A trade-first Pakistan policy
Saturday, 27 September 2008
Robert M Hathaway and Edward Gresser
Seven months ago, Pakistanis hoped elections would usher in a brighter era. Instead, skies are darkening. As President Asif Ali Zardari visited the United Nations and met with President Bush this week, Pakistan watchers worried that simultaneous political and economic crises are pushing the country toward disaster.
In response, both the administration and its Democratic critics advocate a new round of foreign aid increases. But past aid increases have failed to achieve results. If we expect different results, we need a different approach: an economic policy built upon trade and job creation for Pakistan's people, not just aid to its soldiers and ministries.
With 165 million people, Pakistan is the world's sixth-most-populous country and second-most-populous Muslim state. It is nuclear-armed and a prime target for Islamic extremists. A successful, democratic Pakistan would ease political tensions and drain support for radicalism throughout the Muslim world; a struggling, chaotic Pakistan would do the reverse. The country is too important to fail - but it is in trouble.
Pakistan's government long since lost effective control over lengthy swaths of territory along its border with Afghanistan, which extremist groups now use as bases for attacks on U.S. troops in Afghanistan and civilians in urban Pakistan. Economic stress is rising as growth rates are dropping just as food and energy prices soar. Meanwhile, millions of young men, poorly trained in decrepit schools or religious institutions, cannot find jobs and are easy targets for terrorist recruiters. The Bush administration has used aid as its main tool, pouring $12 billion into the country since 9/11. But this has produced few results, just as large aid packages in the 1970s and 1980s failed to create lasting growth or political momentum for moderates. There is no reason to think a new aid boom would end otherwise. But the typical alternatives, political pressure and sanctions, failed in the 1990s.
So we need new tools. The best way America can help Pakistan is to put people to work. And the best way to do this would be to give duty-free treatment to Pakistan's clothing, leather and textile industries.
In earlier decades, Southeast Asia and Central America used labor-intensive exports to create jobs, promote economic growth and defang radicals. Pakistan should be able to do the same. Though it is a small exporter, it has an efficient textile industry. Household linens earn most of the hard currency Pakistan uses to buy food and fuel, and are good job creators - each container full of towels puts 500 urban residents to work.
Today, though, American trade policy hurts these industries more than it helps. Tariffs on Pakistan's goods are far above those imposed on products from affluent countries. To choose a simple example: Pakistan's towels and T-shirts trigger 7.5 percent and 19 percent tariffs, while tariffs on Sweden's cars and airplane parts are only 2.5 percent and zero. So last year, Pakistan's $3.6 billion in goods exported to the U.S. faced a $365 million tariff penalty - almost three times the $142 million penalty on Sweden's $13 billion. Why this perverse outcome? Lobbying campaigns have kept U.S. tariffs on the textiles Pakistan makes much higher than our tariffs on rich-country goods. To make matters worse, our exemption of most African and Latin American towels and shirts from tariffs puts Pakistan at a disadvantage against its direct competitors.
The logical step is to give Pakistan a break. Waiving tariffs on Pakistan's millions of towels and shirts - and soccer balls and everything else it makes - could boost urban employment, help Pakistan's government cool the political temperature, and thus help the new democratic system succeed.
Retail politics has blocked such a step until now. Fear of Pakistani competition in textiles, augmented by industry lobbying, stopped the Bush administration from pushing a tariff waiver in 2001 on the grounds that Congress would never go along. But as one-time congressional staffers, we think this sells Congress short. When a grave national security interest is at stake, Congress usually responds. We think it would do so again.
Shifting support for Pakistan from "aid first" to "trade first" would require leadership from the White House and support from Democrats. But given the dangers - for Pakistanis, Afghans, Americans and others - should Pakistan fail, the Bush administration should use its remaining time in office to take on this fight. — Baltimoresun.com
Seven months ago, Pakistanis hoped elections would usher in a brighter era. Instead, skies are darkening. As President Asif Ali Zardari visited the United Nations and met with President Bush this week, Pakistan watchers worried that simultaneous political and economic crises are pushing the country toward disaster.
In response, both the administration and its Democratic critics advocate a new round of foreign aid increases. But past aid increases have failed to achieve results. If we expect different results, we need a different approach: an economic policy built upon trade and job creation for Pakistan's people, not just aid to its soldiers and ministries.
With 165 million people, Pakistan is the world's sixth-most-populous country and second-most-populous Muslim state. It is nuclear-armed and a prime target for Islamic extremists. A successful, democratic Pakistan would ease political tensions and drain support for radicalism throughout the Muslim world; a struggling, chaotic Pakistan would do the reverse. The country is too important to fail - but it is in trouble.
Pakistan's government long since lost effective control over lengthy swaths of territory along its border with Afghanistan, which extremist groups now use as bases for attacks on U.S. troops in Afghanistan and civilians in urban Pakistan. Economic stress is rising as growth rates are dropping just as food and energy prices soar. Meanwhile, millions of young men, poorly trained in decrepit schools or religious institutions, cannot find jobs and are easy targets for terrorist recruiters. The Bush administration has used aid as its main tool, pouring $12 billion into the country since 9/11. But this has produced few results, just as large aid packages in the 1970s and 1980s failed to create lasting growth or political momentum for moderates. There is no reason to think a new aid boom would end otherwise. But the typical alternatives, political pressure and sanctions, failed in the 1990s.
So we need new tools. The best way America can help Pakistan is to put people to work. And the best way to do this would be to give duty-free treatment to Pakistan's clothing, leather and textile industries.
In earlier decades, Southeast Asia and Central America used labor-intensive exports to create jobs, promote economic growth and defang radicals. Pakistan should be able to do the same. Though it is a small exporter, it has an efficient textile industry. Household linens earn most of the hard currency Pakistan uses to buy food and fuel, and are good job creators - each container full of towels puts 500 urban residents to work.
Today, though, American trade policy hurts these industries more than it helps. Tariffs on Pakistan's goods are far above those imposed on products from affluent countries. To choose a simple example: Pakistan's towels and T-shirts trigger 7.5 percent and 19 percent tariffs, while tariffs on Sweden's cars and airplane parts are only 2.5 percent and zero. So last year, Pakistan's $3.6 billion in goods exported to the U.S. faced a $365 million tariff penalty - almost three times the $142 million penalty on Sweden's $13 billion. Why this perverse outcome? Lobbying campaigns have kept U.S. tariffs on the textiles Pakistan makes much higher than our tariffs on rich-country goods. To make matters worse, our exemption of most African and Latin American towels and shirts from tariffs puts Pakistan at a disadvantage against its direct competitors.
The logical step is to give Pakistan a break. Waiving tariffs on Pakistan's millions of towels and shirts - and soccer balls and everything else it makes - could boost urban employment, help Pakistan's government cool the political temperature, and thus help the new democratic system succeed.
Retail politics has blocked such a step until now. Fear of Pakistani competition in textiles, augmented by industry lobbying, stopped the Bush administration from pushing a tariff waiver in 2001 on the grounds that Congress would never go along. But as one-time congressional staffers, we think this sells Congress short. When a grave national security interest is at stake, Congress usually responds. We think it would do so again.
Shifting support for Pakistan from "aid first" to "trade first" would require leadership from the White House and support from Democrats. But given the dangers - for Pakistanis, Afghans, Americans and others - should Pakistan fail, the Bush administration should use its remaining time in office to take on this fight. — Baltimoresun.com