Due to overall low economic institutional quality, recurring macroeconomic stabilization issues and lower market access internationally, Pakistan’s overall exports have shown weak growth, and little diversification over the years. At the same time, the experience of trade liberalization over the last two decades, under the World Trade Organization (WTO) regime has also shown mixed results for developing countries in particular, due to overall lack of low-income country contextualization under the WTO-led trade liberalization regime. This resulted in greater move towards regional trading blocs to balance trade liberalization and country’s protectionist/autarkist needs.
For instance, in their 2014 article ‘Governing trade in global food and agriculture’ Jennifer Clapp and her co-author Kim Burnett pointed out in this regard: ‘Despite being shaped by ideas that trade liberalization will bring benefits to all, the regime in practice has locked in an imbalanced set of rules and practices that have contributed to the vulnerability in the world’s poorest countries. This system has contributed to hunger and poverty, especially in a world that is facing ongoing volatility in food prices.’
Moreover, the shortcomings of WTO regime have apparently led to greater surge towards countries forging new regional trade blocs like more recently CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which came into force on December 30, 2018, and with greater need perhaps being felt to reform the WTO in view of a variety of reasons, including woefully weak performance of the WTO in managing the vaccine production/supply issues along with the overall global commodity supply shock. In this regard, highlighting the cracks in global trade liberalization regime under the WTO, a few years ago, Rorden Wilkinson in his (2014) book ‘What’s wrong with the WTO and how to fix it’ had pointed out: ‘While Peter Singer [in his (2004) article ‘One world: the ethics of globalization’] reminds us that it is not possible to prove that the liberalization pursued under the GATT/WTO has made ‘the rich richer and the poor poorer’… and has undergone little more than a rearranging of the furniture reform-wise since it was established. This form of trade governance has produced a pattern of liberalization that has accorded the lion’s share of trade opportunities to the leading industrial states, offered others limited prospects, and for others still excluded them from openings in key economic sectors inhibiting their capacity to take advantage of the opportunities that trade-led growth could bring.’
Hence, it is important that while Pakistan and the world at large continue to push for reforms in the WTO, including the way intellectual property rights are managed, the country should also be clear at what pace it wishes to embrace trade liberalization. It is important to note that its current model of too much of it and too quickly over the years, unlike China and India for instance, has made it too vulnerable to shocks produced by both fickle-natured capital flows and also resulted in overall lack of needed protection for domestic industrial base and export sectors. Therefore, it should also look to pursue the path of participating in meaningful regional blocs. This is not to say that the prolonged protection of certain economic sectors by domestic economic policy over the years does not need rationalization and rollback where warranted.
An important regional bloc that is shaping up in this regard is CPTPP. The government should take a closer look with regard to the economic opportunities involved if it already hasn’t done so. For instance, Muhammad Aamir Khan, Naseeb Zada, and Kakali Mukhopadhyay in their (2018) article ‘Economic implications of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on Pakistan: a CGE approach’ pointed out the importance of this regional bloc for Pakistan in the following words: ‘The economy-wide results show the proposed CPTPP will have a negative impact on Pakistan’s real GDP, sectoral exports and imports and at household level. However, if Pakistan joins CPTPP, there is an overall positive impact on Pakistan’s economy. Thus, keeping in view Pakistan’s ideal geographical and strategic location and its potential to be a transit economy with a junction of south Asia, west Asia and central Asia, this study suggests that Pakistan’s proposed entry to CPTPP will not only yield a wide gain to the region but will reduce the gap between poor and rich in Pakistan and hence will have a positive impact on overall income inequality in Pakistan.’
Jeffrey J. Schott at the Peterson Institute for International Economics (PIIE), in his recent article ‘Which countries are in the CPTPP and RCEP [Regional Comprehensive Economic Partnership] trade agreements and which want in?’ indicated that: ‘The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement, signed by 11 Asia-Pacific countries representing 13 percent of global GDP, that lowers barriers to trade in goods and services between member countries. Members pledged to eliminate almost all tariffs and import charges on each other’s products and accepted common obligations on food regulations, environmental protections, the digital economy, investment, labour, and financial services, among others.’
Pointing out some perceived threats facing Pakistan’s economy, in case it decides to remain outside of CPTPP, or it fails to get entry, the same article by Muhammad Aamir Khan and others argued, among other things, that: ‘The formation and implementation of this proposed partnership is a valid threat for other economies, particularly for Pakistan. Pakistan will likely to suffer from this agreement due to trade diversion of textile and apparels in favor of the CPTPP members. The reason can be extended in terms of the likely ‘yarn forward rule,’ according to which, it is obligatory for the CPTPP member economies to import all the components of manufactured products from other CPTPP member economies. So, the implementation of the CPTPP will have an impact on global supply chain of textile and apparels.’
It is, therefore, important that as the country looks to expand growth and diversification of exports, that the government looks deep and fast – if it has not already done so –especially in the overall environment of a significantly large trade deficit currently, as to how it can enter CPTPP, which may not be an easy task after all, as pointed out by Jeffrey J. Schott at the PIIE in his other article ‘Joining the CPTPP is a long process and needs consensus among existing members’ in the following manner: ‘China formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in a letter to New Zealand’s trade minister on September 16, 2021, the first step in a long and complicated admission process. The United Kingdom is more advanced in the process, having begun accession talks in the summer of 2021 with the agreement’s 11 members… Entry to the trade pact requires a consensus among existing signatories – at the beginning of the accession process and along the way to achieve acceptance of the applicant’s terms. Applicants must work with every member to satisfy their concerns.’
(The writer holds a PhD in Economics from the University of Barcelona; he previously worked at the International Monetary Fund)
He tweets@omerjaved7
Copyright Business Recorder, 2021