EPB has been assigned responsibilities of promoting and supporting the sustained growth in exports of the Pakistan's goods and services. As a part of seven-point export strategy, alongwith Ministry of Commerce, EPB has created a new WTO Cell in order to respond on critical and technical trade issue and suggest practical measures to counter them.
It is strongly felt that multilateralism spearheaded by the WTO has opened the world markets for both developed and developing countries thereby creating both opportunities as well challenges for all trading nations including Pakistan. Capitalising on this phenomenon most developed countries and some developing countries were able to achieve rapid economic development. Opportunities for Pakistan in this environment are vast considering our export potential, competitiveness, abundant resources, strategic location and an on going measure to develop infrastructure.
Today under WTO, scope is being widened to include non-trade related issues such as environment, social and labour issues under Technical Barriers to Trade (TBT), ISO, etc.
NON-TARIFF BARRIERS TO TRADE (NTBS): include agricultural subsidies given by the developed markets to their farm sector including subsidies on cotton, market access conditionalities before opening up markets, Regional Trading Arrangements (RTAs), Free Trade Agreements (FTAs), giving tariff preferences to countries within specific regions and putting non-member countries at a disadvantage through anti-dumping and countervailing measures and Security inspection at port of discharge.
The contemporary trading environment calls for Pakistan to adopt prudent policies to ward off the challenges and to exploit the emerging opportunities. This envisages enhancing our export competitiveness, product development & up-gradation to meet International Standards to proactively pursue market access issues in multilateral fora.
Besides Imports/exports, trade encompasses all activities of economic and production, how they are used, mobilised and complied with fixed standards. Post 2004 scenario will benefit those countries, which are prepared to meet the challenges individually or collectively.
Some of the South Asian countries have attained rapid economic development by pursuing the export-led growth paradigm. Japan, South Korea, Malaysia, Taiwan, China, Hong Kong, Singapore are some of the examples of miracles of export led development strategy outlining the transformation from an underdeveloped country to one of high-income status in a single generation. Pakistan can learn from study of the Success stories in respect of above countries and can emulate some of the policies tailoring to contemporary realities to attain the rapid economic progress through Export-led growth paradigm to enhance Pakistan's Export Competitiveness in Global markets.
There is also a need to examine and pursue Regional Trading Arrangements within the ambit of multilateralism. Neo-protection in the guise of the social compliance, environmental issues and those associated with the abuse of standards and anti-dumping and safeguards measures also pose a threat and a challenge to Developing Country like Pakistan and need to be highlighted.
Exports are basically a function of selling a product that is competitive in terms of price, quality and reliability. Better production processes, management techniques, innovation, constant up-gradation and better marketing are the primary factors for making a product competitive. The impact of external factors like utilities cost, cost and quality of labour, taxation regimes, incentives for the export sector, macro-economic conditions coupled with social and political stability also determine the export competitiveness.
A Country's comparative advantage in exports can be turned into competitive advantage if both internal and external factors are tackled adroitly and simultaneously. Textile & Clothing sector being the backbone of our economy can be put forth as an example where Pakistan enjoys competitive advantage. The following facts will amply demonstrate the above facts to be true:
a) Textile Industries Economic Contributions:
-- 65% of total export
-- 46% of total Manufacturing
-- 45% of total Employment
-- 8.5% of total GDP
-- 31% of total Investment
-- Salaries and Wages Rs 40
-- Billion per annum
-- Contribution to R&D Rs 116 Million per annum
b) Prospect of Textiles from Pakistan show that it is the 4th largest resource in world of 2 million M. tons of raw cotton, 1.7 million M. tons converted to yarns, fabrics and finished products. Pakistan is an established, reliable long-term supplier of textiles, apparel and home textiles therefore has the potential of enhanced sourcing from Pakistan.
With the fast changing global trade scenario, Pakistan needs to adopt a strategy to sustain its export competitiveness. Steps should be taken to expand the export basket and market's width & depth in order to attain economic development and stability. Foreign companies will have to be given national treatment as per WTO regime to which Pakistan is a signatory. While WTO has been operational since 1995, most of the deadlines will be reached by 01.01.2005. Developed countries will protect their Intellectual rights, (Trade Marks, Patent, copyright) and their labour oriented industry.
Developing countries like Pakistan will stand to gain very little compared to develop and developing countries. It is visualised that not much impact will be made in textile, as it is our main strength. Private Sector has also faired well by investing US $4 (billion) through BMR. Pakistan today has a commanding position in Bed lined, knitwear, yarn, fabric, towels and RMG (pants/bottom).
The Government of Pakistan reacting to the needs of WTO requirements today, is actively engaged to pursue results on the following issues:-
a) TECHNICAL BARRIERS TO TRADE (TBTS): The Export Promotion Bureau is engaged in an ongoing exporter's education programme (Seminars, Workshops etc) to provide detailed information, guidance and assistance in capacity building in matters relating to social standards, environmental issues, quality (ISO 9000 etc) simplification of procedures, SPS health and hygience issues and ECO labelling etc.
b) SKILL DEVELOPMENT: EPB has also established 22 institutes for skill development in private sector and 6 common facility programmes.
c) NON-TARIFF BARRIERS TO TRADE (NTBS): Domestically, the new Trade Policy, encourages the export sector to move towards value addition by upgrading technology. Consultancy support has been announced for assistance in technology enhancement through the Export Promotion Bureau. EPB has already been offering financial and technical assistance to the exporters in acquiring ISO certification. Assistance in value addition and maintenance of higher quality standards will lead the industry out of the lower-end production cycle which is more susceptible to anti-dumping and countervailing measures by the developed world.
d) Under the trade Policy three Garment Cities are to be set up in Karachi, Lahore and Faisalabad. These will facilitate economies of scale, horizontal value chain linkages, and enhanced productivity. This will further help to improve the positioning of our textile exports abroad.
e) Internationally, at the ministerial level, Pakistan's position with regard to agricultural subsidies and market access issues is already aligned with the viewpoint of the G-20, which protects our national interest. At the WTO level, Pakistan has opposed continuation of agricultural subsidies including subsidies on cotton. While closely monitoring recent developments in Regional Trading Arrangements and free Trade Agreements, Pakistan is already actively engaged with several countries including Sri Lanka, Iran, Bangladesh and China as well as within the SAARC region to strike RTAs/FTAs to protect the interest of our textile sector in particular and all other exports in general. Trade Policy announced for providing uplift to export sector through Technology Upgradation, Brand Development, Brand Acquisition, Marketing of Pakistan's product abroad, Effluent Treatment Plants etc are also on the anvil under Trade Policy Initiatives.
POST 2004 SCENARIO:
-- Agreement on Textile & clothing (ATC) will end on 31.12.2004. This will mean that all the quantitative restriction under MFA like Quota placed on Pakistan's textiles will be lifted.
-- It is speculated that China will dominate the textile exports. According to American Textile Manufacturers Institute (ATMI), China's currency is estimated to be fairly under valued which gives it a cost advantage. Besides China's textile sector is state owned & subsidised with unlimited labour supply.
-- Many countries are now exporting textiles to major markets such as USA & EU. Fierce competition from Indonesia, Bangladesh, Thailand, and Jordan etc will be witnessed.
-- Non-Tariff barriers under trade blocks like ASEAN; NAFTA etc will gain advantage to push their goods and services. These countries under Special Trading Arrangements have also shifted to man made fiber export and technical Textile exports thereby enhancing their export potential. They are doing so by focusing on high technology, innovation, speed and low production costs.
Who will benefit in Pakistan: It is estimated that manufacturers who will stand to gain after lifting of quantitative restrictions are those:-
i) Which are vertically integrated units and are full packaged supplier.
ii) Who are big players doing sizeable business from Pakistan.
iii) Who accord priority to improvement better processes & exercise tight management control.
iv) Who are producers of women apparel.
v) Who understand and benefit from Brand names.
vi) Who are willing to enter new markets with product adaptability.
Agriculture and Human Resource Development are two basic key areas of strength in Pakistan. We need to implement modern techniques as well as instill management skills for uplifting this sector. Pakistan has displayed considerable strength in WTO rounds at Doha and Cancun.
WHO WILL BENEFIT FROM THE ABOLITION OF QUOTAS:
-- All countries, which have shown strength in production & exports of their items over the years, will reap the benefits. China, India & Pakistan will benefit in Textile & clothing areas.
-- Pakistan will gain in the fully utilised categories, but lose out in the under-utilised categories, and those, which are non-quota in textiles.
-- Those countries will gain, where there will be foreign investment as a result of re-location, like Sri Lanka and Bangladesh and Jordan.
According to a US Trade representative study, China is expected to become the "supplier of choice" for most US importers (the large apparel companies and retailers) because of its ability to make almost any type of textile and apparel product at any quality level at a competitive price. However, the extent to which China continues to expand its shipments following quota elimination in 2005 will be tempered by the uncertainty over the use by the United States and other importing countries of the textile-specific safeguard provisions contained in China's World Trade Organisation (WTO) protocol of accession.
To reduce the risk of sourcing from only one country, US importers also plan to expand trade relationships with other low-cost countries as alternatives to China, particularly with India, which also has a very large manufacturing base to produce a wide range of textiles and apparel at competitive prices and a large supply of relatively low-cost skilled labour. Bangladesh, Pakistan are expected to emerge as major suppliers for a narrower but still significant range of goods, such as mass-produced basic knit cotton tops and woven cotton shirts and pants (Bangladesh) or men's and boys' cotton apparel (Pakistan).
WTO is a double-edged sword. No one institution in Pakistan can claim progress on WTO issues alone. It has to be a joint effort of both public and private sectors to achieve progress, establish linkages needed to create a chain reaction. Synergy will help to over come problems thereby creating a win-win situation for all in Pakistan.
(The writer is Director EPB).
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