WWII is not remembered fondly, yet it helped pull the United States out of the Great Depression. Million may have died but the war economy gave US the boost it needed and made it the super power that it is today. War can work, if leveraged right.
Despite the casualties of Iraq, Syria and Afghanistan and others, it is the US China trade war that is making the most headlines today. As Pakistan waits for the fallout while drawing ever closer to its neighbouring ally, it offers a host of opportunities on the export and import fronts that can be benefited from.
One such positive spillover for Pakistan is lower cotton import prices (read “Trade war to benefit Pakistan’s cotton,” published on June 28, 2018). Another such benefit may accrue from Chinese tariffs on US’s soya bean exports. While soya bean is not an important item on Pakistan’s food bill, lowering of prices of these two resource products indicates that others may follow suit as two of the biggest economies in the world lose each other’s market. Basic demand and supply rules indicate that though domestic prices in both the respective country may rise, globally the increase in supply will bring down international prices.
But the biggest impact that Pakistan could take advantage of, which may truly be transformational in nature, is the opening in the textile sector as Chinese imports become more expensive. Yes, companies may most likely flee into arms of Vietnamese and Bangladeshi counterparts who are better plugged into global textile value chains. But the US market is $50-60 billion of which China’s share is about two-thirds. With China’s exports to US decreasing, there is room for growth for all competing countries.
Currently Pakistan has a miniscule share in US’s exports at less than 1 percent. US however is Pakistan’s top export destination for textile exports. If Pakistan can muscle in even 10 percent of China’s US market, in dollar terms Pakistan’s current deficit will get a boost bigger than the one brought about the currency devaluation or the export package combined. And it wouldn’t have cost Pakistan a cent.
Pakistan has in the past been able to benefit from bans on others (read “India’s loss – Pakistan’s gain”, published on June 6, 2018). The question is, can Pakistan profit on a larger scale than mere incremental increase in exports?
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