Pakistan has a strong case for FTA

IN his meeting on Tuesday with Jack Straw, Britain’s Law and Justice Secretary, who is more familiar with the problems facing Pakistan from his previous stint as foreign secretary, Prime Minister Yousuf Raza Gilani sought London’s help for his government’s efforts to acquire greater access to the EU market, especially its quest for a free trade agreement (FTA). Our request for FTA, in fact, has been pending with the EU for a while. The officials concerned seem to be in no hurry, as they should have been in view of Pakistan’s peculiar situation, to give it due attention. Meanwhile, Pakistan being a frontline state in the West’s war against terrorism, the country’s economy has suffered immensely on account of a violent blow-back from Afghanistan. Investments, both local and foreign, have gone down to a significant extent. An unprecedented increase in the international price of oil has made a bad situation worse, severely impacting our balance of payments. As Pakistan has been telling the Western nations since long what it needs is trade rather than aid to strengthen its economy on a long-term basis. But EU trade policies seem to favour Pakistan’s trading competitors. The Generalised System of Preferences (GSP) extended to it for a while has been withdrawn; and our exports face both tariff and non-tariff barriers. Representatives of our badly hit textile sector have reason to complain that whereas our bed linen exports are subjected to a 5.8 percent anti-dumping duty and 9.6 percent customs duty on all textile exports, our competitors from India and China get preferential treatment as well as free market access.
Then our exporters have to deal with non-tariff barriers such as security situation related travel advisories for importers and travel restrictions for exporters together with certain other conditions. Other regional competitors comprising Bangladesh, Nepal, Sri Lanka, Bhutan and the Maldives are entitled to duty-free access to EU as Least Developed Countries (LDCs). Pakistan is fortunate enough not be included in the LDC category. Yet it needs some sort of encouragement. After the withdrawal of GSP, it expected to be given GSP Plus status that would have placed it in a better position to deal with its regional rivals, but that move was blocked in the WTO on a member’s appeal. It is obvious enough from these details that Pakistan faces serious difficulties in the EU market, which happens to be its largest trading block. Considering that certain security interests of its Western friends too are tied to its political and economic stability, EU needs to facilitate this country’s trade, and bring down the barriers in its way. Pakistan has already fulfilled almost all of the 27 ratification and promulgation conventions necessary for it to qualify for FTA. It is about time its friends like Britain used their clout within the EU to help Pakistan secure the much-needed FTA.

Market volatility fueled by fears

WORLD leaders are in New York — not to find out first hand what is happening on Wall Street but for the annual UN General Assembly. The truth is, however, that most are far more concerned about the market volatility and how it will affect their economies than with any of the issues on the UN agenda. The renewed volatility in the markets, with shares and the dollar again diving, is wholly due to fears that the politicians in Washington will not deliver on the massive $700-billion bailout package devised by US Treasury Secretary Henry Paulson. On Monday, those fears wiped out all the gains made on Friday following the announcement of the plan. Unfortunately there is every reason to believe that the politicians will stall the plan because, with elections only six weeks away, neither the Republicans nor the Democrats can resist the urge to use the mess to beat political drums. The Democrats blame “failed’’ Bush administration policies for the turmoil and insist that their support for the rescue package will have to come with strings attached; Democrat Nancy Pelosi, the House speaker, wants the plan to include provisions for job creation and help for the taxpayer. For many Republicans, equally alarmed at the cost of the plan, it goes against all their free-market principles. They believe that collapsing banks and institutions should go to the wall.
The Republicans could counter the Democrats’ insinuation that the Bush administration was responsible for the deregulation that enabled the chaos to happen. It was the Clinton administration that deregulated the US financial industry. Its Financial Services Modernization Act in 1999 swept aside all restrictions on the integration of American banking, insurance and stock trading and was largely responsible for the economic boom that is now associated with the Clinton era. But Republicans can hardly blame Democrats for that; they supported the act at the time and still believe passionately in deregulation. However, they have been anything but consistent. President Bush helped bail out Bear Stearns in March, then let Lehman Brothers go to the wall; he backed Freddie Mac and Fannie Mae, supported insurance giant AIG, helped broker a rescue plan for Merrill Lynch and then came up with a package of staggering proportions for state support for the market. For a president committed to the free market, it looks inconsistent. That inconsistency, now fully in the spotlight, may still do massive damage to Republican hopes in November. Meanwhile, there is a powerful feeling among the general public that the bailout rewards rich bankers for their selfishness and incompetence and is thus immoral. The price of government intervention may have to be an end to deregulation. There is no reason either why the government should not take equity stakes in banks in return for buying up their bad debt — which can be sold when the market revives. It would go some way to covering the cost to the taxpayer. All this will be thrashed out in Congress and will mean that whatever help is finally provided is going to take time — which is not what the market wants to hear. But it has to be. At the end of the day, even if they are clearly playing to an audience of soon-to-be voters, America’s politicians are not out to sabotage a rescue deal. It is simply that they realize that knee-jerk responses and blank checks are not answers.
 

—Arab News