Opportunity of a lifetime

The global trade landscape is undergoing significant realignment. For Pakistan, particularly for its textile sector, this is a once-in-a-lifetime opportunity to increase exports and gain market share in the world’s largest consumer economy: the United States.

The reciprocal tariffs imposed by the United States on key textile and apparel exporters—China (34%), Vietnam (46%), and Bangladesh (37%) — will create vacuum in the US market.

Pakistan, which itself faces a reciprocal tariff of 29%, remains well-positioned to step in and fill this gap. With its robust textile value chain, globally competitive labour costs, and a longstanding trade relationship with the US, Pakistan stands out as a viable and strategic alternative.

That said, it is imperative for the Government of Pakistan to urgently initiate efforts to negotiate a tariff exemption, leveraging the country’s low trade surplus with the US and mutual trade dependencies. Specific policy proposals to that end are outlined later in this article.

Currently, Pakistan is a marginal player in the US textile and apparel import landscape. In 2024, the US imported $112.9 billion worth of textile and apparel products.

Pakistan’s share was just $3.93 billion, a modest 3.5% of American textile and apparel imports. In comparison, Bangladesh accounted for 6.4%, India for 9.0%, and Vietnam for 14.1%. China, even amid declining exports due to rising tariffs and supply chain diversification, still held over 25% share.

If Pakistan were to capture even an additional 1% share in the US textile and apparel import market, it would mean $1.1 billion in extra annual exports. Over time, securing a sustainable 10% market share — well within reach — could yield $11 billion annually.

The United States has taken a deliberate shift in trade policy to diversify its supply chain and reduce dependence on countries with whom it has large trade imbalances.

However, Pakistan has a modest trade surplus of only $3 billion with the US, which constitutes just 0.25% of America’s overall trade deficit. The overwhelming majority — 95% — of the US trade deficit stems from 9-10 large markets including, China, the EU, Vietnam, Japan, Canada, Mexico, etc. For the US, Pakistan’s surplus is not even a rounding error in comparison — but for Pakistan, it is an economic lifeline.

At the same time, the US is seeking to diversify its sourcing to countries with stable political relations, competitive production capabilities, and no significant trade imbalance. Pakistan ticks all these boxes.

This opportunity will not translate into economic gain unless the Government of Pakistan takes immediate action.

There are four key areas where intervention is critical:

1. Renegotiate reciprocal tariffs with the US

Pakistan must urgently initiate dialogue with Washington to secure exemption from the 29% reciprocal tariffs. This should be done through:

• Addressing all outstanding issues highlighted in the USTR’s 2025 Report on Foreign Trade Barriers, particularly those related to intellectual property rights, transparency, and regulatory standards.

• Offering reciprocal market access in Pakistan to key US exports, in areas that do not undermine domestic industry or threaten the balance of payments. For instance, we already provide duty-free access for US cotton and are among its largest global buyers with potential for expansion.

• Exploring expanded US LNG imports, to meet Pakistan’s energy demands for textile manufacturing, thereby further integrating American value addition into our exports.

In exchange, Pakistan should request preferential or duty-free access for its value-added textile and apparel exports. This will not only stabilize US-Pakistan trade relations but also support American raw material and energy suppliers.

2. Ensure regional energy price parity

While Pakistan enjoys low labour costs — around $100/month, compared to $150-$250 in regional competitors — the advantage is offset by high energy tariffs. At present:

• Electricity for industry is priced around $12 cents/kWh, significantly higher than $5–9 cents/kWh in India, China, Vietnam, and Bangladesh.

• Captive power producers, particularly efficient cogeneration setups, are penalized with $15.38/MMBtu gas tariffs, inflated by cross-subsidies and policy distortions.

APTMA urges the government to:

• Reduce industrial electricity tariffs to 9 cents/kWh, in line with regional levels.

• Eliminate the unjustified levy and supply RLNG to industry at full cost without additional surcharges or subsidies to other sectors.

Without competitive energy pricing, Pakistan will struggle to sustain export-led growth despite global market openings.

3. Support the entire value chain, especially SMEs

Pakistan’s textile industry is not monolithic. It comprises large integrated exporters as well as a vast network of small and medium enterprises (SMEs) that contribute to spinning, weaving, processing, and stitching.

To ensure inclusive export growth:

• A level playing field must be maintained for local manufacturers against imports, and to this end the sales tax disparity created by the Export Facilitation Scheme must be addressed.

• SMEs must be supported in accessing certifications, traceability tools, and compliance protocols required by US buyers.

Any preferential access deal should ensure that all parts of the value chain benefit, not just large exporters.

4. Expand product scope within US market

Beyond apparel and home textiles, Pakistan must diversify into adjacent categories now affected by US supply disruptions. For instance:

• The U.S. leather and footwear market — currently facing high tariffs on Chinese and Vietnamese goods — offers significant room for Pakistani manufacturers.

•Technical textiles, uniforms, and sportswear, particularly those using US cotton and energy inputs, could also see growth.

• For this, it is important to ensure availability of raw material and inputs for manufacturing of man-made textiles. Currently, imports of PSF are subject to excessive import, anti-dumping and regulatory duties (up to 18%), which make MMF-manufacturing in Pakistan uncompetitive.

Moreover, Pakistani exports of high-value textiles containing American cotton and possibly energy represent products with high American value addition—further justifying preferential treatment.

This is not a routine policy challenge—it is a strategic economic opportunity. Global market conditions are aligning in Pakistan’s favour.

Tariffs on regional competitors have risen. The United States is seeking stable, reliable partners with whom it has manageable trade balances. Pakistan fits that profile.

But action is needed now. The government must initiate diplomatic engagement with the United States, offer thoughtful reciprocal access, and request exemption from the 29% tariff — based not only on economics but mutual benefit.

At the same time, we must correct domestic distortions—especially in electricity pricing, industrial gas supply, tax disparities and trade facilitation—so our exporters are not handicapped in seizing this opportunity.

APTMA urges the Government of Pakistan to treat this moment with the urgency and strategic focus it demands. With timely reforms and diplomatic initiative, Pakistan could double its textile exports to the US within three years, creating jobs, improving foreign exchange reserves, and strengthening our industrial base.

This is not just about trade — this is about economic security.

Copyright Business Recorder, 2025