Pakistan enjoys less duty-free access to US despite being the biggest export destination

The United States is Pakistan’s biggest export destination, during the last three years, the annual trade balance has been around $2 billion in favour of Pakistan and one of the few countries where Pakistan enjoys a substantial trade surplus.

Pakistan’s exports predominantly comprise textile made-ups with shipments of home textile standing at more than $1 billion and accounting for about 10% market share in the total US global imports of $13 billion. In 2014, Pakistan exported goods worth $3.6 billion and imported $1.5 billion of goods from the US.

Despite the trade surplus, Pakistan’s total share in the US market of $2.3 trillion is just 0.2%. The US is also Pakistan’s biggest donor and contributed over $4 billion since 2009 to projects relating to energy, economic growth, education, healthcare and women empowerment.

Moreover, Pakistan also receives $500 million annually for the Coalition Support Fund (CSF) in support of counter-terrorism efforts along the Afghan border.

Pakistan is also a beneficiary of the US Generalised System of Preferences (GSP) programme that provides duty-free access for approximately 3,500 products from 120 designated countries including Pakistan. It has been exporting an average of $200 million worth of goods under the GSP scheme which include gems and jewellery, carpets, sugar, cutlery and surgical items. The GSP does not include Pakistan’s core textile exports for duty-free market access.

There is an impression amongst policy circles that the US tariff system is unfair for countries such as Pakistan that depend on exports of textiles to the US.

Edward Gresser, a renowned trade policy scholar while testifying in the US senate, argued that Pakistan’s exporters have to pay $315 million in tariffs on exports of $3.2 billion worth of bed sheets, towels and clothes compared to British exports of $47 billion comprising airplanes, medicines and oil on which only $280 million is levied as customs duty.

He also made a general comparison of exports made by the EU, China and Pakistan and noted that 66% of EU’s and 57% of Chinese exports enter duty-free in the US, but only 12% of Pakistan’s exports get this treatment.

Pakistan has been persistently requesting the US leadership for market access in the agenda of bilateral engagements at the highest level.