Trade Policy Review of Pakistan
January 23, 2002

Statement of the U.S. Representative

Thank you Mr. Chairman. The United States is pleased to participate in Pakistan’s second Trade Policy Review under the GATT and WTO.We appreciate the report provided by Pakistan for this review. As usual, the Secretariat has produced a high quality report that allows us to better understand the structure and substance of Pakistan’s trade policy regime. We have provided a variety of questions about Pakistan’s regime based on those reports. We look forward to receiving answers from Pakistan in reviewing in greater depth the country's trade regime.

In 2001, bilateral trade between the United Statesand Pakistan totaled about $2.8 billion, up from $ 2.1 billion in 1995. U.S. imports from Pakistan were about $2.23 billion in 2001- nearly double the 1995 level of $1.2 billion, making the United States Pakistan’s largest single export market. U.S. exports to Pakistan were about $450 million in 2001, less than half the 1995 level of $920 million. The United States remains the largest foreign direct investor in Pakistan. Cumulative direct foreign investment from the U.S. now totals $1,248.6 million.

Over the past few years, Pakistan has taken significant steps toward stabilizing and improving its economy, integrating it into the international trading system and reducing the direct involvement of the state in the economy. The reform plan undertaken in the last few years has emphasized enhancing macroeconomic stability, instituting structural reforms to promote private sector and export-led industrial development, and reestablished a focus on progress in key social sectors such as health, education and population planning. Measures taken under this plan in the financial sector, including the beginning steps of tax reform, have been critical to the improvement in the fundamentals of Pakistan’s economy. In this organization, we saw the positive effects of the reform process in Pakistan’s action to eliminate it’s balance-of-payments related measures in advance of the date agreed in the Balance of Payments Committee. Pakistan certainly deserves credit for this action.

Efforts to reduce barriers to trade, for imports and exports, improve the competitiveness of Pakistan’s productive sector, and diversify the economy are equally important. In our discussions with the Government of Pakistan, we know that industrial and export diversification is an important objective, both as a way to lessen dependence on a single economic sector and as part of its commitment to improving the quality of life for poorer citizens through its poverty alleviation strategy. The United States Government, through the U.S. Agency for International Development, supports Pakistan in this effort.

The Government of Pakistan deserves credit for the bold steps it has taken. We look forward to a continuation of the reform program, which should enhance investor confidence in Pakistan. The substantial debt relief agreed between Pakistan and the international community in recent months should help Pakistan as it goes down the reform path.
Issues of Ongoing Concern

In spite of the significant progress made by Pakistan, as the Secretariat's report notes, there are several barriers to trade and investment that still create potentially important distortions to competition and thus potential impediments to Pakistan’s long-term development.

We were particularly concerned to know that Pakistan appears to be violating its tariff bindings on approximately 90 tariff lines. While this is apparently an improvement from the situation in the previous year, any violation of bindings is a serious matter. We look forward to a prompt correction of this situation.

While we recognize Pakistan’s efforts over the past few years to reduce tariff levels and simplify the structure of its tariff, Pakistan’s rate structure remains relatively high. We world urge further reductions. We encourage Pakistan to take steps to address high tariffs and excise taxes on autos, parts and motorcycles to encourage investment in the sector.

We were also interested to have more information about the degree of state involvement in the economy and the types of approvals and restrictions–essentially licensing–that is required for imports. We have been disappointed in past years that Pakistan did not notify this information to the WTO.

Of course, as we move forward with the negotiations agreed at Doha, we encourage Pakistan to increase the number of lines bound in its tariff schedule and narrow the spread between bound and applied rates as a way to add predictability to Pakistan’s tariff. We encourage the Government of Pakistan to speed up the privatization process.

CONCLUSION

Mr. Chairman, Pakistan has faced and continues to face many challenges, but nonetheless has made great strides in undertaking economic reform. We acknowledge the potential risk to its trade and economy the government of Pakistan took when President Musharraf chose to place his country on the very frontline of the war on terrorism. The international community owesPresident Musharraf and the people of Pakistan a debt of gratitude for facing down the forces of extremism within his own country and helping to knock the pillars of support from under al-Qaeda and the Taliban. Ultimately, President Musharraf's decision has made Pakistan a better and safer place for business.