The worlds largest economy is isolating itself as Donald Trump scrapped the Trans Pacific Partnership (TPP) what was to be Obamas pivot to Asia to keep China in check. With the US opting out of the deal as well as the TTIP and declaring intentions to tweak NAFTA could this be an opportunity for Pakistan to capture the States coveted textile market?
The US is the worlds second-largest importer of textiles (after the EU), accounting for around 10 percent of total world textile trade. Its an important market for Pakistan as well, accounting for around 25 percent of our total textile exports. However, the reverse is not true; Pakistan accounts for less than three percent of total US textile imports.
The US is not a major apparel manufacturer/exporter but a consumer/importer. As such, it imports mostly in three categories (HS code 61, 62, and 63 [explained in table]), which cumulatively amount to around 90-96 percent of its total textile imports. It is these product categories that Pakistan has to market to the US.
Regarding TPP, only Vietnam and Mexico were members with significant exports to the US in these categories. The graph shows how Vietnams exports have been growing, while Pakisans and Mexicos have declined. In terms of market share, Pakistan has gone from 2.99 percent in 2014 to 2.73 percent in 2016, while Vietnams share grew from 9.67 percent to 11.3 percent over the same period.
Naturally, this conversation ties in to what is one of the most fundamental issues regarding Pakistans textile industry lack of value-addition. Out of its $13.6 billion annual textile exports in FY16, products from HS52 (Cotton) which includes raw cotton, cotton yarn, and woven fabrics accounted for around one-third of total textile exports; more than HS61 and HS62 combined. The value-added textile sector is underdeveloped and not living up to its potential, with policies that encourage low-value exports.
Coming back to TPP, a Bloomberg article recently shed light on Asian economies like Vietnam, China, India, and Thailand having enormous trade surpluses over the US (in the case of Vietnam its 15 percent of the economy). With China already being targeted, it may well be the case that the US now slaps tariffs on goods coming in from Vietnam, India, South Korea, and Malaysia. However, Pakistans name is not on that list since Pakistan has an overall trade deficit with the US.
The US opting out of TPP was a bullet dodged for Pakistan, as it surely would have meant that Vietnam would have further increased its already expanding hold on the US textile market. Now, if the Trump administration goes ahead with his planned trade war and targets these countries, Pakistan may capitalise on this opportunity, if only it can get its house in order.
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