Pakistan’s trade with regional countries especially neighbouring India, Iran and Afghanistan suffered due to geopolitical developments in the region, since 2013-14. The biggest reason for the decline of Pakistan’s exports to Iran according to Government of Pakistan data which claims the absence of banking channel especially amidst U.S. sections on Iran; withdrawal of NATO forces from Afghanistan caused a decline in demand for Pakistan’s exports to Afghanistan while Post Pulwama developments undermine Pak-India Trade.
Ministry of Commerce’s reply to a question raised by Senator Muhammad Ayub figured out the four reasons for the decrease in the exports of Pakistan to Iran over the years. Firstly, the absence of banking channel with Iran amidst U.S. sanctions on Iran. Secondly, closure of the border with Iran owing to prevailing COVID-19 pandemic from 16th March 2020 to 15th May 2020. Thirdly, a seasonal ban imposed by Iran on Pakistani Rice; finally, high tariff and non-tariff barriers being imposed by Iran on Pakistani exports. Pakistan’s total trade with Iran accounts $52.67 million in 2013-14 which declines at its low by $ 0.01 million in 2019-20, however, import from Iran data suggest otherwise, Pakistan’s imports account $172.49 in 2013-14 with slightly improved with 422.97 in 2019-20.
Pakistan Business Council’s analyzes Pak- Iran trade very much low then its potential. “Pakistan exports paper and paperboard, rice and stationery products to Iran while it imports LPG, other mineral fuels and electrical energy from Iran. The potential for trade between the two countries is immense with the top 20 high potential export items for Pakistan having a potential of $1.9 billion. On the import side, the top 20 items had an import potential of $7.2 billion.” PBC report suggests.
Pakistan’s exports to Afghanistan stood $1706.17 million in 2013-14 which declines over the years at $795.08 million in 2019-20; Afghanistan is the only country of which trade balance is in Pakistan’s favour, continuously at a decline. However, government accounts four reasons for the decline in Pakistan’s export to Afghanistan. Firstly, the decline of demand for Pakistan’s exports to Afghanistan due to the withdrawal of NATO forces from Afghanistan. Secondly, the lack of Afghan interest in entering into a trade liberalization regime with Pakistan. Thirdly, a ban imposed by Afghanistan on exports of culling birds from Pakistan and finally closure Pak-Afghan border due to COVlD-19 pandemic from 15th March 2020. However, the border is now opened for exports of Pakistan to Afghanistan and Afghan Transit Trade for 6 days a week.
Afghanistan is a significant trading partner of Pakistan; however, the trade volumes between the two have been on a decline since 2011. While sugar, petroleum products, wheat and rice are the top exports to Afghanistan, Pakistan imports grapes, apples, coal and cotton from Afghanistan. PBC estimates as of 2018, the untapped export potential for Pakistan to Afghanistan for its top 20 products was $354.0 million while the import potential for Pakistan from Afghanistan for the top 20 potential imports amounted to $56.0 million.
Troubled relations with India remained a fundamental reason for Pak-India trade contraction, the government’s pointed out two reasons for the decline in recent years. Firstly, Pulwama attack in February 2019 caused the imposition of 200 per cent duty by India on its imports from Pakistan; secondly, reciprocally suspension of the trade by Pakistan with India (except therapeutic products) since 9th August 2019 as a response to the revocation of Article 370 by India on 5th August 2019. Pak-India trade always remained in India’s favour, Government estimated trade deficit also reducing along with the entire volume. In 2013-14, Pakistan’s exports to India stands $408.36 million, import remained $2049.38 million with negative trade balance for Pakistan stands $1641 million. However, the latest data shared by the government in senate, Pakistan’s exports were $408.365 million in 2013-14 which shrunk to $ 8.39 million in 2019-20. Data suggests $261 million exports to India in 2018-19 which decline at $8.39 million, 2020.
India is 7th largest economy according to World Bank ranking in 2018, huge potential exists between India and Pakistan but geopolitical tensions caused contractions of bilateral trade. PBC reports Pakistan’s primary exports to India to include dates and cement while Pakistan’s imports include cotton, cotton yarn and industrial chemicals & dyes from India. PBC estimates as of 2018, Pakistan had an export potential of $1.6 billion for just the top 20 high potential items. On the imports side, the top 20 high potential import items from India were worth $7.0 billion.
Pakistan’s exports and imports from China in the month of February 2020 have also declined especially after Covid-19. Ministry of Commerce’s estimates suggests that “in comparison to the same period last year, Pakistan’s exports to China have declined by $28 million 18%, whereas imports declined by $137 million 15%. Fall in exports in this month was in sharp contrast to the 20% increase registered in January 2020 which can be attributed to Phase-II of the China-Pakistan Free Trade Agreement (CPFTA). The decline in imports is also unusually high in February 2020, which has remained at -1.5% during July-January of FY2019-20 and for the month of January, it had posted a slight growth of 0.3%.”
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.