcome that tangibly adds value to the home economy and ensures a gradual but clear development of its core national industries. Our trade equations with India & China thus far may tell a different story!

And it is not just China and India, but in the last 5 to 7 years, we have been blindly signing trade agreements, which not only make no sense, but are also out-rightly destructive for home manufacturing. Examples are numerous: As already pointed out that none of our major FTA or PTA with China, Malaysia and Indonesia has led to any significant increase in Pakistan’s exports. Indonesia being the latest case, where we decided to give preferential access to imports of more than $200 million from Indonesia against an exports’ ‘potential’ – not figure – of around $20 million in oranges/kinnoos. Ironically, a few months after signing of this FTA, the Indonesian government slapped a ban on imports of Pak oranges/kinnoos, leaving our trade policymakers red in their face. Though hectic efforts are afoot to somehow resolve the situation, even so, the ultimate equation from our perspective will always make little sense. Likewise, a similar FTA agreement is now also on course to be signed with Turkey ‘on an urgent basis’! God knows what the urgency is, because again given the business dynamics in the two countries, such an agreement is likely to go against Pakistan’s economic interests. The current value of trade between the two countries is very low at $584 million in 2014. Pakistan’s exports to Turkey were valued at $391 million while its imports from Turkey were recorded at $193 million, depicting a surplus of $198 million. A recent report by research and analysis wing of KCCI (Karachi Chamber of Commerce & Industry) stated that Pakistan-Turkey trade took place in only 1,371 products in 2014, out of which bilateral trade occurred only in 137 items, while Pakistan exported 256 items to Turkey and Turkey exported 978 items to Pakistan, showing that current Pakistani exports to Turkey are concentrated in a limited number of products as compared to Turkey, whose exports on the other hand to Pakistan are much diversified. It concluded that though Pakistan at present has a trade surplus with Turkey, yet this could change very quickly once a FTA is signed, due to a much wider range of products being offered by Turkey.

The story with Thailand comes across as no different where the government of Pakistan is keen to enter into a FTA. Here we find that almost all the 50 main potential export items from Pakistan are already tariff exempted by Thailand, so really a FTA will not bring much joy to Pakistani manufacturing, since it is in effect the Pak government that needs to work with its domestic industry to help it realize an already existing Thai export potential of nearly $2.80 billion, i.e. by making it more competitive. In absence of any efforts at home, a FTA will merely push up Thai exports to Pakistan to around $1.71 billion, whereas, Pakistani exports are likely to increase to no more than $160 million, in-turn pushing the trade deficit to even a higher level at $1.54 billion.

The key is to not let emotions dictate trade agreements and to keep an eye on the interests of the home manufacturing sectors when endeavoring to enhance trade. So far most of our FTAs have failed to achieve these objectives, where, several of our high potential export items rarely received concessions under such agreements. Rectifying these mistakes will be necessary if Pakistan’s trade fortunes are to flourish going forward. Not only do we have to be mindful of our real economic interests when striving to enhance regional and global trades, but like others we also need to realize that while it is nice to form new economic linkages the resulting economic development must primarily take place at home - a sentiment, which today is in fact gripping nearly all world (developing and developed) economies alike.

Once the champions of out-sourcing and of trade without barriers, US and Japan, are currently busy doing the very opposite in 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 a host conscious industrial policies unleashed by Japanese Government to boost home manufacturing, leading Japanese firms like Panasonic, Sharp, TDK, Canon, Daikin and MUJI Corporations are relocating significant parts of their overseas production back to Japan.

Essentially, countries looking for increased market share in total global trade are not just looking for FTAs, but also strategizing 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: in this new Great Game of Trade, the emphasis is on safeguarding home markets whilst going on to strengthening external influence. In one such recent development, the United States in order to counter China’s influence and pivot itself as the dominant power in the region, just concluded a far from perfect deal, 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.

The endeavor being to draw 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, making it the capstone of a new economic agenda that not only expands trade but does so by tipping the scale in favor of smaller economies, so that average deficit graph within a given trading bloc flattens over time instead of becoming steep. It took more than 6 years for TPP to become a reality because the smaller nations would just not budge from their stance where they saw a danger for their core home industries. The Pakistani trade policymakers also need to show the same tenacity when striking trade deals with other nations or when looking to expand bilateral trade with larger neighboring Asian or South Asian economies.