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Textiles – and Mangoes!

(This is the NINTH part of a series of weekly articles which will attempt to explore the advantages/disadvantages of Barter/ Countertrade as opposed to the liberal trade policy in vogue in Pakistan).

Pakistan’s main cash earners in export have been raw cotton, cotton textiles and cotton manufactures. Theoretically, it does not make economic sense to put any of these items under Countertrade (CT). On the other hand, any one desirous of entering into an STA with the Government of Pakistan (GoP) will like to have a “sweetener” in the form of between 30-40% of traditional items, prime among them being raw cotton. As far as those cotton textiles and cotton manufactures are concerned which fall within the ambit of quota items they should definitely be deleted from any CT list.

Being one of the few countries in the Third World which can FEED and CLOTHE itself, Pakistan has an inherent advantage in dealing with the normal problems of a developing nation. However, we have to maximise the benefits we can get from our traditional items. If our traditional items of export are subjected to economic pressure, it does not only mean loss of foreign exchange. Due to the resulting surplus in the country, the prices fall below production costs and the irrecoverable cost of storage (and wastage thereof) goes up. There is a strain imposed on the economy due to these hindrances in the natural flow of exports which reaches down, and imposes misery mainly on the common man and further deteriorates his living conditions, which are already unacceptable.

The whole purpose of Central Planning in Commerce is to cater to expeditious sales of our production outputs. In the respect of raw cotton, the Cotton Export Corporation of Pakistan (CECP) has the prime responsibility and for NON-QUOTA cotton textiles and manufactures, the responsibility and initiative lies essentially with the private sector. If we can maintain a constant outflow of our produce, and manufacture in respect of cotton, Pakistan’s foreign exchange problems will ease to a great extent. Because raw cotton is primarily a cash, foreign exchange earner, it is enough to raise the hackles of all our Central Planners if one were to recommend that a part of the total export of raw cotton be put on barter and/or CT. But since raw cotton has been put on Barter contracts for years and makes up 8% of the export list in the present CTs, this is an accepted fact of life.

However, the quantum in Barter and/or CT marginally has to be increased for 2 reasons:

a. By providing more raw cotton, the level of MARK-UP will come down on an average.

b. If we were to sell 20 to 30% of our raw cotton under Barter and/or CT, the sales effort for the remaining correspondingly becomes lower.

A fair percentage of raw cotton in an export list of Barter and/or CT would be 10-12% ie. increasing the quantum by about 2-4% over the average export list at present. According to the export list of the MNC’s STA with TCP, non-quota cotton textiles and manufactures make up US$15 million or 30% of the export list.

Thus a fair percentage as NON-QUOTA items must fall within the list of non-traditional exports. Being excluded from quota countries our Barter and/or CT partners will be forced to find markets elsewhere — in places where Pakistan has no means to nurture and/or support sales promotion, mainly South America, Latin America and Africa. These are excellent markets for us but need a strong trading infrastructure on the spot to effectively sell our products. Our product range and the quantum thereof are miniscule compared to the potential demand. Since we have no Barter with any countries in this area, the main pressure will be on our CT partners, the various Multi-Nationals (MNCs), on whom it will be incumbent to find out new areas for sales within the regions defined. As stated earlier, the textile industry and downstream products effect a large segment of our population vis-a-vis their livelihood and prosperity. Only by ensuring a constant production and export flow can we maintain the standards and expect improvement in their lot. A broad spectrum of our masses are affected by this and as an economic indicator for Pakistan it represents what housing starts/new automobiles is for the USA.

Recently we have signed a new textile agreement with the USA. Granted that there has been a “Most Favoured Nation” approach from the US towards giving us increases in our quotas but when you compare the quotas given to Taiwan, Hong Kong, South Korea, etc, we are far behind. Considering the strategic interests of the US, we are among the four largest recipients of economic and military aid. By this token, we should have textile quotas in proportion to our population and our economy. While we do not grudge the textile quotas granted to the others, we could perhaps have opted for less economic aid and requested for enhanced textile quotas. USA is an established friend, make no mistake.

As much as we generally indulge in making the US a favourite whipping boy for all our ills, the fact remains that as a sovereign nation Pakistan had two choices, to become Finland-ized (or Afghanistan-ized) or to stand upto the threats on our borders. The fact also remains that it is the US which gave us and continues giving us the tools to confront our potential foes.

True it coincides with the strategic interests of the USA but then who does not make allies and enemies based on strategic interests? Our strategic, tactical or whatever interest is to remain FREE and the US has been singularly forthcoming in helping us to be FREE of an abhorrent foreign domination, either from the East or the North West, both from ideologies sworn to be anathema to ours, as God fearing, believing Muslims. Those who tend to be blind to the AID given to us by the USA and indulge in wanton, unbridled attacks and rhetoric against the USA and their AID to us should be sent post-haste to the FREE FIRE zones in Afghanistan (which includes all areas except some parts of Kabul) on a tourist package. The liberty to indulge in free-wheeling comment is a comfort derived from US Support and AID that they so blatantly decry.

It is to the US that our Central Planners must appeal in the context of textile quotas. We do not require alms but we do require a secure market for our products. The USA is a huge market which can very easily absorb the doubling or trebling of our textile quotas without even a murmur. If we can only explain lucidly to the US Government and the American Congress that cotton products represent our economic lifeblood and the continued prosperity of an ideological Islamic nation like ours is the greatest bastion against communist ideology, we do not see any reason why the US should not listen to our arguments with due consideration. To the US, increase of textile quotas for Pakistan by 20, 50 and 100 percent will not make any difference, but to our people, our poor skilled labourers in textile industries and the garment factories, with the ever increasing of population every year, a ONE percent drop in contrast with population expansion, means misery, starvation and death for many. The US need not give us economic largesse by the bountiful in credits but can confine the largesse to increasing our textile quotas to really make our basic industries hum again. This is the truth which should be explained diligently and brought home to the US, that making an economically vibrant Pakistan means letting the vast US market open to a greater share of Pakistan textiles.

Reciprocity in trade will definitely result in a better balanced economy. As our goods find the way into the US market system the present pressure of maintaining exports at any cost which is applied on our production units will ease with associated manifold benefits.

All this brings us back to the basic philosophy which should govern our CT and which has been recognized by our planners, that any CT must cater for a large segment in exports of our non-quota textiles and made-ups. As much as we would like our friends to eat our mangoes, we would rather settle for the next best thing, that they should wear clothes fashioned from our textiles, with a preference that these clothes should be made by our skilled labour.

Pakistan’s economic prosperity lies in force feeding our NON-QUOTA textiles into the world market and where best can one start than with the two SPECIAL friends who have helped us through thick and thin, the USA and Peoples Republic of China? Since China is in the same textile boat as ourselves vis-a-vis the USA, the BUCK stops at the door of the US Commerce Department, provided our negotiators are forceful enough to explain the economic reasons why.

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