Withdrawal of a tempting offer

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Weekly Updates - Traders' Diary

The news that the plan for preferential status in the US market to Pakistan under the Reconstruction Opportunity Zones (ROZs) has finally been dropped by the US administration would be a shocker for most people in the country but should not be a surprise for those who know the intricacies of international relations based on mutuality of interests.

The withdrawal of the offer by the US was confirmed in a presentation submitted to the National Assembly Standing Committee on Commerce by the Ministry of Commerce, reiterating that an alternative arrangement had been proposed to expand trade and investment between the two countries. It may be recalled that Pakistan and the US had been negotiating the proposal for establishing ROZs since 2006 to grant import concessions for products manufactured in terror-hit areas of Pakistan.

The setting up of ROZs in terrorist-infested northern areas was considered a highly attractive idea to boost economic opportunities in underdeveloped tribal belt to bring young people of the area in the economic mainstream and wean them away from terroristic activities. According to the Ministry of Commerce, the US administration had failed to get the relevant legislation approved as required for the establishment of ROZs.

The alternative arrangement, it may be mentioned however, is still in initial stages and much less attractive than the idea of ROZs. The Ministry of Commerce summary states that Pakistan and the US had decided to set up a working group on trade and investment matters of bilateral interest under Trade and Investment Facilitation Agreement (TIFA) Council and formation of the group would be finalised through an exchange of diplomatic notes. The US had, nonetheless, proposed that Pakistan may suggest a set of enhanced trade market access proposals, which the said working group would evaluate, and subsequently recommend to the US administration.

The sad ending of the idea of ROZs is undoubtedly depressing due to the dashing off of high hopes attached to it by all and sundry in Pakistan and the failure of the US authorities to fulfil its promise to help the country in fighting terrorism through an almost ideal mechanism. The understanding was that the US would provide duty-free access to imports produced in areas adjacent to Fata to revive economic activities and increase employment opportunities so that people in the region were less tempted to join militant ranks. The negotiations between the US and Pakistan on the proposal lasted for about six years and even locations for ROZs were identified to give the agreement a final shape. All of this had happened despite opposition by certain lobbies in the US to protect their industries from stiff competition from abroad. The latest development sounding the death knell of a highly tempting offer is a huge disappointment to the country because of the loss of a great opportunity to develop terrorist-infested northern region, reduce militancy and increase export earnings.

Nevertheless, it is important to learn certain lessons from this bitter experience. The most significant lesson is that there is no free lunch in the world, especially in relationships between countries and every nation has to survive and prosper on its own strength. The idea of ROZs was conceived when US policymakers badly needed the support of Pakistan to fight terrorism and had no plans to leave Afghanistan. The situation has changed now. Whatever the reasons, the US does not see Pakistan as a reliable partner in the fight against terrorism anymore and is set to leave Afghanistan in a couple of years.

As such, it has no qualms in ditching Pakistan and shelving the offer. Failure to get the legislation approved was largely an excuse to reduce the bitterness of the real message and the offer of negotiations for a new agreement was probably meant to mollify excessive criticism on the US by certain quarters in the country. Of course, learning from this experience, the only way forward for Pakistan now is not to look for crutches but enhance productivity of the economy through optimal utilisation of its resources and increase comparative advantage of its export products by improving their competitiveness in the world markets as soon as possible. This is not to say that Pakistan should not try to facilitate its exports and attract investment by entering into various kinds of agreements and avail incentives offered by other countries but only to remind that such initiatives are not real substitutes for the hard work and reform efforts needed to boost the economy and its exports on a self-reliant and sustainable basis. Others' generosity is always dependent on their own needs. So far militancy in the northern regions is considered, a multi-pronged strategy has to be adopted to reduce the scourge to manageable levels by the country itself. Of course, outside help should be welcomed but cannot play a decisive role in this regard.


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