Pakistan exports 'threat to US jobs' By Syed Fazl-e-Haider
QUETTA, Pakistan - Plans by Washington to allow garment manufacturers in the
Taliban-dominated northwestern parts of Pakistan to export their products duty
free to the United States are under attack by American apparel makers and
unions that believe the policy could come at a high cost to US workers.
Critics say that American retailers, such as Wal-Mart and Levi Strauss, and
brand owners would take advantage of the duty savings and the US$0.35-an-hour
labor costs in Pakistan, threatening the livelihoods of workers in the US
textile and
clothing sector, which has already lost some 700,000 jobs over the past 10
years.
The policy is part of a bill before US Congress that seeks to provide
employment in the insurgency-hit North-West Frontier Province, which is bearing
the brunt of Taliban militancy in terms of huge human and economic losses. It
aims to boost the current $3.1 billion worth of annual textile exports from
Pakistan to the US. The bill comes as the South Asian country's textile
industry is struggling to increase exports and is suffering losses running to
millions of rupees.
Under the bill, the US would help Pakistan through the Reconstruction
Opportunity Zones (ROZs) trade program. The zones are aimed at creating
employment in the tribal areas as a strategy for fighting terrorism. Goods
produced in the ROZs would be exported to the US at zero tariffs.
The idea of setting up RoZs in areas close to the Afghanistan border came when
a US consulting firm issued an assessment report during the George W Bush
administration. The study emphasized the need to combat unemployment of young
educated males and pay attention to reducing poverty in the tribal areas, which
serve as the terrorists' sanctuaries and nurseries for extremists.
Poor distribution of wealth has deprived the tribal areas of economic
development, helping to turn them into a hub for extremists. The RoZs are seen
as a way to fast-track industrial development there.
A
report published in The Observer
in the UK on July 19 , citing Lloyd Wood of the American Manufacturing Trade Action Coalition, says that
Pakistan's exports to the US would net a saving of only around $100 million
a year if the scheme went ahead - and even that would be eaten up by
retailers rather than benefit the manufacturers.
Islamabad hopes to get at least 10 billion rupees (US$121 million) for this
project from the US, which has already agreed to accept duty free imports of
items manufactured in backward areas to be designated as ROZs. The US has
imposed no production cap under the proposed ROZ legislation, unlike the
similar African Growth Opportunity Act. The proposed law to establish ROZs in
Pakistan and Afghanistan will authorize the US president to give Pakistan the
go-ahead for duty free exports from ROZs. The US generally imposes a 3.9% duty
on manufactured goods.
Pakistan, although a leading partner of the US in its "war on terror", falls
fairly low in the list of US partners in terms of trade in goods and services,
and it has repeatedly urged Washington to facilitate greater market access for
its products, mainly textiles.
The share of exports from Pakistan to the US market has remained stagnant at
around 0.21% during the past four years, while overall exports have held steady
at around $20 billion. Lack of diversification is an important factor hindering
export growth. Five categories, namely cotton manufactures, leather, rice,
synthetic textiles and sports goods, account for 73.5% of total exports during
the nine months to March 2009.
The Pakistan textile industry also fails to add as much value to its products
as competing nations. According to one estimate, one million bales of cotton in
Pakistan produces $1 billion of goods, compared with India, which produces
goods worth $2 billion, and China, which makes $4 billion from the same amount
of cotton.
Local analysts want the government in Islamabad to seek a preferred tariff
status for Pakistani textile exports to the US. Some countries in the region,
such as Oman, have a free trade agreement with the US and are seen as
undermining Pakistan's textile industry.
The calls for help come as Pakistan is failing to meet its export targets by a
wide margin, reaching only $17.781 billion against the $22.1 billion target set
by the government for fiscal year that ended on June 30.
This is against a background of an economy that, even after receiving a $7.6
billion bailout from the International Monetary Fund last November, continues
to deteriorate under the burden of high interest rates, persistent high
inflation, a large revenue shortfall, a widening fiscal deficit, a depreciating
rupee and falling exports.
Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based
development analyst in Pakistan. He is the author of six books, including
The Economic Development of Balochistan (2004).
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