Published Date: Apr 23, 2018
Pakistan unlikely to suffer from the US-China trade war in the short term, experts
Pakistan’s economy is the least integrated in the global value chain and, hence, will not suffer significantly from the recent US-China trade war in the short term. Pakistan should not worry about this rather it should revisit its trade and industrial policy and direct its production incentives and preferences under free trade agreements towards products that are in demand in countries with lower trade barriers, higher consumer confidence, a stable growth outlook, and the potential for supply-chain integration.
This was the crux of the deliberations by trade experts at a special seminar on “Where Does Pakistan Stand in Global Trade War?’ organized by Sustainable Development Policy Institute (SDPI), here on Monday.
Speaking on the occasion, Roubina Ather, Member, National Tariff Commission said that the greatest threat of this trade war is protectionism which in turn will shrink the global trade volume. “We should not be over-concerned on the on-going global trade war mainly between China and the US, as unfortunately or fortunately, Pakistan is not so much integrated in the global value chain”, she said, adding that if the trade war goes further, the textile sector and the apparel market may suffer in the long term. Amid existing geo-political situation and economic challenges, the Foreign Office can play significant role in handling the changing circumstances, she added.
Speaking earlier, Dr Vaqar Ahmed, Joint Executive Director, SDPI said that the ongoing trade war between China and the US may cause a rise in the cost of production and raw material in developing countries which in turn could bring about inflation and threaten the global economic recovery. “As trade declines and commodities output falls, this could also result in lower wages and unemployment”, he said adding that for a developing country’s diaspora working in US, this could have negative implications. Unfortunately, the trade wars are taking place at a time when global investors are also nervous regarding the post-Brexit UK and EU trade negotiations. In the short run, it is expected that trade between UK and its trading partners could decline, he added.
Dr Vaqar said that the US-China trade hostilities will also open the doors for other advanced economies to step up protectionism and start making foreign imports more expensive through tariffs, Para-tariffs and non-tariff barriers. He said this will hurt the decade long efforts of trying to revive a more liberal trade regime and save multilateralism.
“As Pakistan is an importer of iron, steel and aluminum from China and US, it will be good news if both super powers end up having an abundant supply glut in turn brining global prices of metals down,” said Dr Vaqar, adding that this could see costs of large scale manufacturing units go down. The public and private sector stakeholders should make an effort to evaluate which commodities may face short term shortage due to hike in tariffs on Chinese goods and if some such goods can be supplied to the US by Pakistan, he added.
Ahmad Qadir, Director General, Competition Commission of Pakistan on the occasion said that the nature of doing business is changing, where economies are becoming part of global value chain. “Becoming a part of integrated global value chain, where technology transfer and innovation takes place, the developing countries like Pakistan should take care of the changing scenarios” he said, adding that Pakistan should give more attention towards supply side distortions to tackle the emerging challenges such as recent US-China trade hostilities and to be competitive and innovative in the global market.
Dr. Usman Mustafa, Professor, Pakistan Institute of Development Economics (PIDE) said that the country with high quality products and competitive prices will survive to such global trade rivalries. He said Pakistan must invest more on its human resource development and strengthen its research and development to ensure quality of its products and competitiveness.