By Marvin Weinbaum and Syed Mohammad Ali
Improving currently under-performing bilateral trade and investment is perhaps the single most effective means by which the two nations can better converge their interests and demonstrate the practical value of improved relations.
What is more, from a political standpoint, enhanced business and economic collaboration can serve as an important counterweight to national security-related irritants that may well persist. Sluggish economic growth and challenging social conditions remain major issues of concern for Pakistan.
With little to no likelihood for substantial increases in the U.S. government’s direct economic assistance, a suite of enhanced commercial cooperation initiatives to enhance U.S.- Pakistan trade and investment flows becomes even more attractive.
Expanded export opportunities in both directions can assist in building employment opportunities, as well as reducing trade deficits, issues of importance to both nations, but perhaps with the greatest positive impact on Pakistan, given the relative sizes of the two economies.
While expanded commercial relations need some action by both governments, it can be led and sustained by both private sectors. Pakistan has made very significant progress in enhancing its attractiveness as a commercial partner. In recent months, the present U.S. administration has placed emphasis on business opportunities for large U.S.-based firms within Pakistan.
The new U.S. Development Finance Corporation (DFC), in conjunction with other U.S. government trade and investment promotion and financing agencies, can mount a major, coordinated project in conjunction with Pakistani counterparts to identify a catalog of key investment projects of potential interest to American firms.
This effort can be supported by business delegations of private sector firms that can examine specific projects to assess how the U.S. and Pakistani governments can collaborate to provide necessary support. These projects should be focused on key industries in which American firms have technological and economic advantage (such as the information technology and clean energy sectors). The U.S. can further help Pakistan develop an industry-led ethical sourcing program for the textile/garment sector. Doing so would make it possible for Pakistan to build on progress on worker rights and seek to regain American customers lost several years ago.
An initiative to improve the Pakistan brand internationally would have a transformative effect on international market perception of the country. While it is not feasible for the U.S. to offer Pakistan as expansive an economic partnership as China, the U.S. can offer Pakistan alternative options, or even explore supplemental opportunities, which can be aligned with CPEC.
It is possible for the U.S. to align itself with the CPEC initiative via green technology investments. The U.S. government need not be directly involved in this process either. The private sector in the U.S. is spearheading green technologies and green growth, enabling states like Texas to become the largest wind producer. Encouraged by the U.S. government, U.S. green energy firms can make big gains in Pakistan, offering alternatives to the coal-dependent CPEC energy portfolio.
U.S. firms have recently initiated a dozen wind energy projects in Pakistan. There are, however, opportunities where the U.S. government could further facilitate this process by creating a mechanism to mobilize finance for clean energy projects within Pakistan along the lines of the recently created U.S.-India Clean Energy Finance Task Force. Pakistan can be invited to join the State Department’s Energy Resource Governance Initiative (ERGI), launched late last year, and which includes nearly a dozen other countries, including Australia, Brazil, Peru, and the Philippines, aiming to promote sound mining sector governance, and secure and resilient supply chains for critical energy minerals.
Besides enhancing private sector and its own bilateral economic engagements with Pakistan, the U.S. can also help to facilitate broader regional cooperation on cleaner energy projects. Progress on the India-Pakistan-Iran gas pipeline has been blocked as an outgrowth of U.S. tensions with Iran.
However, the Turkmenistan-Afghanistan-Pakistan-India gas pipeline offers an alternative, which has extended from Turkmenistan into Afghanistan. The U.S. in its future involvement in Afghanistan should fast track the Afghanistan component of this project and encourage Pakistan and India to complete their segments of the pipeline.
The history of the U.S.-Pakistan relationship has deep roots, and it is a big asset in terms of institutional links and people-to-people contacts spread over generations. There is a sizeable diaspora in the U.S., and an extensive alumni network of U.S.- educated A laborer works on a loom at a factory in Pakistan’s port city of Karachi on January 17, 2020. (Photo by ASIF HASSAN/ AFP via Getty Images) 9 Pakistanis, including civil servants and members of the armed forces. These are the under-appreciated assets in the relationship that can help make varied forms of interactions easier and more sustainable.
There is, for instance, an unmet need for doctors and nurses in medically underserved areas in the U.S. Established Pakistani-American associations (such as the Association of Physicians of Pakistani Descent of North America) that could help address this need by bringing in trained Pakistani medical professionals to the U.S. as well as facilitating medical training of Pakistani doctors in the U.S., under an enabling environment of eased visa restrictions.
Simultaneously, U.S.-based associations (such as the Organization of Pakistani Entrepreneurs of North America and others) can be harnessed to offer business internships and to help create social impact investment and bolster social entrepreneurship within Pakistan. It is also possible to explore potential for a “narrow” bilateral trade agreement of the kind the current administration has concluded or envisioned in several markets, which may provide improved access to the U.S. market for Pakistani textile and apparel products in exchange for improved access to the Pakistan market for U.S. agricultural or other key products.
A Reconstruction Opportunity Zone (ROZ)-like program can be introduced that would, as the earlier version had intended, promote economic development in the border areas of Pakistan and require a certain level of Afghan components be included into Pakistani products to receive duty-free treatment. It is also possible to expand the U.S. Indo-Pacific Strategy to include Pakistan, thereby helping to expand major investment and other projects, including energy sector projects, via programs offered to nations under this initiative.
However, a gradual but steady approach to expanding the bilateral economic relationship is needed. In the short-to-medium term, matching specific opportunities to specific needs that could help U.S. investors and businesses partner with Pakistanis in ways that are mutually beneficial may be where to begin.
Although a labor-intensive process, this more cautious approach offers prospects of yielding mutually beneficial results and building momentum for more ambitious initiatives, such as enhanced bilateral trade via the ROZ Initiative, and/or advocating for Pakistan’s inclusion in the U.S. Indo-Pacific Strategy.
Alongside economic development and commercial activities, the U.S has been a longstanding development aid donor for Pakistan. In recent years, attempts were made within the U.S. to increase nonmilitary aid to Pakistan, but the thrust of this enhanced civilian aid (to supplement military support) became prescriptive – which was not always well received.
While there may be little appetite for enhancing non-military aid to Pakistan at present, there is a compelling case for sustaining non-security funding to Pakistan via the Economic Support Funds and other relevant mechanisms.
U.S. development aid to Pakistan should be viewed as a needed investment for not only yielding influence but building a more sustainable bilateral relationship and enabling Pakistan to better contend with emerging challenges. Besides focusing on smaller people-to people-programs, which help address economic empowerment, USAID can help address growing environmental concerns such as improving water management, contending with air pollution, and building climate change resilience.
U.S. development aid can also intensify focus on supporting the aforementioned economic goals, such as creating an industry-led ethical sourcing program for the textile/ garment sector, and building the capacity of smaller businesses, social impact startups, and social entrepreneurs.
This opinion piece is sourced from a new study ‘Seizing the Moment for Change – Pathways to a Sustainable US-Pakistan Relationship, released in Washington D.C. on March 4, 2020. The research, jointly carried out by Dr. Marvin Weinbaum and Prof. Syed Mohammad Ali, was co-sponsored by Mahvash and Jahangir Siddiqui Foundation in Pakistan and the Middle East Institute in Washington, D.C
