The Trade War and Pakistan

By Shehryar Hamesh Khan

With Trump coming to power in the US and the launch of the Belt and Road Initiative (BRI) in China, the indirect rivalry between the two countries have no longer remained that indirect. But the twenty-first-century divides are not like the Cold War era, where countries were distributed in easily distinguishable blocs. Instead, the fault lines are now evident in trade, technology, and geostrategic spheres, where economic interests take precedence over everything else.

As the world is connected in a far greater way than was in the Cold War era, enhanced trade ties and global economic chains leave little space for countries to isolate themselves from others. On the technology front, telecommunication bigwigs are yearning to provide faster connectivity to their ever-expanding consumer base, and governments that are keen to provide better services to their citizens — are eager to jump on the 5G bandwagon, with little regard to if and when the US will catch up. And with more than 65 countries plugged into the BRI, with access to vast Chinese markets, low-cost manufacturing capabilities and a rapidly-expanding consumer base, there is even lesser room for a firewalled world, which could jeopardize these serious partnerships.

So far, Pakistan has managed to pull off a balanced relationship with both the US, a country with unparalleled strategic importance, and China, an emerging superpower that has pumped an unprecedented amount of infrastructure financing funds into the country. On one hand, Trump can be seen standing in Davos, claiming that the two countries have never been this close, and on the other, President Xi Jinping considers the China-Pakistan Economic Corridor (CPEC) as the main project of the BRI. But beneath the illusion of a balanced and well thought out foreign policy lies an awkward trio, in which Pakistan is stuck in the middle of the US-China trade war for global economic dominance.

Despite being essential to the US with regards to a peace deal in Afghanistan and heightened US-Iran tensions, Pakistan has not been able to receive reciprocation in the form of support for the Kashmir cause and exiting the FATF Grey List.

However, with regards to China, our own internal issues are a hindrance to fully benefit from ties with the most populous country in the world. The CPEC pipeline is drying up and Pakistan is no longer in a position to take on new infrastructure projects, owing to IMF’s restrictions and a tight monetary policy. The signing of second phase of the China-Pakistan Free Trade Agreement has paved the way for much deeper economic cooperation between the two countries. But for these new trade opportunities to materialize, Pakistan needs new investment and superior technology. The much-touted special economic zones (SEZs) that were supposed to provide the stimulus through relocation of Chinese enterprises are still nowhere near completion. And despite the talk of the second phase of CPEC, Gwadar is nowhere near the “Dubai of Southeast Asia” it was envisaged to be.

No one can question our stance on staying neutral in the trade war and with regards to regional interests of the two economic goliaths. However, the real question is if and when this policy will yield benefits for a nation that was recently on the verge of economic collapse and a full-blown out war with its six times more populous neighbor.

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