WHO IS BETTER AND MORE BENEFICIARY FOR
PAKISTAN,CHINA OR USA & EUROPE UNION,IN LIGHT OF ECONOMICAL, STRATEGICAL &
DEFENCE?
When analysing which partner
2. the USA & European Union (EU)
is better or more beneficial for Pakistan in
terms of economic, strategic, and defence dimensions, it's important to
consider several key factors. Both partnerships offer distinct advantages and
challenges, and the answer largely depends on Pakistan’s long-term goals and priorities.
Here’s a breakdown of the benefits and challenges of both relationships:
---
1. Economic Relations
China:
Ø China-Pakistan Economic Corridor (CPEC):
China’s largest contribution to Pakistan's economy is through CPEC, which is a key component of China’s Belt and Road Initiative (BRI). CPEC is an investment project worth over $60 billion, focused on infrastructure development (roads, ports, and energy).
v Benefits:
1. Infrastructure development (e.g.,
Gwadar port, roads, energy projects).
2. Job creation and industrial growth.
3. Long-term growth potential through
improved connectivity and trade routes.
v Challenges:
1. Rising concerns over debt dependency:
Pakistan’s external debt to China has increased significantly, raising fears
about "debt traps."
2. Domestic political concerns over lack
of transparency and the uneven distribution of CPEC benefits.
Pakistan-China Trade
Ø Exports to China:
1. China is one of Pakistan’s top export
destinations, though the trade balance is largely in China's favor. Pakistan
primarily exports:
2. Textiles and garments: Cotton yarn and
fabrics are some of the key exports.
3. Leather products.
4. Agricultural goods: Rice and seafood
are also significant exports.
5. Minerals and ores: Pakistan exports
some copper and other minerals to China.
According to recent data (as of 2022-2023), Pakistan’s exports to China
were valued at approximately $3 billion. However, this figure is relatively low
compared to the imports from China.
Ø Imports from China:
1. China is Pakistan’s largest trading
partner when it comes to imports. The major imports include:
2. Machinery and electronics: Heavy
machinery, telecom equipment, and other capital goods make up a large portion.
3. Chemical products: Including raw
materials for Pakistan's pharmaceutical and textile industries.
4. Iron and steel products.
5. Electrical appliances and consumer
goods.
Imports from China have surpassed $14 billion annually, resulting in a
significant trade deficit for Pakistan with China.
Trade
Balance with China:
Pakistan’s trade balance with China is heavily
skewed towards China, resulting in a trade deficit of about $11 billion.
Although CPEC is expected to help boost Pakistan’s export capacity in the
future, as of now, the gap remains substantial.
USA
& European Union:
Ø Trade Relations: The US and EU are
significant trade partners for Pakistan. The EU, in particular, is a key
destination for Pakistan’s textile exports. Pakistan benefits from the EU’s
Generalized Scheme of Preferences (GSP+) status, which allows duty-free exports
of Pakistani goods.
v Benefits:
1. Access to lucrative Western markets,
particularly for textiles, which is crucial for Pakistan’s export revenue.
2. Support for foreign aid and
development programs (USAID, World Bank, and other EU initiatives).
v Challenges:
1. Declining US aid over time,
particularly after the end of US operations in Afghanistan.
2. Trade with the West may not lead to
the same level of investment in infrastructure compared to China’s CPEC
projects.
Pakistan-USA Trade
Exports
to the USA:
1. The United States is one of the top
export destinations for Pakistan, especially in the textile sector. Pakistan
exports:
2. Textiles and garments: Including
cotton products, ready-made garments, and bed linen.
3. Leather products.
4. Surgical instruments: Pakistan is a
leading exporter of surgical instruments to the US.
5. Basmati rice and other agricultural
goods.
Pakistan’s exports to the USA were valued at approximately $5.9 billion
in 2022. This makes the US one of Pakistan's largest markets, particularly for
textiles.
Imports
from the USA:
1. Pakistan imports a variety of products
from the US, including:
2. Machinery and equipment.
3. Aircraft and defense-related equipment
(historically).
4. Agricultural products: Including
cotton, soybeans, and other crops.
5. Pharmaceutical products.
Imports from the US amounted to about $2.6 billion in recent years,
which makes the trade balance with the US positive for Pakistan, unlike the
situation with China.
Trade
Balance with the USA:
Pakistan enjoys a trade surplus with the
United States, as it exports more than it imports, largely due to the strong
demand for Pakistani textiles and apparel in the US market. This surplus is
approximately $3.3 billion.
Pakistan-European Union (EU) Trade
Exports
to the EU:
1. The EU is another major trading
partner, especially for textile exports. Pakistan benefits from GSP+ status,
which grants Pakistani goods duty-free access to EU markets. Key exports
include:
2. Textiles: Including garments, home
textiles, and fabrics.
3. Leather goods.
4. Surgical instruments.
5. Rice and other agricultural products.
Exports to the EU were valued at around $8.4 billion in 2022. Pakistan’s
exports to the EU are highly concentrated in the textile sector, but they also
include food products and other goods.
Imports
from the EU:
1. Pakistan imports the following from
the EU:
2. Machinery and industrial equipment.
3. Pharmaceuticals and medical equipment.
4. Chemicals for various industries,
including agriculture and textiles.
5. Automobiles and related parts.
Imports from the EU were valued at approximately $5.4 billion in recent
years, making the trade balance with the EU somewhat favorable but more
balanced compared to China.
Trade
Balance with the EU:
Pakistan has a trade surplus with the EU,
largely driven by textile exports. The surplus stands at around $3 billion,
supported by preferential trade arrangements such as GSP+.
Impact of GSP+ on Pakistan's Exports
The Generalized Scheme of Preferences Plus
(GSP+) is a trade privilege that provides duty-free access to the European
Union (EU) market for developing countries like Pakistan. The GSP+
status has had a significant positive impact on Pakistan’s exports to the
EU, particularly in key sectors such as textiles and garments, leather
goods, and agriculture. Here’s an in-depth look at the effects of
GSP+ on Pakistan’s exports and the potential consequences if it were revoked:
1.
Boost
to Exports:
o GSP+ has dramatically increased
Pakistan’s exports to the EU since Pakistan gained the status in 2014.
o Exports to the EU rose by more than 60%
since GSP+ status was granted, helping Pakistan access a market of over 500
million consumers.
o Key export sectors benefiting from
GSP+ include:
§ Textiles and garments: Pakistan’s largest export category to the
EU, making up over 75% of total exports to the EU.
§ Leather goods: Including footwear, gloves, and other
accessories.
§ Agricultural products: Especially rice, fruits, and seafood.
2.
Competitive
Edge:
o GSP+ gives Pakistan an advantage over
non-GSP countries, as its goods enter the EU at zero tariffs, compared
to the regular customs duties imposed on other countries.
o This preferential access has made
Pakistan’s exports more competitive, especially in the textile sector,
which faces tough competition from countries like Bangladesh, India,
and Vietnam.
3.
Job
Creation:
o The GSP+ status has helped create millions
of jobs, particularly in Pakistan’s textile industry. A large
portion of the workforce in this sector is composed of women, making it a
critical factor for Pakistan’s economic stability and social development.
4.
Diversification
of Export Market:
o The GSP+ status has allowed Pakistan
to reduce its reliance on the US market and diversify its exports to the EU.
The EU now accounts for a large percentage of Pakistan’s total exports, with about
30% of Pakistan’s exports going to the EU.
Potential Impact if GSP+ Status is Revoked
If Pakistan’s GSP+ status is revoked,
the consequences for its exports to the EU could be significant:
1.
Higher
Tariffs:
o Pakistan’s exports to the EU would
face higher tariffs if GSP+ is revoked. Without this status, Pakistani
goods would be subject to the EU’s Most Favored Nation (MFN) tariffs,
which could be anywhere from 5% to 12% for textiles and even higher
for other goods.
o The textile sector would be
particularly hard hit, as textile and garment products are the backbone
of Pakistan’s exports to the EU. The increased cost of tariffs could
lead to reduced competitiveness and lower demand for Pakistani goods.
2.
Decline
in Exports:
o The removal of tariff advantages would
likely result in a sharp decline in exports to the EU. Without GSP+,
Pakistan would lose its competitive pricing advantage, and EU importers may
turn to other low-cost suppliers like Bangladesh (which also has
GSP+ status), India, or Vietnam.
o Analysts estimate that Pakistan’s
textile exports to the EU could fall by up to 30-50%, given the
cost-sensitivity of the industry and the competitiveness of other exporters.
3.
Loss
of Jobs:
o A reduction in exports, particularly
in labor-intensive sectors like textiles, could lead to significant job
losses in Pakistan. The textile industry employs around 40%
of Pakistan's industrial labor force, and any disruption in export demand could
result in large-scale unemployment.
o This would disproportionately affect women
and rural workers who depend on the textile sector for their
livelihoods.
4.
Reduction
in Foreign Exchange:
o The EU is one of Pakistan’s largest
export destinations, and a decline in exports would result in a loss of
foreign exchange earnings, exacerbating Pakistan’s trade deficit and
putting pressure on its balance of payments.
5.
Negative
Impact on Investment:
o The uncertainty around GSP+ status
could deter foreign direct investment (FDI) in Pakistan, particularly in
export-oriented industries such as textiles, as businesses and investors might
be reluctant to invest without the assurance of duty-free access to the
EU market.
o Existing manufacturers may also shift
production to other GSP+ countries that offer more stable access to the
EU.
Broader Economic and Diplomatic Implications
1.
Pressure
on Economic Growth:
o Given the strong correlation between
Pakistan’s export performance and its overall economic growth, the loss of GSP+
could hamper GDP growth, particularly in a country already facing economic
challenges like high inflation, external debt, and fiscal deficits.
2.
Diplomatic
Repercussions:
o The GSP+ status is tied to compliance
with 27 international conventions related to human rights, labor
rights, environmental protection, and good governance. Pakistan’s failure
to meet these obligations, particularly regarding human rights and labor
standards, could not only lead to the loss of GSP+ but also diplomatic
isolation from the EU.
o The revocation of GSP+ could strain Pakistan-EU
relations and reduce the EU's willingness to engage in development aid and
broader economic cooperation with Pakistan.
Steps Pakistan Can Take to Retain GSP+ Status
1.
Improve
Compliance with International Conventions:
o To maintain GSP+ status, Pakistan
needs to ensure compliance with the 27 international conventions,
particularly those related to labor laws, human rights, and environmental
protections. This includes improving the conditions for workers,
safeguarding press freedom, and implementing reforms to address child labor
and gender inequality.
2.
Engage
in Diplomatic Dialogue:
o Pakistan must actively engage with
the EU to address any concerns related to its GSP+ compliance. This can
involve working closely with EU monitors and engaging in proactive
diplomacy to showcase efforts in improving governance and rights-related
issues.
3.
Diversify
Export Markets:
o In case of future risks related to
GSP+ or other trade privileges, Pakistan should focus on diversifying its
export markets, exploring new trade opportunities with China, Africa,
Middle Eastern countries, and ASEAN nations.
o Furthermore, Pakistan should look to diversify
its export basket, expanding beyond textiles to high-value products such as
technology, engineering, and agricultural value-added goods.
The GSP+ status has been immensely
beneficial for Pakistan, particularly in boosting its textile exports
to the European Union. If GSP+ status were revoked, it would lead to higher
tariffs, a significant decline in exports, job losses, and a negative
impact on Pakistan’s economy, especially in the textile sector.
To avoid these consequences, Pakistan must
continue compliance efforts with international standards and engage
diplomatically with the EU. In parallel, diversifying export markets and
industries can help reduce over-reliance on the GSP+ arrangement in the
future.
Comparison of Trade Relations:
| Partner
| Exports from Pakistan | Imports to Pakistan | Trade Balance |
|------------------|---------------------------|-------------------------|----------------|
| China
| $3 billion | $14 billion | -$11 billion (deficit) |
| USA
| $5.9 billion | $2.6 billion | +$3.3 billion (surplus) |
| European Union| $8.4 billion | $5.4 billion | +$3 billion (surplus) |
Summary
and Conclusion:
a.
China:
Pakistan’s trade with China is highly import-dependent, leading to a
significant trade deficit. While China is a key economic and strategic partner,
Pakistan imports far more than it exports, and this trade imbalance remains a
challenge. However, China’s investments through CPEC offer long-term growth
potential.
b.
USA
and EU: In contrast, Pakistan enjoys a trade surplus with both the USA and the
EU, primarily driven by the strong demand for textiles. The US and EU provide
Pakistan with key markets for exports and grant preferential trade access,
especially in the case of the EU’s GSP+ scheme. This helps stabilize Pakistan’s
trade accounts.
Conclusion:
Ø China is crucial for Pakistan in terms
of investment, infrastructure, and strategic alliances, but the trade deficit
with China is a significant challenge.
Ø The USA and EU offer more immediate
benefits in terms of trade surpluses, market access, and stable exports,
particularly in the textile sector.
For Pakistan’s long-term economic health,
maintaining strong ties with both China (for investment) and the USA/EU (for
export growth and trade surpluses) is key to balancing these relationships
effectively.
_____________________________________________________
2. Strategic Relations
China:
Ø Strategic Alliance: China and Pakistan
have a long-standing, time-tested relationship. China has been a reliable
strategic partner for Pakistan, particularly in countering India's influence.
v Benefits:
1. China is a consistent supporter of
Pakistan in the United Nations and other international forums, especially
regarding issues like Kashmir and India.
2. Collaboration on defense technology,
including the joint production of the JF-17 Thunder fighter jet and other
military hardware.
v Challenges:
1. While strategically aligned, China
often prioritizes its own national interests, and Pakistan has limited leverage
in influencing Chinese decisions.
2. China’s growing ties with India and
economic investments in other South Asian countries can sometimes dilute its
exclusive support to Pakistan.
USA
& EU:
Ø Security Cooperation: Historically,
Pakistan and the US have had close military ties, especially during the Cold
War and the War on Terror. However, these relations have seen ups and downs.
v Benefits:
1. Defense aid: The US has provided
significant military and defense aid to Pakistan over the years.
2. NATO and strategic cooperation during
the war in Afghanistan allowed Pakistan to leverage its geopolitical importance
for defense funding and support.
v Challenges:
1. Deterioration of trust: After years of
reliance, Pakistan-US relations have soured at times, particularly over
concerns related to terrorism, Afghanistan, and nuclear policy.
2. The US has increasingly turned toward
India as a strategic partner in Asia to counter China, which can complicate the
US-Pakistan relationship.
---
3.
Defense Relations
China:
Ø Defense Technology: China is
Pakistan's largest supplier of military equipment. The two countries share a
robust defense relationship, including the joint development of the JF-17
fighter jet and the supply of advanced military technology.
v Benefits:
1. Steady supply of military equipment,
including drones, submarines, and aircraft.
2. China has provided strategic
assistance to Pakistan's nuclear program in the past.
3. Close military collaboration through
regular joint exercises and defense projects.
v Challenges:
1. Dependency on Chinese defense systems
might limit Pakistan’s diversification of its defense portfolio.
USA
& EU:
Ø Military Aid and Training: In the
past, Pakistan has received significant military aid from the US, including
F-16 fighter jets, helicopters, and other military assets.
v Benefits:
1. The US has provided Pakistan with
advanced military technology, including the F-16 fighter jet program.
2. Pakistan has historically received
military training and intelligence cooperation from Western countries.
v Challenges:
1. Suspensions of military aid: In recent
years, US military aid has been suspended or cut due to concerns over
Pakistan’s handling of terrorism and regional security.
2. Western political pressure on issues
related to democracy, governance, and terrorism.
---
4.
Overall Strategic and Diplomatic Support
China:
Ø China is generally seen as a more
consistent and reliable ally to Pakistan on the international stage. It has
supported Pakistan on issues like Kashmir and India, and has often shielded
Pakistan from pressure in international forums, such as the Financial Action
Task Force (FATF).
USA
& EU:
Ø While the US and EU are important,
their relationship with Pakistan is less predictable. The US-Pakistan alliance
often depends on short-term strategic interests (such as Afghanistan), and
Washington’s pivot to India for strategic reasons has complicated ties with
Islamabad.
---
Conclusion: China or USA & EU?
a.
Economically,
China’s investment through CPEC is unmatched in terms of infrastructure
development, but it comes with potential risks related to debt. On the other
hand, the USA and the EU offer access to large export markets, especially for
Pakistan's textile industry.
b.
Strategically,
China is a long-term ally that shares Pakistan’s concerns about India, offering
more reliable support on defense and regional issues. However, the US and EU
remain important for balancing Pakistan’s international relations, as they
provide alternative diplomatic and economic avenues.
c.
Defense-wise,
while China offers a robust partnership in military development, Pakistan’s
previous military cooperation with the US provided access to advanced
technology and training.
In summary, China is the more reliable,
consistent, and long-term partner for Pakistan, especially in terms of
strategic and defense support, while the USA and EU are crucial for trade,
market access, and diplomatic diversity. Ideally, Pakistan benefits most from
balancing relationships between both China and Western partners, ensuring that
it can leverage its geopolitical position effectively.
