The Pak-US relations rhetoric currently is based on calls for greater market access to the United States rather than more aid. At $3.9 billion of exports in FY18, the US is already the single largest market for Pakistan’s exports by far. To contextualize it keep this in mind, Pakistan exported more to the US last fiscal year than UK and China combined which were the second and third largest export markets respectively.
As the graph shows, over the years Pakistan’s exports have remained more or less at a constant level but imports from US have been rising since FY16. As a result, Pakistan’s trade surplus with the US is under pressure.
Pakistan’s exports are what they always have been – rice, sugar, leather, textiles and apparel. Bed, table and kitchen linen alone is nearly a billion dollar market for Pakistan. Imports are spread over numerous products ranging from food items to machinery. The most significant change has been the rise in imports of Soya bean seeds which have quadrupled from FY16 to FY17.
Though Soya bean is an oil seed, its oil content is low which is why its main purpose in the local economy is as feed for poultry. Worldwide corn and soybean are being mixed to make poultry feed but it is only in recent years that Pakistan’s poultry industry has adopted this practice. Inclusion of Soya bean into poultry feed reduces feed conversion ratio, which is the amount of feed need to be given to produce one kilogram of meat. Therefore, rise in Soya bean seeds imports is a positive sign for the local economy since it indicates adoption of international best practices in an important sector.
Thus, to widen the trade surplus to previous levels or higher, it is imperative that Pakistan increases exports to the United States rather than concentrates on imports alone. This begs the question regarding what can Pakistan export if more access is granted. Already, Pakistan is the recipient of US’s GSP and underutilizes it. (Read “US GSP scheme: a case of lost opportunities” published on December 28, 2018 and “US GSP scheme revival – implications” published on March 19, 2018).
The most trade potential that exists is in the textile sector. As it is the United States is one of the most important markets for Pakistan’s apparel and linen products. For increased access the textile sector needs to up its ante and move towards polyester apparel. This column has highlighted the excessive focus of cotton-based textile and apparel products and strongly recommended a move towards synthetic products time and again.
To increase exports to the US requires the same formula applicable to all of Pakistan’s exports: diversify and incorporate higher value addition.
Till Pakistan’s export base improves, demanding higher access will yield limited results at best.
